British Airways says London City Airport’s GBP 2bn asking price is ‘foolish,’ threatens to cut flights if landing charges increased
London City Airport could lose British Airways flights if a buyer for the UK-based airport increases landing charges to help pay for the cost of a takeover, the Financial Times reported. The newspaper quoted Willie Walsh, the CEO of British Airways’ parent company International Consolidated Airlines Group [LON:IAG], who voiced worries about the GBP 2bn (EUR 2.64bn) price tag put on London City Airport by its owner Global Infrastructure Partners (GIP).
GIP began a sale process for London City Airport in August 2015 and has received a minimum of three bids, the item said. The valuation is 44 times the airport’s FY14 earnings before interest, tax, depreciation and amortisation, according to the report.
British Airways is London City Airport’s largest airline customer, accounting for about 40% of passengers using the airport annually, the article added.
Walsh said he cannot envisage a buyer being able to cover its costs or make a return on a GBP 2bn investment without significantly increasing airport charges.
The CEO went on to describe the valuation as “foolish” and said IAG would cut its flights at London City should the airport increase its landing charges.
An analyst cited by the report said the Crossrail link, due to become operational in 2018, could add to the pressure on London City, as it would reduce journey times from the London financial centre of Canary Wharf to Heathrow Airport. Close to 66% of London City Airport’s passengers use the airport for business trips, the article noted.
Global Infrastructure Partners and London City Airport refuse to comment, the report said.
As previously reportd, Global Infrastructure Partners holds a majority stake in London City Airport, while Oaktree Capital Management holds a 25% stake.
The investment bank Credit Suisse is advising on the London City Airport sale process, according to previous reports.