(Reuters) - British Airways has mulled pulling most of its aircraft out of London City airport if a new owner raised airline charges to cover the hefty 2 billion pound price tag on the airport, the Financial Times reported.
This move could prove to be a hurdle for the airport’s sale, which already attracted three groups including Cheung Kong Infrastructure Holdings, Atlantia Spa and another three consortia, one of which is led by Macquarie Infrastructure Corp.
"If the owners succeed in selling this for 2 billion pounds, we cannot see how a buyer will be able to recover or make any return on that investment unless they make a significant increase in airport charges," Willie Walsh, chief executive of IAG, British Airways' parent, said to the FT. (bit.ly/1nErnPS)
Walsh said to the paper that he had serious concerns about the owners’ 2 billion pound valuation, which would represent a multiple of 44 times London City’s earnings before interest, tax, depreciation and amortisation in 2014.
“We will not stay in London City at the levels we are today if these charges increase. Quite honestly the margins we make at London City would not support any increase in charges.” Welsh added.
London City Airport, a favourite among executives for its convenient location near London’s two financial districts, is majority-owned by Global Infrastructure Partners (GIP), an investment fund that also backs Gatwick and Edinburgh airports.
The airport, located about three miles from the Canary Wharf financial district to the east of the city, catered for about 3.6 million passengers in 2014. It aims to serve 6 million a year by 2023.
($1 = 0.6939 pounds)
Reporting by Sangameswaran S in Bengaluru; Editing by Andrew Hay