DCSIMG

Taxpayers are new owners of Prestwick airport

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  • by ALASTAIR DALTON
 

The Scottish Government stepped in and bought ailing Prestwick airport after revealing it would otherwise have closed with the loss of up to 1,400 jobs.

Deputy First Minister Nicola Sturgeon told MSPs that taking the airport into public ownership had been the only alternative to it being shut by its owners after they failed to find a buyer.

She said that returning the loss-making Ayrshire airport to profit under government ownership would be “demanding but possible”.

Ms Sturgeon said the airport was likely to stay in state hands for several years but did not disclose how much the move was likely to cost taxpayers.

Last night, experts questioned whether the airport, which is haemorrhaging £7 million a year in operating and building losses, had a commercial future, and whether public support would give it an unfair advantage over nearby rival Glasgow. There were also concerns over whether Ryanair would seek to 
exploit its position as Prestwick’s sole remaining airline.

The airport has fared badly in competition with Glasgow and Edinburgh airports, which have lured away airlines such as Wizz. The success of the two bigger airports has also led to falling passenger demand.

Ms Sturgeon admitted that saving Scotland’s fourth busiest airport would require a “wide-ranging efficiency programme and disposal of surplus assets” – calling into question how many of its 300 jobs will be saved. A further 1,100 jobs depend on the airport, including those in associated and neighbouring firms.

Ms Sturgeon told MSPs: “The Scottish Government has advised the current owners of our intention to commence a process towards acquisition of Prestwick airport.”

A “commercial partner” would run it on behalf of ministers before it was eventually sold back to the private 
sector. Ms Sturgeon said New Zealand owner Infratil – which has owned the airport since 2001 – would have shut the airport if it had not secured a sale to the public sector.

Infratil has failed to attract a private buyer since putting the site up for sale 18 months ago as an “under-performing asset”. Prestwick’s valuation is thought to have dropped to under £10m compared to the £33m paid by Infratil when it was bought from Stagecoach in 2001.

Ms Sturgeon said closure was a “very real alternative”. However, she was bullish about its prospects, despite its passenger total now being about half its peak of 2.4 million in 2006.

Ms Sturgeon said: “We believe Prestwick airport can have a positive future. It will require investment and it will take time.

“Over the next few weeks we will focus on due diligence, legal and commercial issues around public ownership and the development of a business plan that will allow Prestwick to thrive once again. I want to stress to staff and passengers booked to fly from Prestwick that in the meantime it is business as usual at the airport.”

The takeover comes six months after the Scottish Government told The Scotsman it had no plans to follow the Welsh government’s lead in nationalising Cardiff airport.

Opposition politicians warned there must be limits on Scottish Government help for the airport.

Scottish Conservative transport spokesman Alex Johnstone said: “It is going to take an enormous effort to get the airport back into profit and make it sustainable for the future.

“That will involve a significant level of restructuring, and the Scottish Government has to have the courage to do what’s necessary, rather than simply pouring money into something without accruing any benefit.”

South of Scotland Liberal Democrat MSP Jim Hume said: “At the moment the Scottish Government doesn’t have a plan or a price. These will need to be set out clearly before we know for sure that a long-term future can be achieved.”

One Scottish aviation consultant told The Scotsman: “The fact that Infratil could not find a buyer anywhere in the world suggests Prestwick has a less than rosy future.

“In addition, any new owners of an airport which has Ryanair as a significant, let alone only customer, is going to find it extremely difficult to negotiate.”

Aviation expert John Strickland, of JLS Consulting, said: “The challenge for the Scottish Government will be running Prestwick so close to a privately run airport, Glasgow.”

However, fellow aviation consultant Laurie Price said: “You now have the certainty of an investor taking a long-term perspective, which provides a degree of security.”

Glasgow airport did not respond to the move, suggesting it was still considering its position. Its spokesman said: “We are unable to comment at this stage.”

Ms Sturgeon also hinted the airport’s controversial “Pure Dead Brilliant” slogan could be scrapped as part of possible future rebranding.

If the airport had been closed, it is not clear if it could have been sold off for redevelopment because of possible legal agreements with neighbouring aerospace firms. The airport, as well as a major employer, is seen as crucial to the surrounding cluster of aerospace firms, which make parts for aircraft such as the Airbus A380 superjumbo and Boeing’s 787 Dreamliner.

Central Ayrshire Labour MP Brian Donohoe said: “The airport has been moribund for about ten years – income has not matched spending. There has not been the necessary investment.”

Despite its troubles, Prestwick’s passenger numbers have been increasing again for several months. It reported last week it had handled 742,413 passengers in the six months to September – up 7 per cent on last summer.

Infratil chief executive Marko Bogoievski said the airport had been put up for sale in March last year “as part of a process to refocus its investment profile”.

He said: “Recognising the importance of the airports to their local communities, Infratil’s preference has been to secure a new owner with the capacity to support their future success.

“We believe a Scottish Government acquisition of Prestwick achieves that objective, and will work pro-actively with the Scottish Government over the next six weeks towards achieving completion of a transaction.”

A Transport Scotland spokesman said: “Once the Scottish Government has completed its due diligence and is content to proceed, it will negotiate a purchase price with Infratil that will aim to maximise the return for taxpayers’ investment.”

Background: Visit left scotland all shook up

• Flights first began from or near the site of Glasgow Prestwick International Airport in 1913 – just ten years after the Wright brothers, the inventors of the world’s first successful aeroplane, took to the skies.

• The airport’s official opening was in 1934 and during the Second World War up to 300 American aircraft flew in on a daily basis.

• One of the airport’s most famous passengers was 25-year-old Elivs Presley who landed there at 7:30pm on

3 March 1960 – the only time the legendary singer set foot on British soil.

Elvis was finishing his American army national service in Germany and stopped over at the airport for just two hours. Prestwick was home to the 1631 US air force unit and word leaked out that a mystery VIP was flying in. When Sergeant Presley alighted from the plane he was mobbed by local fans.

In 2010 the airport unveiled a plaque commemorating the 50th anniversary of the “King’s” visit. A lounge in the airport also bears his name.

• The role played by the US in controversial rendition flights came to the fore this week after the Lord Advocate was urged to instigate a criminal investigation into claims made by researchers that CIA-linked planes allegedly landed at Prestwick and other Scottish airports as part of its rendition programme to interrogate terrorist suspects.

• Since 2007 the airport has been used to film a number of episodes of the BBC motoring show Top Gear. The most famous scene was a take on scene from Casino Royale and featured a Ford Mondeo and a Citroën 2CV in an experiment to see if the thrust from the four engines of a Virgin Atlantic Boeing 747-400 could lift a car off the ground.

George Kerevan: Sky’s the limit for Prestwick to turn around its fortunes

Public ownership of airports is not uncommon. A majority stake in Manchester airport (the busiest outside London) is owned by a consortium of local authorities.

Manchester proved so successful that this consortium bought Stansted airport in February for a whacking £1.5 billion. In March, the Welsh government purchased Cardiff airport for £52 million.

Public involvement is necessary because airports are vital infrastructure like roads and railways. All require huge up-front capital investment that private investors shy clear of.

The economies of major urban centres are now heavily dependent on their local airport – letting an airport collapse hurts everyone, not just passengers off on a hen party.

The economic crisis after 2008 has reduced traffic at many UK regional airports. We saved the banks, but it is just as important to save these regional airports if there is to be a sustained recovery outside of London.

Could public ownership be unfair to Glasgow airport?

Prestwick and Glasgow airports developed to serve different needs and different communities – there is no reason why one should threaten the other.

With its rare, super-long runway, Prestwick has a future as a transatlantic freight hub and as a maintenance base for giant airliners like the Airbus 380 that crowded Glasgow airport cannot accommodate.

Prestwick would be ideal as a location for clearing US customs and immigration on the UK side of the Atlantic – other airports lack the physical capacity to do this.

It would be economically inefficient for any public enterprise to receive subsidies that disadvantaged private operators – but this is outlawed by EU regulation. However, it would be sensible if Prestwick airport was operated independently of ministers, and if there was a long-term strategy to involve private capital – the model followed at Manchester.

Can ministers make a go of Prestwick?

Prestwick makes a £2 million annual operating loss. Yet Ayrshire is a golf magnet while the airport is the only one in Scotland with a train station.

Prestwick has been starved of investment to upgrade facilities – on the air traffic control side, as well as for passengers. With such a boost, it could be turned round.

Unlike Glasgow and Edinburgh, Prestwick airport has significant land available to host new manufacturing and logistics industries. Reviving the Scottish International Air Show at Prestwick could bring 100,000 visitors a year and make the airport exciting.

Prestwick could also do with a new name – Robert Burns International Airport?

• George Kerevan writes and makes documentaries on aviation themes

ELSEWHERE

Leaders: Prestwick deal comes with baggage

The Scotsman Conferences is hosting a series of events capturing the many facets of the Scottish independence debate. 3 December sees a formidable line up of expert speakers tackle “The Independence White Paper: A Business Plan for Scotland?” For more details on this and other great events please visit www.scotsmanconferences.com

 

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