Heathrow’s Spanish owner Ferrovial considers selling stake if airport does not make enough money
Ferrovial, which owns 25% of Heathrow, is considering selling its stake. A French investor, Ardian – which has other airport interests – might buy it. Ferrovial considers it has not made, and is not making, enough money from Heathrow. It is displeased by the CAA ruling, that Heathrow cannot hugely increase its landing fees charged per passenger at Heathrow. Heathrow wanted to put this up to over £40 per person, but recently the CAA ruled that it will have to fall from £30.19 to £26.31 by 2026, despite a furious lobbying effort by the airport. Ferrovial is understood to have been approached by Ardian, a Paris-based private equity firm, about a possible joint deal with Saudi Arabia’s Public Investment Fund. Ardian held a 49% stake in Luton airport between 2013 and 2018. Ferrovial has said it would be sceptical about committing further funding to Heathrow if the airport cannot get CAA agreement on charges. The lower landing charges are a disincentive to new investors, who fear low profits. Experts consider that any decision to cut off funding was likely to scupper plans for a 3rd runway, with progress already disrupted by a sharp fall in air travel during the pandemic and huge debts.
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Heathrow investor could take flight
By Russell Hotten
August 10th 2022, (The Times)
Heathrow’s single largest investor is reportedly looking at offloading all or part of its stake in the airport.
Ferrovial, the Spanish infrastructure giant, is considering options for its 25% stake, with private equity firms and Saudi Arabia’s sovereign wealth fund said to have shown interest, according to Reuters.
It reported that Ferrovial’s board had made no final decisions and had several times in the past reviewed options for its investment. Analysts value the stake in Britain’s biggest airport at up to €2 billion.
News of the possible sale sent Ferrovial’s Madrid-listed shares up nearly 4% yesterday.
Ardian, the Paris-based private equity firm, and its advisers had held talks about a joint offer with the Saudi public investment fund, Reuters said.
Heathrow is mired in controversy about congestion, investment in infrastructure and the amount of money it charges airlines to use the airport.
Ferrovial has held its stake for 16 years. It controls the Spanish transport infrastructure developer Cintra and has stakes in motorways in the US and Canada. Its Heathrow experience has been difficult and Ignacio Castejón, the chief financial officer of its airports business, said last year he was “very sceptical” about contributing further capital, citing a lack of recovery in its economic value and low equity returns.
Other investors in the London hub are the Qatar Investment Authority, with 20%, the pension fund manager Caisse de dépôt et placement du Québec, Singapore’s sovereign wealth fund GIC and China Investment Corporation.
Heathrow is worth about €24.3 billion, including debt, JPMorgan analysts calculated in May. By those estimates, Ferrovial’s Heathrow holding has an equity value of €611 million.
The airport, which the aviation data firm OAG said was the world’s fifth busiest airport in July, was hard hit by lockdowns, but raised its 2022 traffic forecast to 54.4 million passengers in June after a travel rebound.
Last month Heathrow, like some other airports in Europe, asked airlines to stop selling tickets for summer departures and capped passenger numbers to limit queues and cancellations as it struggled with pent-up demand.
https://www.thetimes.co.uk/article/heathrow-investor-could-take-flight-k7qw6028m
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Heathrow’s Spanish owner considers selling stake amid airport chaos
Ferrovial has previously warned about committing more funding following row over landing charges
By Helen Cahill (Telegraph)
9 August 2022
Heathrow’s Spanish owner is exploring a sale of its 25pc stake in the business amid interest from a French investor, following a bitter row with the regulator over airport charges.
Ferrovial, Heathrow’s largest shareholder, is understood to be in talks with advisers about a potential sale of its stake in Britain’s largest airport after it fiercely opposed a decision by the Civil Aviation Authority (CAA) to reduce the cap on landing fees charged to passengers.
The Spanish shareholder is said to have been approached by Ardian, the Paris-based private equity firm, about a possible joint deal with Saudi Arabia’s Public Investment Fund.
Ardian held a 49% stake in Luton airport between 2013 and 2018, during which time it invested £150m in a major expansion that saw its annual passengers grow from 12m to 18m.
The investment house sold its stake in Luton in 2018 to AMP Capital, the Australian investor, in a deal thought to be worth £1bn.
The investment house, which is headed up by the French business woman Dominique Senequier, also has a 49% stake in Italian airport network 2i Aeroporti, and has interests in Milan’s Malpensa and Linate airports.
Ardian first approached Ferrovial about buying its Heathrow stake last year, Reuters reported, but discussions did not advance. It is understood that any current discussions over Ferrovial’s interest may not result in a sale.
Ferrovial has previously warned that it would be sceptical about committing further funding to Heathrow if the airport cannot win an appropriate increase in airport charges from regulators.
Ignacio Madridejos, Ferrovial’s chief executive, said in 2020 that it could “rotate the asset” if “regulation is at a level that we cannot get an adequate return for our investors”.
Heathrow, meanwhile, has said that it needs to raise the fees to make sure the airport does not fall into disrepair.
The CAA said in June that the cap on landing fees charged per passenger at Heathrow will fall from £30.19 to £26.31 by 2026, despite a furious lobbying effort by the airport to raise charges to more than £40.
John Holland-Kaye, chief executive of Heathrow, hit out at the decision, adding that it underestimated “the fair investment needed” for maintaining operations at the airport.
He said: “Uncorrected, these elements of the CAA’s proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.
“The CAA’s proposal will undermine the delivery of key improvements for passengers, while also raising serious questions about Britain’s attractiveness to private investors.”
An airport industry source said the lower charges “will not allow investment” into Heathrow and would not “incentivise” shareholders to provide further funding to Britain’s leading travel hub.
They confirmed that the row over charges would be a key factor in any discussions over a sale of Ferrovial’s stake. The CAA is currently consulting on airport charges and is expected to reach a decision in the autumn.
Ignacio Castejon, Ferrovial’s airport head, warned last year that the Spaniards had reservations about providing more investment to Heathrow in light of the CAA’s proposals.
He said: “[It] makes me feel very sceptical about the appetite to contribute further capital into Heathrow.”
Experts have also warned that any decision to cut off funding was likely to have scupper plans for a third runway at Heathrow, with progress already disrupted by a sharp fall in air travel during the pandemic.
It comes amid continued chaos in Heathrow’s terminals after it struggled to find enough staff to meet demand for a return to air travel after the pandemic.
Heathrow was recently forced to impose limits on inbound and outbound flights due to staff shortages in a move that could trigger more flight cancellations.
The airport asked carriers to stop selling tickets for summer holidays and imposed a departure limit of 100,000 passengers per day.
The west London airport told carriers it could limit flights until at least October 29 and threatened to sue airlines that failed to reduce capacity.
Mark Powell, Heathrow’s director of operational planning, warned that the airport was introducing “contingency” measures to avert “dangerous” overgrounding in terminals.
The airport has reported a £321m loss for the first six months of the year as it struggled with the return of travellers after pandemic restrictions eased.
It blamed a lack of ground handling staff for its issues and estimated there had been a 30pc decline in staffing levels since the pandemic.
Madrid-based Ferrorival also controls Spanish infrastructure developer Cintra and has been invested in Heathrow airport for 16 years. It purchased an indirect stake of almost 56pc in Heathrow in 2006 and eventually reduced its stake to 25pc in 2013.
Ferrovial is Heathrow’s largest investor and sits alongside the Qatar Investment Authority, which holds a 20pc stake, as well as Caisse de dépôt et placement du Québec, Singapore’s wealth fund GIC and China Investment Corporation.
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See earlier
Heathrow makes a loss in first half of 2022; debt increases; RAB increases
Heathrow airport has reported a £321m adjusted pretax loss for the first half of the year after weeks of lengthy queues and flight cancellations, with passenger numbers back at near pre-pandemic levels. It recently had to announce a daily cap of 100,000 passengers until early September. It estimated that airlines were lacking about 30% of ground handling staff compared with before Covid. The airport said it did not expect to pay any dividends to its shareholders for the rest of the year. Heathrow’s revenue in the 6 months to 30th June was £1,280 million, compared to £348 million in 2021, and £712m in 2020, and £1,461m in 2019. The £231 million loss in 2022 compares with a loss of £787m in 2021, a loss of £471m in 2020, and a £153m profit in 2019. Heathrow’s Regulated Asset Base (RAB), on the size of which it can levy passenger charges, was £18,425m in 2022, compared to £17,474m in 2021, £16,516m in 2020 and £16,598m in 2019. Heathrow Finance plc consolidated nominal net debt was £15,561 million in 2022, compared to £15,440m in 2021, £14,932m in 2020 and £14,361m in 2019. ie. it has risen a lot.
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CAA confirms it wants Heathrow landing charges to fall from £30.19 to £26.31 for next 5 years
The CAA, as expected, has released its Final Proposals for the “H7” price control (5 year) period which runs from January 2022 – December 2026. The CAA is now undertaking a consultation on the proposal to which Heathrow, the airlines that use it, and others will respond. The CAA will consider the feedback it receives during this consultation before making a final decision on the H7 price control, which is expected later this year. The CAA has said that the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026. (Heathrow was allowed an interim increase earlier this year, due to Covid issues). When the effects of inflation are removed, this is equivalent to nearly a 6% reduction every year (ie. down £1.87 in the first year, etc) from today’s level up to 2026. Heathrow has claimed huge losses due to the pandemic, and that it wanted the higher landing charge, to help recovery. But the CAA considers the return of high passenger numbers – that has been faster than anticipated – will bring in sufficient money into Heathrow, for its spending and investment requirements. The higher landing charge is not needed.
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