Debt fears by North Tyneside Council mean no loan for Newcastle Airport
North Tyneside Council have opted not to follow the region’s other local authorities in making a loan to Newcastle Airport, which is the North East’s biggest airport. The airport needs to refinance its near £300m debt. Seven local authorities in the North East own 51% of the shares in the airport and 3 of them have agreed the size of their contributions. But North Tyneside has said it is not willing to incur additional debt at a time when local authorities are being asked to make huge budget cuts. The other 6 will have to make higher contributions and hope they will get higher pay-outs in due course, if the airport gets back into being profitable. The other 49% is owned by Copenhagen Airports, which is looking to sell its stake. Annual passenger numbers using Newcastle Airport in 2011 were 4.3 million, compared to 5.6 million at their peak in 2007.
Debt fears mean no loan for Newcastle Airport
by Brian Daniel, The Journal
North Tyneside Council last night confirmed it would not be making a loan to Newcastle Airport, as bosses there look to refinance its near £300m debt.
Seven local authorities in the North East own just over half the shares in the airport and three of them have agreed the size of their contributions.
But North Tyneside has said it is not willing to incur additional debt at a time when local authorities are being asked to make huge budget cuts.
North Tyneside’s decision means higher contributions from the other six councils. In return, they will get higher pay-outs from the airport.
The seven councils – the others being Northumberland, South Tyneside, Newcastle, Sunderland, Durham and Gateshead – form LA7, which owns 51% of shares in the airport. The other 49% are owned by Copenhagen Airports, which is looking to sell its stake.
The airport confirmed in May that it had begun the process of refinancing a £298m net debt and the councils are being asked for loans as part of this.
The exact amount of the loans will not be known until the re-financing is completed.
North Tyneside mayor Linda Arkley said: “The LA7 authorities have all agreed that there is continued support for the airport and its future growth. It was mutually agreed that the decision relating to future share options is a matter for individual authorities to consider.
“Six of the seven will be taking up the option of making further investment. After discussions with the leaders of the other shareholding authorities our position is that we will not be taking up the option that would involve additional debt for the council.”
A spokesman for LA7 said: “We have been aware of North Tyneside’s intention not to invest in the refinancing package for some time and this has been taken into consideration when establishing the maximum level of investment required from each of the remaining six authorities.
“All seven local authorities continue to be committed to the future success of the airport and are working together to ensure a successful refinancing process and to select a new partner.”
The spokesman also confirmed the six investing councils would be in line for higher dividend payments, but that North Tyneside would not.
An airport spokesman said: “The airport employs over 3,200 people and generates over £645m for the regional economy every year.
“When the economic recovery comes, the airport will provide the connectivity the North East needs in order to compete effectively.”
Passenger numbers at Newcastle Airport over the past 14 years:
The airport has had these debts for several years, and has not managed to clear them .
Newcastle Airport chiefs hail strong performance
- NEWCASTLE Airport has said it “weathered the storm very well” last year, although it is still facing heavy interest payments on its £300m debt.
The airport announced its performance for 2010 “compared favourably” with other regional airports, while its financial results have “remained comparatively strong”.
It said passenger numbers had dropped from 4.6 million to 4.4 million in 2010, while pre-tax losses increased from £4.1m to £4.8m. Its operating profit was £16.1m compared to £17.1m in 2009.
But the airport had to make £19.5m in interest payments on its debts in both 2009 and 2010. The loan behind those debts has caused controversy in recent months, with one MP calling for an inquiry into the arrangements behind it.
A spokesman for the airport said: “Considering the events of 2010 that we faced, including a lengthy period of Icelandic volcanic activity and the extreme weather problems of January and November, the results are remarkably strong. It’s also set against the background of challenging conditions in the aviation marketplace, Newcastle Airport has weathered the storm very well.”
However, the weight of the refinancing deal struck with Royal Bank of Scotland in 2006 still weighs on the company’s finances. The airport – which is 51% owned by the region’s seven councils – agreed a £377m mortgage, and The Journal has reported earlier that former chief executive John Parkin and former finance director Lars Friis had it written into their contracts that they would receive 2% and 1% of the loan amount as a bonus. Friis has since died and Parkin no longer works for the airport.
However, the councils opted not to comment and Copenhagen Airports said it was “not in a formal process to sell”.
The airport added economic problems had been “compounded by successive increases in air passenger duty”, a tax which may well be raised yet again next year. The Journal has launched a campaign called A Tax Too Far to highlight the effect of air passenger duty on the region’s aviation industry and the local economy, and industry organisations and businesses have added their opposition to rises.
Staff numbers rose from 360 to 371 in the year, while it welcomed the imminent opening of a Hilton DoubleTree luxury hotel on site in the autumn as a “signal the airport is going places”.
The spokesman added: “We have ambitious plans going forward. We’re constantly working with airlines to improve frequency and new routes and there’s a possibility of announcements, and we’re also looking at further improvements to the terminal building.
“While these have been challenging times, Newcastle Airport remains one of the key regional airports and remains a robust business with a crucial role to play in the North East both now and in future.”