Gatwick owner hires RBS in bid battle for Edinburgh airport

GLOBAL Infrastructure Partners has given its strongest indication yet that it intends to bid for Edinburgh airport after hiring Royal Bank of Scotland as adviser.

The Scotsman has learned that GIP, which acquired Gatwick in 2009, intends to work with the Scottish Government and the City of Edinburgh Council on a bid that would focus on improving global connections with the Scottish capital.

Edinburgh airport, which handles nine million passengers a year, is being sold following a Competition Commission directive which found that owner BAA operated a near-monopoly because it also owned Aberdeen and Glasgow. BAA was also ordered to sell Stansted and Gatwick to break its stranglehold on the south-east market.

GIP paid £1.5 billion for Gatwick and has also owned London City since 2006, since when it has become an increasingly popular alternative to Heathrow.

The company is not a passive investor but has a policy of investing only where it believes its expertise can add value. At City, punctuality has improved, runway capacity has been increased and there has been a 50 per cent rise in departure lounge space. It has enhanced security and cut average queues for passengers to just four minutes.

Gatwick has become the first UK airport to offer special security assistance to families and those with disabilities and special needs. GIP has worked with airlines to reduce average check-in times from two minutes to 23 seconds. Security complaints are down by 50 per cent. All 1,600 front-line security staff have been trained to City and Guilds standard.

GIP joins a growing list of bidders that includes the listed private equity firm 3i and the US private equity firm Carlyle Group. 3i will work with the Universities Superannuation Scheme and M&G, the fund manager owned by insurance company Prudential. It would probably bid for Edinburgh airport through 3i Infrastructure and has hired the Australian investment bank Macquarie as adviser.

The Scotsman revealed in early November that Scottish transport tycoon Sir Brian Souter is also likely to be involved, possibly via his Souter Investments vehicle taking part in the Carlyle group consortium that includes other prominent Scots such as the investment banker Sir Angus Grossart.

Another Scottish consortium is being led by Ben Thomson, chairman of Inverleith Capital, and former Edinburgh airport managing director Richard Jeffrey who say they have won support from financial backers to mount a bid. BAA is advised by Citi and BNP Paribas and is expected to issue a prospectus early in the new year followed by bids in excess of £450 million.

There has been speculation that a successful bidder may have to pay considerably more, given the likely level of interest that could also draw attention from several others.

Manchester Airport Group, Fraport, owner of Frankfurt; Peel Holdings; Borealis Infrastructure of Canada and Arcus Infrastructure Partners, owner of Forth Ports, are among those mentioned.

TAV, the Turkish-headquartered operator, Aeroports de Paris, owner of Charles de Gaulle, and YVRAS, the owner of Vancouver, are other potential buyers.