WHY AIRPORT EXPANSION? the Overseas Investors demand profits

Home Portfolio WHY AIRPORT EXPANSION? the Overseas Investors demand profits

In a nutshell …

The airport is owned by a Canadian investment fund, the Ontario Teachers Pension Fund (OTPP). The plan to grow by 50% is symptomatic of a high level of financial instability in its core aviation business.

The Airport is badly served by public transport, with 69% of passengers arriving by car. The Airport’s Canadian and Australian owners aim to take advantage of this by increasing passenger so sucking in cars to ramp up profitable parking revenue. This will also increase the asset value of the airport, fattening the cow at the expense of the pasture…  There is little care for the impact on tiny, remote North Somerset.

In more detail …

The financial accounts for 2016 show that the Airport has accumulated massive debts. It is clear that the overseas owners have instructed the Airport to develop a predatory Master Plan in order to:

  • repay the investment and loans from bankers and the owners themselves;
  • drive up the value of the Airport as a commercial asset, fattening the calf for sale…

The Airport makes a loss on its core aviation operation which generated only £34 million in 2016. A further £26 million came from was from concessions (shops cafés and other retail). However the most profitable part of the business, generating £27 million, came from car parking. Car parks are very profitable so the Airport will focus on ways to increase parking revenue. Without the income stream from parking the viability of the airport would be questionable since the lower landing fees set to encourage use of the airport by flight operators are heavily subsidised by parking profits.

Why yet more car parking is the Airport’s answer to its problems…

These overseas owners expect up to 15% p.a. return on capital. Unusually for an investment fund, Ontario Teachers’ Pension Plan is a

hands-on investor dedicated to ‘active management’. In its own words:

      ‘Active management’ means finding investments that we believe are undervalued and then using various business strategies to get the best possible returns

So the overseas investors have decided on a cynical and opportunistic strategy to ‘add value’ and get ‘the best possible returns’ by exploiting the poor access to this Airport, particularly the lack of rail and coach links that encourage more passengers to use a car than any other airport in the UK (69%). The investors solution to increase passenger numbers by 50% is intended to suck in more private cars and massively increase profits from parking  – as long as North Somerset Council gives them permission to add nearly 5,000 car park spaces to the Green Belt site.

The sole motive for the proposed expansion North Somerset and Bristol is commercial profit for these overseas investors who want to turn the Airport into a parking business with a landing strip attached.

The Airport’s complex financial structure is such that it pays very little tax in the UK. Nor, despite the Airport’s inflated claims, does expansion benefit the regional economy.