Flight plans cancelled

Sovereign Oil

15.75p unch

THERE are several reasons why Ferrovial, the Spanish infrastructure giant which owns BAA, should feel nothing more than a twinge of grudging regret, rather than anger, after the Competition Commission said it should be forced to sell three of its British airports, including one in Scotland.

First, it cannot possibly come as a surprise. Long before the Madrid-based company bought the British Airports Authority, there had been grumbling from airlines and passenger groups alike about the dominance the company held, particularly in London.

While it could argue long and hard in justifying its position – and the company gained substantial backing from business groups in Scotland – significant action of some form was inevitable.

Even if its fate was not determined when it bought the company, numerous incidents over the past two years, including when thousands of passengers have been left stranded or without their bags, have given the impression of an arrogant company aware there is little alternative for passengers. The disastrous opening of Terminal 5, surely, was the coup de grâce.

Secondly, even if the commission's recommendations are enforced in full (the government may attempt to offer an olive branch and allow BAA to retain two London airports, for example), it will still largely have what it wants – Heathrow.

Despite all the talk about the growing importance and reach of regional airports, for a whole host of reasons the world's largest airport is still the unchallenged jewel in the company crown and overwhelmingly its most important asset.

In 2007 it carried as many passengers as Gatwick, Stansted and Edinburgh (the next three largest UK airports) put together.

While Heathrow may be bursting at the seams, there are a host of reasons why it will retain its position as the world's leading airport, even if one of the main ones is simply its reputation.

Nevertheless, the company may feel a twinge of regret, mainly because it did not bite the bullet and act sooner.

Whatever method it used to calculate how much it was prepared to pay for BAA, it is almost certain the valuations Ferrovial gave to the likes of Gatwick and Glasgow airports when it bid are substantially higher than the market will value them now, with the Spanish company likely to be forced to sell them from a double-barrelled position of weakness.

Valuations for infrastructure assets (which, despite the potential for growth, is what airports are) in general are not what they where two years ago.

Ferrovial won a protracted auction for BAA for £10.3 billion in 2006, when the bull market still had more than a year to run, and private equity companies were still able to get debt at rates which made large and steady cash cows, such as airports, ideal targets. No more.

While there is little in the way of benchmarks for airports, if they follow the trend of their major customers, airlines and, increasingly, retailers, valuations are likely to have dropped substantially over the last 12 months.

Had Ferrovial looked to sell off one London and one Scottish airport 18 months ago, it may have not only gained a better price, but avoided being ordered to sell a second London airport.

Now the market is lining up to buy the assets, knowing only too well that Ferrovial will have to accept what it is given.

NON-EXECUTIVE positions are frequently dismissed by those who are unable to gain them as "nice work if you can get it".

For less than a fortnight's worth of direct work, attending meetings to challenge, or simply approve, the executive directors' plans, the corporate fat cats usually receive at least £15,000 a year from even the smallest companies.

Meanwhile those who join the table of FTSE-100 giants often earn closer to £60,000.

But one wonders at the attraction for young Sheikh Sabah Ali Fahad Al Salem Al Sabah, the latest non-executive at Sovereign Oilfield Group, an Aim-listed oil services group which, due to concerns over debt, has fallen in value to just a few million pounds.

Fitting somewhere into the fabulously wealthy Kuwaiti royal family, the attraction of perhaps eight long-haul trips a year to Aberdeen – no offence to the Granite City – is a strange career path for a 25-year-old who, you might presume, could use his connections to find a more exciting job closer to home.

"You have to start somewhere," a spokeswoman said yesterday. Nice work if you have to start somewhere, I guess.