IT WAS a terrible week to announce the sale of an airport. Snow has sent air travel into meltdown, in spite of airports’ best efforts to stock up on pricey new ploughs and grit, while safety fears over Boeing’s new Dreamliner planes are playing havoc with the industry’s public image.
For Stansted, however, any buyer would have been good news. It’s been more than three years since the Competition Commission put a question mark over the airport’s ownership, starting a volley of ultimately fruitless appeals while traffic dwindled.
Heathrow Airport Holdings, known as BAA until its antitrust-enforced asset sales stripped it of all but four airports, has done well to get £1.5bn for an airport that brings a quarter fewer passengers through its doors than it did half a decade ago. More than two-thirds of its traffic relies on Ryanair’s routes.
Manchester Airports Group, which already owns Bournemouth and East Midlands airports, justified the price tag by talking up Stansted’s “significant growth potential”.
Stansted is indeed only half full, based on its current deal with the government to carry up to 35m passengers a year on its single runway. Its cargo operations also have space to grow.
But MAG and its new partner, Industry Funds Management, have their work cut out to turn around the airport’s sliding traffic.
According to the most recent Civil Aviation Authority passenger survey, Stansted has the edge when it comes to value-for-money: a third of Stansted passengers choose the airport for cost reasons.
Heathrow attracts roughly the same proportion thanks to the routes it offers, but its customers score higher on airport loyalty. Poaching Heathrow’s passengers, or persuading Stansted’s existing customers to try new flights to growth markets such as Brazil, is no easy task.
The CAA is also the body responsible for keeping a lid on airport charges, a cap that cushions ticket prices from steep hikes but represents a long-standing bugbear of Stansted’s current managers.
This makes the new owners’ relationship with Ryanair even more important.
Michael O’Leary’s firm, which has welcomed Stansted’s new owners, decided to scrap 90 per cent of its Manchester routes in a spat over airport charges in 2009.
MAG and IFM are both experienced airport owners, with plenty of ideas intended to improve Stansted’s performance. After three years of uncertainty and 18 months putting together a proposal, there’s plenty to do. But they can’t control the weather – or Ryanair’s reactions to their ambitious plans.
ADVISERS STANSTED SALE
JP MORGAN CAZENOVE
The £1.5bn sale of Stansted Airport has supplied a string of City firms with advisory work.
JP Morgan Cazenove is acting as Manchester Airports Group’s financial adviser, with RBS advising on debt matters.
Investment bank Gleacher Shacklock is advising Industry Funds Management, which is taking a minority stake in Stansted and Manchester through the deal.
Deutsche Bank and ING are advising Heathrow, alongside legal advisers Freshfields and Herbert Smith, property specialist Strutt & Parker, risk adviser Marsh and PwC.
Also on the firm’s advisory team was transport consultancy Steer Davies Gleave, whose track record includes producing a report last May for the Civil Aviation Authority on Stansted’s operating costs and investment plans.