London City Airport has officially been sold to a Canadian Consortium for a figure around £2bn. The Airport which is located in Docklands is used mainly by business executives and has been purchased by a consortium led by the Ontario Teachers pension fund and also Borealis who have both also invested in HS1 (High Speed 1).
This business couple were not the only bidders for the London based airport. The Chinese transport company HNA and another Canadian consortium were also in the race for the site, however, the airports price exceeded early expectations. The airport, which serves about 4 million passengers a year has seen tremendous levels of growth in the past 2 years. This is why it’s considered a shame for GIP (Global Infrastructure Partners) to let the airport go from its portfolio, which also includes Gatwick and Edinburgh, especially seeing as the airport was bought for a third of the price 10 years ago.
Unfortunately expansion plans costing around £200m aimed to doubled its passenger traffic by 2030, extending the terminal and airfield to allow 50% more flights has currently been rejected by mayor Boris Johnson. This was amplified by campaigners who aim to shut down operations of an expansion because of the noise pollution and disruption throughout north-east London.
The purchase of the airport could also be detrimental to the relationship with its biggest customer, British Airways. BA’s CEO Willie Walsh claimed that the £2bn purchase was “foolish” and suggested that the company was prepared to move should another company offer a larger landing charge to cover cost of it’s purchase. Walsh also said he could not see how any buyer could “recover or make any return on that investment unless they make significant increases in airport charges”. To put into perspective, Manchester Airport Group’s recently purchased Stansted Airport which has more that 5 times the number of passengers, but was only purchased for £1.5bn. However this could be argued against as London City Airport is in close proximity to Canary Wharf and has an unparalleled location that investors may justifies airlines sustaining higher fares.