MAG ‘plans Gatwick raid’
18.03.08
Manchester Airport has rival Gatwick 'firmly in its sights' as MPs and leading airlines call for the break-up of BAA, the Manchester Evening News reports. The UK's biggest airports operator is currently the subject of a review by the Competition Commission, which could rule that it should sell one of its London airports, and perhaps one of its Scottish airports too.
A powerful committee of MPs has called for BAA's monopoly of London's major gateways - it also owns Heathrow and Stansted - to be ended over the weekend. Yesterday, senior executives from easyJet, Ryanair, Virgin and bmi met transport secretary Ruth Kelly to also call for action.
Manchester Airports Group (MAG), the country's second largest airports operator behind BAA, already owns East Midlands, Bournemouth and Humberside Airports, 'but would dearly love to add a London gateway to its portfolio,' the newspaper claims.
It says that, although Gatwick or Stansted would cost billions of pounds, MAG chiefs are willing to form a partnership with private equity or other outfits such as American investors or the Australian infrastructure and banking giant Macquarie (and Canadian pension funds too, we assume), to achieve their goal.
Geoff Muirhead, chief executive of MAG, told the MEN: ‘We have a strong track record when it comes to running airports. We have a lot of skilled people who have developed very good relationships with airlines and other partners. The group is interested in acquiring assets that will add value for our shareholders.’
The newspaper speculates that 'BAA, which is owned by Ferrovial, could decide to press ahead with a break-up of its own accord before being ordered to do so by competition regulators, which would prevent a 'fire sale' of its assets. That could mean an announcement by the end of the year.'
With the Competition Commission not expected to report before the end of the year (and a final outcome perhaps two years or more away), BAA planning to use the London airports to back bonds to refinance its debt, and the growing credit crisis driving down the value of assets, we think this is unlikely. BAA is already struggling to sell its commercial property portfolio, according to press reports.
In addition, MAG is owned by the 10 local authorities of Greater Manchester. We can see a value in the council's owning Manchester Airport, which has low debt levels and produces a good income stream for them. However, it might be difficult politically for the councils to back a highly leveraged - and therefore risky - airport purchase, even with a big partner in tow. There were already calls last year from business leaders and politicians for the councils to sell MAG.
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