The U.K. government may be forced to close Glasgow Prestwick Airport, Scotland’s fourth-largest airport, after a stalemate was reached on a proposed sale. The rolling deadline for reaching a deal to sell the state-owned airport, which primarily handles cargo, was set at Oct. 4.
A bid by Prestwick-based aerospace company Orbital Access and private equity interests stalled over the Scottish government’s unwillingness to negotiate terms of the sale, including responsibility for £40 million ($52 million) debt owed by Prestwick to the government.
Orbital Access management has bristled at the debt, suggesting that the government’s capital injection was used to cover previous operating losses at the airport, rather than for infrastructure improvements. Scottish media report that the Orbital Access-led bid for the airport was £100 million, plus a further commitment for £200 million.
Scottish Transport Secretary Michael Matheson has indicated he will draw up new plans for Prestwick if a buyer cannot be found. Matheson said that efforts are focused on returning the airport to the private sector, but “should this not be achievable for any reason, we will consider options for taking the airport forward in the future.”
Prestwick was put on the block in June, six years after it was taken under public ownership by the government to save the airport from closure. Official documents stated that a preferred bidder was expected to be chosen in the first week of September and the sale completed by early October.
Prestwick is mostly an air cargo facility, with 2018 freight throughput reaching 13,000 metric tons, according to statistics from the U.K.’s Civil Aviation Authority (CAA), a 14% jump from the prior year. Most freight transiting Prestwick is carried on scheduled cargo rather than chartered cargo flights. A large amount of cargo involves livestock, oil well equipment and aircraft engines.
Prestwick is attractive to cargo carriers because it operates around the clock, with no curfews, noise restrictions or slot constraints. Prestwick also features the longest commercial runway north of Manchester Airport. Cargo carriers using Prestwick include Atlas Air, CargoLogic and Cargolux.
The airport’s sole scheduled passenger carrier is low-cost operator Ryanair, which primarily serves a handful tourist destinations in Portugal and Spain and doesn’t carry cargo. Prestwick trumpets on its website that the airport “currently services daily B747F freight movements along with ad-hoc charters ranging from livestock, oil well equipment and aircraft engines.”
New Zealand-based infrastructure investor Infratil sold the unprofitable airport to the government for a nominal £1 in 2013. Infratil acquired Prestwick for £33.4 million ($48.2 million in 2001 dollars) in 2001 from Stagecoach Group, a multi-modal public transport provider in the U.K.
Separately, U.S.-based infrastructure Global Infrastructure Partners (GIP), the second-largest shareholder in London Gatwick airport, is shopping its remaining 21% stake less than a year after French infrastructure powerhouse Vinci took control of the airport. Vinci Airports, a unit of Europe’s biggest construction and concessions company, agreed to pay £2.9 billion for a 50.01% stake in Gatwick. Vinci acquired the stake from GIP and a consortium of co-investors. The transaction meant that GIP roughly doubled its money after originally investing in Gatwick in 2009.
Airports are attractive to investors burdened by low-yielding traditional investments because of relatively stable and predictable cash flows.
Cargo throughput at Gatwick in 2018 reached over 112 million tons, a substantial jump of 16% over the throughput volume reported for the previous year, according to the CAA.