Low Gatwick passenger number may hit price-bidders

24.4.2009   (Guardian)

* Deadline for bids is next Monday

* Owner BAA overestimated March numbers, says source

* Bidders say data put downward pressure on valuation
* BAA still anticipates ‘highly competitive’ bids
LONDON, April 23 (Reuters) –
UK airports operator BAA may raise less than it hoped from the sale of London’s
Gatwick after latest passenger numbers there disappointed, putting downward pressure
on its valuation, bidders said on Thursday.
A source close to one of the bidders said that BAA, which is owned by debt-laden
Spanish construction firm Ferrovial, significantly over-estimated passenger numbers
for March, which anyone setting a price for a bid would take into account.
Gatwick airport was put up for sale last year to meet competition concerns and
BAA was subsequently also ordered to sell London’s Stansted and either Edinburgh
or Glasgow airports.
The deadline for prospective buyers to put in bids for Gatwick is April 27.
“When the passenger numbers go down the price doesn’t go up … Market conditions
for BAA aren’t the best for a sale,” added another source associated with one
of the bidders.
Passenger numbers in March were 17.7% down at Gatwick compared with the previous
year, against a 7.5% fall at Heathrow and 15.9% declines at Stansted.
Some analysts see Gatwick as particularly vulnerable to an economic downturn
because of its reliance on revenues from “bucket and spade” summer charter flights.
Analyst Andrew Fitchie at Collins Stewart predicted that BAA owner Ferrovial
would find it difficult to achieve a premium to the Regulatory Asset Base value
of 1.6 billion pounds ($2.33 billion).
“I think they’ll struggle in the current climate to achieve a premium to regulatory
asset base,” he said.   He added that it was “totally reasonable” that the passenger
numbers would affect the price.
The expected price for the airport has fallen in the past few years from a high
of 3 billion pounds.
“There was some chit chat before the end of March … that it could be as low
as 1.3 billion which is a 20 percent discount to RAB which wouldn’t be out of
line with other utilities in the UK,” added Fitchie.
A spokesman for BAA remained optimistic.
“Given the volume of work being undertaken by potential buyers we expect a number
of highly competitive bids next week,” he said.
In March, BAA extended the deadline for final bids until the end of April from
the end of March, giving bidders more time to finalise due diligence and financing
At that time, three groups of bidders remained in the running to buy Gatwick
airport, which was valued at up to 2 billion pounds.
The bidders are Global Infrastructure Partners (GIP), a joint venture between General Electric and Credit Suisse, which owns London
City Airport; Lysander Gatwick Investment Group, comprising Citi Infrastructure Partners, Vancouver Airport Services and John
Hancock Life Insurance Company; and a third consortium consisting of Manchester Airports Group, Borealis and Greater Manchester Pension
HSBC and RBS are running the sale.
(Reporting by Ben Deighton, editing by John Stonestreet and Sonya Dowsett)
see also
(Bloomberg)       23.4.2009
Gatwick Airport Sale Said to Draw Three Bids, Defy Travel Slump

By Steve Rothwell and Ambereen Choudhury
April 24 (Bloomberg) — Three groups plan to bid for London Gatwick airport,
defying expectations that a slump in travel would stymie the auction, three people
close to the sale said.
Global Infrastructure Partners, owner of London’s City Airport; a group led by
Citi Infrastructure Investors; and a third team that includes the owner of Manchester
Airport plan to submit offers before the April 27 deadline, said the people, who
spoke on condition of anonymity.
"Gatwick passenger numbers are falling steeply at the moment, but it remains
the second-busiest London airport," said Douglas McNeill, a London-based transport
analyst at Blue Oar Securities. "There was speculation that one of the three remaining
bidders would drop out on the grounds that they wouldn’t be able to raise the
Three groups have already pulled out of the auction, which is being overseen
by Gatwick’s owner BAA Ltd. The company is seeking more than the 1.64 billion-pound
($2.14 billion) valuation put on Gatwick by Britain’s aviation regulator, just
as the credit crisis and a slump in travel deter bidders.
Traffic at Gatwick has tumbled 15 percent so far this year as the recession forces
airlines to cut capacity. That decline is being exacerbated as carriers move flights
to Gatwick’s bigger rival, Heathrow, under the "Open Skies" treaty with the U.S.
German builder Hochtief AG dropped out from the Gatwick auction in January, and
groups led by 3i Infrastructure Plc and a Deutsche Bank AG fund withdrew the following
Stansted Sale
The U.K. Competition Commission ruled in March that BAA, the owner of five of
the country’s 10 biggest airports, should be should be broken up. The airport
operator will also have to sell Stansted airport and a terminal in Edinburgh or
Glasgow, Scotland.
Spanish builder Grupo Ferrovial SA paid 10.1 billion pounds for BAA in 2006.
The money raised by the Gatwick sale will be used to reduce some of the debt used
to finance BAA’s takeover.
"Given the volume of work undertaken by potential buyers, we expect a number
of highly competitive bids next week," said Malcolm Robertson, a London-based
spokesman for BAA.
Ontario Municipal Employees Retirement System is working with a group interested
in buying Gatwick, Chief Executive Officer Michael Nobrega said in a March 27
interview. The Canadian pension plan’s Borealis Infrastructure unit is bidding
with the owner of Manchester Airport. Officials at Manchester Airport and Global
Infrastructure Partners declined to comment.
Lysander Gatwick Investment Group, which includes Citi Infrastructure, Vancouver
Airport Services and John Hancock Life Insurance Co., remains in the auction,
according to spokesman Steve Double.
BAA was founded as the British Airports Authority in 1965 and began running four
U.K. terminals a year later. It sold shares to the public in 1987 as part of then
Prime Minister Margaret Thatcher’s disposal of state assets.