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Ryanair expresses interest in Stansted as BAA puts it up for sale Ryanair expresses interest in Stansted as BAA puts it up for sale
(about 6 hours later)
BAA has put Stansted airport up for sale in a move that could see Ryanair taking a stake in its biggest British base. It transformed the airline business with its no-frills approach to flying and now Ryanair is considering the same approach with airports after the budget carrier confirmed its interest in acquiring London Stansted.
Britain's largest airport group announced on Monday that it is ending a protracted legal battle over the sale of the Essex airport, which had been ordered by the Competition Commission in 2009 but had been hotly contested by its owner ever since. BAA said it would not challenge a recent loss in the court of appeal over the commission ruling and will sell the airport. Stansted is valued at just over £1.3bn according to a formula used by the Civil Aviation Authority, the industry regulator, to calculate landing charges at the airport. However, some industry observers view £1bn as a par bid for the asset. The Dublin-based airline has held discussions over taking a 25% stake in the Essex airport, which has a price tag of more than £1bn. The current owner, BAA, announced on Monday that it is ending a protracted legal battle to prevent the sale of Stansted, which had been ordered by the Competition Commission in 2009 but had been hotly contested by BAA.
"Having carefully considered the court of appeal's recent ruling, BAA has decided not to appeal to the supreme court and is now proceeding with the sale of Stansted Airport," said BAA. A spokesman for Ryanair, which operates 41 planes from the airport, said the carrier would be interested in a deal. Last month Howard Millar, Ryanair's deputy chief executive, said the airline has been approached by potential buyers with the view to joining a consortium bid. He said: "We have met these consortia and they want us to be an anchor tenant." Last year Stansted posted an operating profit of £39.4m, compared with £526.8m at Heathrow. A spokesman for Ryanair, which operates 41 planes from the airport, said the carrier would be interested in a deal following the BAA announcement.
A spokesman for Ryanair said on Monday that if the airline did not take a stake it would also be interested in giving long-term assurances to bidders over its commitment to the airport. Ryanair and its biggest Stansted rival, easyJet, have been pulling capacity out of the airport over the past five years, reflecting their displeasure over rising landing fees. The Ryanair spokesman said the airline would be interested in returning the airport to pre-boom levels of use, when it handled 24 million passengers a year compared with 18 million now. "There is huge growth potential there and we would be very interested in discussing the future of Stansted with any groups looking at a potential purpose." Last month Howard Millar, Ryanair's deputy chief executive, said the airline has been approached by potential buyers with the view to joining a consortium bid. He said: "We have met these consortia and they want us to be an anchor tenant."
Stansted is now Britain's fourth largest airport, having slipped behind Manchester, which carried 18.8 million passengers last year – 760,000 more than Stansted. The Essex airport will be BAA's third major disposal following the sale of Gatwick in 2009 and the disposal of Edinburgh Airport in 2012. Both times the airports were acquired by Global Infrastructure Partners, a New York-based investment group, but it is believed that GIP is not interested in bidding this time. As the owner of London's City airport, it is also likely that any offer would face watchdog scrutiny. As well as Ryanair other potential bidders include Manchester Airports Group and South Korea's Incheon. Ryanair has long campaigned to have airports remade in its low-cost image, and has cited Stansted as an example of the "Taj Mahal" facilities that are out-of-kilter with the low-cost model that now dominates the European short-haul market.
Last week BAA's biggest shareholder, Spanish conglomerate Ferrovial, announced an agreement to sell 10% of BAA to Qatar's sovereign wealth fund in a transaction that would give Qatar Holding a 20% stake in BAA's parent company. A Ryanair-owned airport would emphasise low cost and quick turnarounds, so the airline will speed up the journey from check-in to security and the departure gate if it can. "We want as small and efficient a facility as possible," said a Ryanair spokesman.
At Stansted, however, that would probably have to apply to a new terminal. The current terminal, designed by renowned British architect Lord Foster, embodies the "glass palaces" that are hated by Ryanair's outspoken boss, Michael O'Leary, because the cost of building them is recouped in higher landing fees that in turn result in steep fare increases. Passengers would also be expected to walk on and off airplanes via steps, instead of the airport bridges that are common at Heathrow.
"The future for short-haul airlines in Europe is walk-on and walk-off services," said the spokesman.
However, shops and restaurants would still be available in departure terminals, disproving conspiracy theories that Ryanair would limit refreshments at airports in order to boost onboard food and drink sales. "There would need to be restaurants and bars, we accept that," said the spokesman.
Last year, Stansted posted an operating profit of £39.4m, compared with £526.8m at Heathrow, but Ryanair believes that would be even bigger if the owner lowered its landing charges to encourage more traffic – which in turn could trigger the return of Ryanair routes that have been pulled by the carrier in recent years in a protest over fees.
A spokesman for Ryanair said on Monday that if the airline did not take a stake it would also be interested in giving long-term assurances to bidders over its commitment to the airport.
Ryanair and its biggest Stansted rival, easyJet, have been pulling capacity out of the airport over the past five years, reflecting their displeasure over rising landing fees.
The Ryanair spokesman said the airline would be interested in returning the airport to pre-boom levels of use, when it handled 24 million passengers a year compared with 18 million now.
"There is huge growth potential there and we would be very interested in discussing the future of Stansted with any groups looking at a potential purpose."
Stansted is now Britain's fourth largest airport, having slipped behind Manchester, which carried 18.8 million passengers last year – 760,000 more than Stansted. The Essex airport will be BAA's third major disposal following the sale of Gatwick in 2009 and the disposal of Edinburgh airport in 2012. Both times the airports were acquired by Global Infrastructure Partners, a New York-based investment group, but it is believed that GIP is not interested in bidding this time. As the owner of London's City airport, it is also likely that any offer would face watchdog scrutiny.
As well as Ryanair, other potential bidders include Manchester Airports Group, which has expressed a strong interest in Stansted.
It is not unknown for airlines to invest in airports. Germany's Lufthansa owns 10% of Frankfurt airport and has a joint venture in a terminal at Munich airport. Ryanair also advised on the design of a terminal at Charleroi airport in Belgium.
However, some experts have warned that Ryanair's interest could lead to other carriers quitting the airport.
Chris Tarry, an airline industry consultant, said other airlines might be deterred from using Stansted if Ryanair became a co-owner of the airport. "Ryanair is in a dominant position at Stansted and short-haul airlines already have concerns about going there because they already have a very forceful competitor there. So what will they think if that competitor also becomes a shareholder in Stansted?"
BAA said it would not challenge a recent loss in the court of appeal over the commission ruling and will sell the airport. Stansted is valued at just over £1.3bn according to a formula used by the Civil Aviation Authority, the industry regulator, to calculate landing charges at the airport. However, some industry observers view £1bn as a par bid for the asset.
"Having carefully considered the court of appeal's recent ruling, BAA has decided not to appeal to the supreme court and is now proceeding with the sale of Stansted airport," said BAA. Last week BAA's biggest shareholder, Spanish conglomerate Ferrovial, announced an agreement to sell 10% of BAA to Qatar's sovereign wealth fund in a transaction that would give Qatar Holding a 20% stake in BAA's parent company.