BA warns London City Airport not to raise landing charges, or it might pull out
Willie Walsh, Chief Executive of IAG, owner of British Airways has issued a further warning to the new owners (a Canadian consortium) of London City that moves to raise landing charges for the airlines operating form the airport will be resisted. He said: “The airport is good, there’s good demand for it, but the off peak demand is very price sensitive and there’s no way you can serve that sort of demand if it’s very expensive to operate from there.” BA currently has about 40% of the flights at London City airport. Walsh said: “They paid a high price. It’s a good airport, but it’s as expensive as Heathrow in terms of passenger charges. The reason it has grown so strongly is because of us. We are the number one operator from there. We have 18 aircraft there. It’s principally a leisure airport, but there’s only so much you can do for leisure flights. We’d have no problem moving away from London City. There’s no way we’re going to be held hostage there and if the charges go up we’ll move the aircraft. That’s the great thing about aircraft – they’re portable, you can take them somewhere else.” Walsh said earlier that the £2 billion price would mean a multiple of 44 times London City’s earnings (EBITDA), though the airport said it was a multiple of 28.
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BA issues further warning to London City Airport
5.5.2016 (Business Traveller)
Willie Walsh, Chief Executive of IAG, owner of British Airways has issued a further warning to the new owners of London City that moves to raise landing charges for the airlines operating form the airport will be resisted.
“We like the airport and we like operating out of it but not at any cost. The airport is good, there’s good demand for it, but the off peak demand is very pricesensitive
, and there’s no way you can serve that sort of demand if it’s very expensive to operate from there.”
London City airport (LCY) was sold to a Canadian consortium for a reported £2bn (see news February 26).
At the time of the deal, Declan Collier, CEO, London City Airport said:
“London City Airport is a successful business with huge opportunities for growth – opportunities that will create jobs, generate more benefit for the UK economy and build new connections to and from London to commercial centres around the world.”
Global Infrastructure Partners bought LCY in 2006 for around £750 million, and a record 4.3 million passengers used the airport last year.
Speaking on the inaugural flight to San Jose today (see review here) Walsh said:
“They paid a high price. It’s a good airport, but it’s as expensive as Heathrow in terms of passenger charges. The reason it has grown so strongly is because of us. We are the number one operator from there. We have 18 aircraft there. It’s principally a leisure airport, but there’s only so much you can do for leisure flights.”
“We’d have no problem moving away from London City. There’s no way we’re going to be held hostage there and if the charges go up we’ll move the aircraft. That’s the great thing about aircraft – they’re portable, you can take them somewhere else.”
http://www.businesstraveller.com/news/ba-issues-further-warning-to-london-city-airport
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Earlier
London City airport sold to Canadian Pension funds, for £2 billion (bought by GIP in 2006 for £760 million)
A Canadian-led consortium of pension funds has beaten rivals to buy London City airport, from GIP, which paid £760 million for it. So that is a hefty profit. The valuation has proved controversial because the largest airline at City airport, BA, threatened to pull most of its aircraft out of the airport if the new owner raised airline charges to cover the high sale price. Willie Walsh, CEO of BA’s owner IAG, considers £2 billion a foolish price. GIP owns 75% of the airport, and Oaktree Capital own 25%. The consortium that has bought the airport is led by the Ontario Teachers’ pension fund. It includes Borealis Infrastructure, which manages funds for one of Canada’s largest pension funds, and also Japanese pension funds. The consortium also includes AimCo and Kuwait’s Wren House Infrastructure Management, which is an investment vehicle owned by the Kuwait Investment Authority. The Canadian Teachers’ pension fund has $160bn in assets, and already owns 4 airports (share of Birmingham, Bristol, Brussels and Copenhagen). HS1 Ltd is jointly owned by Borealis Infrastructure and Ontario Teachers Pension Plan, both Canadian pension funds. GIP bought the airport for an estimated £750m in 2006 from Dermot Desmond, the Irish financier, who paid just £23.5m for it in 1995 from Mowlem.
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London City Airport’s price tag under scrutiny after BA threatens to pull out most flights
The sale of London City Airport could be in jeopardy after British Airways, the largest airline based there (40% of the flights), threatened to pull out most of its aircraft. The second largest airline there has about 20% of the flights. The airport was put up for sale by GIP in in August 2015. BA fears that the high price of £2 billion could force its new owners to raise landing fees, and BA says it is not prepared to pay. Willie Walsh said the £2 billion price would mean a multiple of 44 times London City’s earnings (EBITDA), though the airport said it was a multiple of 28. Walsh said the airport had “very high” airport charges of £19 per passenger, one of the most expensive after Heathrow, and with higher charges he would not make enough profit. The number of passengers at London City airport has grown from 2m in 2005 to an estimated 4.3m in 2015. The airport’s value could also be limited by its battle to get planning permission for a £200m development that would increase the number of passengers to 6m by 2023. The plans were blocked last year by Boris, over aircraft noise concerns. London City is appealing against this. The introduction of Crossrail in 2018, which will cut down the journey time from Canary Wharf to Heathrow, could be a real threat to the airport.