BAA says Stansted could be run for £5m less per year than they did – to raise its price
BAA has admitted that anyone else could run Stansted for at least £5m a year less, due to lower mangement costs. The information is disclosed in the “information memorandum” sent to bidders for Stansted, which is valued at around £1bn in August. The document is aimed at getting the best possible price for Stansted but one City source said it was bizarre to now be saying this. Stansted had £141.5m operating costs in its most recent year. Ryanair says the reason for the £5 million drop is that BAA has been lumping in expenses from its other 4 airports – Heathrow, Southampton, Glasgow and Aberdeen. The sale document makes out that another operator could get passenger numbers to bounce back to 24.6m by 2019, from 17.1 million this year. Some of the possible buyers of Stansted are MAG and a consortium led by Australasian investment manager Morrison & Co, Citi Infrastructure Partners, Macquarie and Deutsche Bank’s infrastructure arm, Morgan Stanley Infrastructure, JP Morgan and Li Ka-Shing’s CKI .
Stansted airport owner admits it could be run for £5m less
BAA, the owners of Stansted, have made the unusual admission that anyone else could run the airport for at least £5m a year less.
By Alistair Osborne (Telegraph)
14 Oct 2012
The figure is disclosed in the “information memorandum” sent to bidders for the Essex airport, which was put on the block for around £1bn in August after BAA lost a three-year legal fight with the Competition Commission over a forced disposal. The sale process is being led by BAA’s major shareholder, Ferrovial, with advice from Deutsche Bank and ING. First-round bids are due next week.
The document, aimed at drumming up the best possible price, claims that simply freeing Stansted from BAA’s ownership will produce immediate savings due to lower management costs.
Stansted had £141.5m operating costs in its most recent year. “It’s bizarre,” said one City source. “In order to bump up the price, BAA’s owners are now saying… ‘we’re so poor, you’ll be able to run it £5m a year cheaper’.”
The figure is also likely to be seized on by Ryanair chief executive Michael O’Leary as confirmation that BAA is not only an inefficient operator, but has been artificially inflating Stansted’s cost base by lumping in expenses from its other four airports – Heathrow, Southampton, Glasgow and Aberdeen.
As Stansted is a regulated airport, a higher cost base can lead to higher landing charges – as long as the regulator accepts the figures.
Ryanair is responsible for 70pc of Stansted’s traffic and Mr O’Leary has already claimed that Stansted’s regulatory accounts are “completely artificial” and straight out of “Noddy land”.
The document handed to bidders also forecasts that a new owner of Stansted would do a much better job of increasing both passenger volumes and earnings. Passenger traffic has declined from a peak of 23.8m in 2007 to an expected 17.1m this year – hit by Ryanair’s decision to divert flights to other airports in protest at the landing charges. However, the document forecasts that volumes will bounce back to 24.6m by 2019.
Meanwhile earnings before interest, tax, depreciation and amortisation, which are down from £117m in 2008 to an estimated £87.3m this year, are forecast to rise to £201m.
Bidders are known to include Manchester Airports Group, which is being backed by Australia’s Industry Funds Management, and a consortium led by Australasian investment manager Morrison & Co. That group also includes the New Zealand Superannuation Fund and Infratil, a Wellington-based infrastructure investor.
There is also thought to be some early interest from Citi Infrastructure Partners, Macquarie and Deutsche Bank’s infrastructure arm, RREEF. Morgan Stanley Infrastructure, JP Morgan and Li Ka-Shing’s CKI have also been touted as possible bidders.
Last week Ryanair accused Ferrovial of excluding it from the Stansted sale process in a move it deemed “anti-competitive”.
A BAA spokesman said: “We are not going to comment on the process.”