Prestwick Airport taxpayer bailout doubles to £40 million by 2021/22
Date added: 25 February, 2015
Nicola Sturgeon has been accused of covering up the true cost to the taxpayer of buying Prestwick Airport after she kept secret the existence of a new estimate predicting it would almost double to £40 million. An Audit Scotland investigation into the purchase found that a revised business plan produced in May last year forecast that public loans to loss-making Prestwick would reach £39.6 million by 2021/22. Ms Sturgeon did not tell MSPs that the predicted cost had increased from the original estimate of £21.3 million when she gave evidence to a Holyrood inquiry the following month. She also did not reveal that the passenger forecasts for the first 5 years had been dramatically cut. Labour are complaining about the handling of the airport problem by the SNP. Prestwick was losing £800,000 per month, and passenger numbers had more than halved to 1.1 million between 2007 and 2013. It was on the market for 18 months but no private buyer emerged. The Scottish government bought it for £1 hoping to protect 3,200 jobs and safeguard a “strategic” asset. So far the government has handed over £9 million and have committed to provide a further £16.2 million by the end of March 2016.
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Prestwick Airport taxpayer bailout doubles to £40m
By SCOTT MACNAB
24.2.2015 (Scotsman)
THE cost to taxpayers of bailing out troubled Prestwick airport has doubled to £40 million and may rise even further, a public spending watchdog has warned.Inflated passenger estimates were used to justify the buyout, according to Audit Scotland, but these have continued to tumble in the first year since the takeover.
Nicola Sturgeon is now facing claims of a “cover up” over the spiralling costs after presiding over the purchase of Prestwick for £1 in November 2013 to save it from looming closure.
The Audit Scotland report today says that there are “uncertainties” over future plans which are crucial to its survival – and suggests ministers may have to cut their losses.
“It is important that its plans for the airport include regular consideration of its ongoing financial liability and a well-defined exit strategy covering a variety of possible scenarios,” it states.
Infrastructure secretary Keith Brown insisted there is “no quick fix” to the airport’s problems and said that the Scottish Government is committed for the “long-term”.
It was estimated that £21.3m of loans would be needed to keep the airport going when it was first bought. But it has emerged that this soared to £39.6 million in a “revised” business plan drawn up last year.
MSPs say they have been kept in the dark about the overruns by Ms Sturgeon.
Labour infrastructure spokeswoman Mary Fee said: “The SNP’s handling of Prestwick airport has been a farce since day one.
“As the minister in charge Nicola Sturgeon was repeatedly unable to answer the most basic financial questions about the airport and its future. Scottish taxpayers have a right to know how their money is being invested.”
The airport is heavily reliant on budget carrier Ryanair, but suffered a blow last year when the Irish firm axed a number of Prestwick routes and opened a base at nearby Glasgow.
Passenger growth of 10.2 per cent in the first five years after purchase was predicted by ministers, but the watchdog states that these were “optimistic”.
These were scaled back six months after purchase when “commercially sensitive information” came to light, but still envisaged 6.5 per cent growth. In fact passengers numbers fell by 15 per cent in the first year of operation.
The prospect of the loans being fully paid back will depend on new developments which may include the airport securing UK spaceport status, a fall in air passenger duty which is due to be devolved to Holyrood, or by becoming a hub for emergency disaster relief programmes, as well as training pilots an engineers.
But the report warns: “These options will take some time and may result in the Scottish Government providing the airport with additional loan funding.”
The airport lost £4.2m in the first year after the takeover and has yet to repay any of the loans it has received from taxpayers. It will do this when it starts making money again, which is expected to be in 2021.
Lib Dem South of Scotland MSP Jim Hume said: “The cost of investing in Prestwick airport to the taxpayer more than doubled but the SNP government kept that a secret. People will want to know why this long term cost to the taxpayer of £40m was covered up.”
Scottish Conservative transport spokesman Alex Johnstone said a clear plans is now needed to offload the airport from public hands.
But Mr Brown said that the report is clear the Scottish Government is “highly likely” make a long-term profit.
A spokesman for Transport Scotland said the report only sets a projection of “potential loan facilities” which have not been confirmed. He said: “It would therefore have been inappropriate for ministers to speculate on how much Glasgow Prestwick airport may or may not need to borrow in future years, given any confirmed facility would need to be based on a robust business case and subject to the availability of the necessary budgetary provision.
“Ministers have made it clear throughout this process that additional loan funding, beyond the £25m already set out, may be required for Glasgow Prestwick airport. Ministers have committed to updating parliament as and when this is confirmed.”
Nicola Sturgeon ‘cover-up’ over Prestwick Airport cost
The First Minister fails to tell MPs that the projected cost of taxpayer loans to Prestwick airport has almost doubled from £21.3 million to £39.6 million.
Nicola Sturgeon has been accused of covering up the true cost to the taxpayer of buying Prestwick Airport after she kept secret the existence of a new estimate predicting it would almost double to £40 million.
An Audit Scotland investigation into the controversial purchase found that a revised business plan produced in May last year forecast that public loans to the loss-making airport would reach £39.6 million by 2021/22.
But Ms Sturgeon failed to tell MSPs that the predicted cost had increased from the original estimate of £21.3 million when she gave evidence to a Holyrood inquiry the following month.
Speaking at the Scottish Parliament’s infrastructure and investment committee in June, she told MSPs there was an updated business plan but claimed she was unable to provide “precise projections” for the cost.
Appearing before the same committee in November, the First Minister said she had no update on the cost and “there is not a figure” for the maximum that could be spent on the airport.
When James Kelly, a Labour MSP, referred to the old £21.3 million estimate and challenged her to give taxpayers more information about the cost, Ms Sturgeon again failed to disclose the substantial increase.
Neither did she reveal that passenger number forecasts for the first five years had been dramatically cut, even before Ryanair announced it was culling its winter flights from the airport.
Transport Scotland, a Scottish Government quango, last night argued that no budget has been set beyond 2015/16 and it would have been “inappropriate” for ministers to speculate on the future cost.
But Jim Hume, a Liberal Democrat MSP, said: “The cost of investing in Prestwick Airport to the taxpayer more than doubled but the SNP kept that a secret. People will want to know why this long-term cost to the taxpayer of £40 million was covered up.”
Mary Fee, Scottish Labour infrastructure spokesman, said: “The SNP’s handling of Prestwick Airport has been a farce since day one. As the Minister in charge Nicola Sturgeon was repeatedly unable to answer the most basic financial questions about the airport and its future.”
The struggling airport, which was losing £800,000 per month, was on the market for 18 months but no private buyer emerged. Passenger numbers more than halved to 1.1 million between 2007/08 and 2012/13, while freight business fell by more than two-thirds over the same period.
Scottish ministers feared it would close unless they stepped in and paid owners Infratil just £1 in November 2013, arguing the move was necessary to protect 3,200 jobs and safeguard a “strategic” asset.
Their long-term plan is to return the airport to profitability before returning it to the private sector. So far they have handed over £9 million and have committed to provide a further £16.2 million by the end of March 2016
Audit Scotland found the Scottish Government’s “purchase process was reasonable”, given the tight timescale of six weeks, and it can eventually expect a “positive return” on the public money being lent.
But its report concluded that its purchase business plan, which estimated that £21.3 million of loans would be required until 2022/23, was too optimistic about passenger numbers. It predicted annual growth of 10.2 per cent in the first five years and 1.8 per cent thereafter.
After the purchase, the Scottish Government commissioned Romain Py, an aviation expert, to prepare a revised business plan that re-examined the assumptions made when it was bought.
The Audit Scotland report disclosed for the first time that this document, published last May, forecast total loans from the taxpayer totalling £39.6 million until 2021/22.
The revised plan downgraded growth in passenger numbers for the first five years to 6.5 per cent, before levelling out at 2.6 per cent after that.
It also took into account £11.6 million needed to cover losses from “core trading activities” and an extra £10.7 million of spending to clear a maintenance backlog and fund several development projects.
Mr Py predicted the airport would report its first operating profit in 2018/19 but taxpayer loans would be required to support its losses and capital spending until April 2021.
But two months after his revised report was produced, Ryanair – Prestwick’s only passenger airline – announced it was cutting its winter schedule from the airport from 42 flights per week to 13. Passenger numbers influence around half the airport’s income.
Transport Scotland said the figures disclosed in the Audit Scotland report were a projection of “potential loan facilities that may be required” to 2021/22 but these were subject to revision “as and when commercial activities become realised”.
“It would therefore have been inappropriate for ministers to speculate on how much Glasgow Prestwick Airport may or may not need to borrow in future years,” a spokesman said, arguing this would depend on a “robust” business case and the necessary funds being available.
“Ministers have made it clear throughout this process that additional loan funding, beyond the £25 million already set out, may be required.”
http://www.telegraph.co.uk/news/politics/SNP/11430692/Nicola-Sturgeon-cover-up-over-Prestwick-Airport-cost.html
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Posted: Wednesday, February 25th, 2015. Filed in News about Airports, Recent News.
