Two Scottish airports to change hands? Part one: Edinburgh sale in the spotlight
The UK has been at the global centre of airport privatisation, especially in the 1990s and early 2000s.
The Scottish airports at the capital, Edinburgh, and at Glasgow Prestwick on the west coast were either acquired from BAA plc by a US-based investment funds manager (Edinburgh) or bought by a succession of what can best be described with hindsight as - 'chancers' (Prestwick).
Edinburgh carried on in the same ownership vein, but in 2013 an ailing Prestwick had to be saved by the Scottish government, which acquired it for almost nothing, and in the same year as Cardiff Airport was also saved by the Welsh government (although substantial money changed hands in that instance).
Over a decade on it looks as if both airports could be sold again in 2024, and in both cases representative of the changing mores of the airport sector.
In Edinburgh's case any sale would likely be to a major player in the industry, and it might be a partial sale. A complicating factor arose as this report was being prepared, namely the agreement of an acquisition of Edinburgh Airport's majority owner GIP by BlackRock.
In Prestwick's case a buyer might not only see an airfield. There are plenty of other potential uses for the land.
And it is always possible that the Scottish government might convert a share in Edinburgh Airport, located in the national capital.
This is part one of a two-part report.
Summary
- Two Scottish airports only 70 miles apart could be sold in 2024 - one government-owned, the other in private hands.
- One is primary and historically the sixth busiest in the UK, with intercontinental services and a broad business model mix.
- The other is secondary and relies wholly on Ryanair to provide air service, but there are other aspects to its own business model.
- Both have a recent history of 'potential' sales, but the odds have improved with a slow recovery in airport M&A activity emerging.
- Edinburgh Airport would probably go to a major player in the sector and perhaps as a partial sale; Glasgow Prestwick Airport possibly to non-aviation interests with a single buyer.
- The prospect of the Scottish government selling Prestwick and then investing in Edinburgh cannot be discounted entirely, but the latter is in a different league.
- BREAKING NEWS - Edinburgh Airport operator GIP to be acquired by Blackrock.
In a stagnant market two Scottish airports could be sold at the same time
While airport M&A activity globally remains in the doldrums, two airports in Scotland in the United Kingdom may possibly be sold, and they are just 70 miles (112km) apart.
The airports are at: Edinburgh, the mixed business model facility serving the Scottish capital, the second most visited British city from abroad, and the sixth busiest UK airport in 2019 before the COVID pandemic; and the much smaller Glasgow Prestwick, a secondary level facility that hosts Ryanair exclusively, and is situated on the Irish Sea coast about 35 miles (56km) from Glasgow, which is Scotland's largest city.
Edinburgh Airport consistently the sixth busiest in the UK
Edinburgh Airport, to the west of the city centre and accessible by a tram (light rail) service from there, was purchased by Global Infrastructure Partners (GIP) in 2012 for GBP800 million, during the enforced break up of BAA plc.
GIP is now the majority owner, together with two Australian funds.
Edinburgh Airport: ownership as at 08-Jan-2024
Edinburgh's passenger traffic throughput in 2019 was 14.7 million, making it the sixth busiest in the UK - as it has been consistently since 2013 and through to 2022. The airport recovered from a low of just over three million in 2021 to 11.25 million in 2022, and then to almost 11 million in the first nine months of 2023 (1-3Q2023), the latest figure available.
Passenger statistics are available for almost 30 years, and they show a marked increase in growth during the five years 2015-2019 before the impact of the COVID-19 pandemic was felt. Business was developed at both ends of the scale, from low cost carrier (LCC) short haul services to long haul flights.
Edinburgh Airport: annual traffic, passenger numbers/growth, 1996-2023
Edinburgh, like many UK airports today, sees much of its capacity on LCCs - in Edinburgh's case, 68% for the week commencing 08-Jan-2024.
Edinburgh Airport: seats by business model, week commencing 08-Jan-2024
British Airways has a large capacity share and will introduce regional European services this year
More than half (55%) of that capacity is taken up by easyJet and Ryanair, the two main airlines.
However, British Airways has a surprisingly large share (14%) at Edinburgh, for a presence at a regional airport, mainly taken up by its flights to and from London airports, although the airline is introducing a European regional flight programme to five tourist destinations in 2024, something that other UK regional airports don't get from the London-centric airline.
Edinburgh has well established and growing long haul operations, with regular or (mostly) seasonal flights to the US (seven airports), Canada (three), the Middle East (one) and China (one), which are at least partially supported by the incoming tourist business that it sustains as a major attraction to foreign visitors.
Edinburgh Airport: network map for the week commencing 08-Jan-2024
Almost two thirds (60%) of capacity at Edinburgh is on international services, the vast majority to Europe, led by Spain and Ireland, but more than 74% is on unaligned airlines.
Edinburgh has supposedly been 'on the market' several times previously
This is not the first time that it has been suggested that Edinburgh Airport might be sold.
GIP has been winding down its UK interests, disposing of London City Airport in 2016 to a gaggle of investment, pension and sovereign wealth funds for a hefty profit. Then, in Dec-2018, minimising its equity share in London Gatwick Airport to 49.99% as part of a consortium with two existing pension and two sovereign wealth fund investors, in favour of a 50.01% share thenceforth held by VINCI Airports.
GIP has since been focused on opportunities elsewhere: such as in Sydney, where it became a minority shareholder in the Kingsford Smith airport early in 2021; in Greece and the Philippines (as a prospective investor); and in the USA, where it was a bidder for the aborted St Louis Lambert Airport lease in 2019 and where it became an investor in the Paine Field Passenger Terminal at Everett Paine Field Airport (Washington state) in 2019.
In Feb-2021 GIP was part of a consortium, along with Blackstone and the Bill Gates-owned Cascade Investments, which bought the London-listed airport FBO operator Signature Aviation.
On the last occasion that Edinburgh Airport was thought to be for sale - as discussed in UK's Edinburgh Airport sale rumours emerge again - who might buy it and what would it be worth? in Oct-2022 - GIP denied any intention to sell it, as it always has.
Could VINCI do a deal similar to the one at London Gatwick?
CAPA - Centre for Aviation speculated at the time that VINCI would be the most likely buyer.
VINCI has experience of operating primary or secondary capital city airports with a tourism bent in Lisbon, Stockholm and Phnom Penh and also in resort cities like Orlando and Acapulco in one way or another. It is a minority shareholder in Groupe ADP, the operator of the Paris airports, and it manages Belfast International Airport in the UK, amongst its 71 assets worldwide.
Moreover, it has learned how to operate closely with GIP at Gatwick, indicating that another partial sale could be in the offing, with perhaps a reduced GIP shareholding wrapped up with those of the Australian investors.
Another possibility might be the Spanish company Ferrovial, which recently sold its 25% stake in London Heathrow airport but which retains its 50% interest in AGS Airports - which operates Glasgow International and Aberdeen airports in Scotland. Competition issues would undoubtedly arise if it were to declare an interest in Edinburgh.
An outsider would be IMF, the Australian fund manager that is a 35% shareholder in Manchester Airports Group and one that has been expanding in recent years.
Valued at GBP2.5 billion
GIP has hired HSBC and JP Morgan to oversee the sale of Edinburgh Airport, and that an asking price of GBP2.5 billion has been suggested.
That is almost exactly what CAPA - Centre for Aviation valued it at in Oct-2022, based on its EBITDA in 2019 and a pre-pandemic valuation earnings multiple in the business that averaged 19 times earnings (i.e. it would take 19 years to repay the purchase out of earnings in the year before the sale).
BlackRock agrees GIP purchase in USD3 billion deal
Global Infrastructure Partners (GIP) and BlackRock Alternative Investors confirmed on 15-Jan-2024 that they have entered into an agreement for BlackRock to acquire GIP for a total consideration of USD3 billion and approximately 12 million shares of BlackRock common stock. The transaction is expected to close in 3Q2024, subject to customary regulatory approvals and other closing conditions.
Any proposed sale of Edinburgh Airport will have been taken into account in this agreement.