The Heathrow owner with the largest share (25%), Ferrovial, has opened the door to selling its stake, as it is unclear if it will ever be able to build a 3rd runway. A top executive at Spanish infrastructure giant Ferrovial said it would look at the merits of bidders if there are offers. It is likely that buyers are being informally sounded out about buying the 25% stake. Recently the regulator, the CAA, ruled that Heathrow will have to cut its passenger charge from £31.57 to £25.43 next year, so the airport will be less profitable. One exit option could be for Ferrovial to sell up to one of its fellow shareholders. Heathrow has proved a lucrative investment for its shareholders, giving them £4 billion in dividends between 2012 and 2020. Though in 2020 the Supreme Court gave permission a 3rd runway, Heathrow got rid of its expansion team, and would have to do a lot of work to reinstate the now outdated plans – against fierce opposition.
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By Oliver Gill, The Sunday Times
November 5th 2023
Ernesto Lopez Mozo suggested bidders were “knocking on our door” for a piece of Heathrow
Heathrow’s owner has opened the door to selling its stake as the fate of the airport’s third runway hangs in the balance.
A top executive at Spanish infrastructure giant Ferrovial said it would look at the merits of offers if bidders “keep knocking on our door”.
The remarks by Ferrovial finance chief Ernesto Lopez Mozo come amid claims that buyers are being informally sounded out about acquiring a 25 per cent stake in Heathrow. “They’ve been testing the market to see who might be interested,” one senior City source said.
A long row over passenger landing charges at Heathrow was ended in September when competition authorities approved proposals from the aviation regulator for a cut in fees. Charges will fall from £31.57 to £25.43 next year.
The decision pleased neither Heathrow nor the airlines, with carriers saying the airport was already one of the most expensive in the world and that charges should be cut further.
Asked whether the end of the dispute meant Ferrovial was now open to selling its stake, Mozo said: “We are open to different alternatives [with Heathrow], as with any other [asset] in the portfolio. So if an opportunity keeps knocking on our door, we will look at it on financial merits.”
The remarks were interpreted by another senior City figure as meaning that Ferrovial was now open to offloading its stake. “If he’s [Mozo] saying that, it means he has thought carefully about it beforehand.”
Ferrovial, seen as the driving force at Heathrow, owns the business alongside a clutch of overseas investors from Qatar, Canada, Singapore, Australia and China. One exit option could be for Ferrovial to sell up to one of its fellow shareholders.
Heathrow has proved a lucrative investment for its shareholders, handing them £4 billion in dividends from 2012 to 2020. It is still mulling whether or not to press ahead with the building of a third runway. The plans were backed by parliament in 2018 but scuppered by a legal challenge from environmental campaigners.
The Supreme Court ultimately backed Heathrow, but the airport has gone back to the drawing board.
https://www.thetimes.co.uk/article/cf5b3a3a-7b45-11ee-83ba-000db1848e33
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Heathrow Airport Holdings Limited (formerly BAA) owns and runs Heathrow Airport,
Heathrow Airport Holdings Limited is in turn owned by FGP Topco Limited, a consortium owned and led by the infrastructure specialist Ferrovial S.A. (25.00%), Qatar Investment Authority (20.00%), Caisse de dépôt et placement du Québec (CDPQ) (12.62%), GIC (11.20%), Australian Retirement Trust (11.18%), China Investment Corporation (10.00%) and Universities Superannuation Scheme (USS) (10.00%).
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Ferrovial, which owns 25% of Heathrow, is considering selling its stake. A French investor, Ardian – which has other airport interests – might buy it. Ferrovial considers it has not made, and is not making, enough money from Heathrow. It is displeased by the CAA ruling, that Heathrow cannot hugely increase its landing fees charged per passenger at Heathrow. Heathrow wanted to put this up to over £40 per person, but recently the CAA ruled that it will have to fall from £30.19 to £26.31 by 2026, despite a furious lobbying effort by the airport. Ferrovial is understood to have been approached by Ardian, a Paris-based private equity firm, about a possible joint deal with Saudi Arabia’s Public Investment Fund. Ardian held a 49% stake in Luton airport between 2013 and 2018. Ferrovial has said it would be sceptical about committing further funding to Heathrow if the airport cannot get CAA agreement on charges. The lower landing charges are a disincentive to new investors, who fear low profits. Experts consider that any decision to cut off funding was likely to scupper plans for a 3rd runway, with progress already disrupted by a sharp fall in air travel during the pandemic and huge debts.
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Heathrow has been highly profitable for its owners, which include Ferrovial, the Qatari sovereign wealth fund, and USS, the British academics’ pension scheme. Since 2012, the owners have taken £4 billion in dividends (but nothing in 2021 and only £100m in 2020)— and Heathrow is still valued at more than £17 billion. But it has £16 billion of debt to boost the returns. These amazing economics are due to the antiquated way Heathrow is regulated. Because it’s a monopoly, for long haul flights, the CAA sets its returns, using the “regulated asset base” (RAB), and decides what it can charge airlines on the back of that. But this encourages the owners to throw as many costs as they can on to the RAB. Inflating Heathrow’s value means they get paid more. So wherever it can, Heathrow gold-plates spending – with everything costing as much as possible. Much of Heathrow’s income comes from passenger charges, which were £19 pre-Covid; the CAA allowed a temporary increase to £30; and they now have to fall back to £26 by 2026. Heathrow has been described as “a cash machine with a couple of runways attached.” At least it now seems the 3rd runway is unlikely to be built.
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