Sale of London’s City Airport expected to be announced this week
22 February 2016 by Leon Pascal
The estimated £2bn sale of London City Airport is expected to be announced this week after its current owners, American private equity firm Global Infrastructure Partners (“GIP”) and global asset management firm Oaktree Capital Management (“Oaktree”), put it up for sale at the end of last year.
Among the interested bidders are Hong Kong billionaire Li Ka-Shing’s Cheung Kong Infrastructure Holdings, the Kuwait Investment Authority sovereign wealth fund and Canadian pension fund The Alberta Investment Management Corp. With the airport’s track record for being a successful investment for previous owners, it is clear to see why: Dermot Desmond purchased London City Airport in 1995 for £23.5m before selling it to GIP and Oaktree for £750m in 2006.
Since its opening in 1987 London City Airport has seen a huge growth in passenger numbers from 133k in 1987, to 3.2m in 2008, to a record 4.3m in 2015, making it the thirteenth busiest airport in the UK and the fifth busiest airport serving London. An application for planning permission to expand the airport to accommodate 6m passengers annually has recently been rejected although the owners are awaiting the result of an appeal against that decision.
The prospective sale does not appear to be good news for all concerned, however, as British Airways, CityJet and Flybe (who together run 70% of the flights to and from London City Airport) have warned that airport fees would likely need to be raised should the £2bn asking price be achieved. Should the new owners decide to raise the airport fees the three main operators would, it has been suggested, seriously consider withdrawing their business from the airport. Willie Walsh, the CEO of BA’s parent company International Airlines Group has branded the price tag “foolish” on this basis.
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