Ferrovial Braced For Airports Sale Order
Spain's Ferrovial is expected to be ordered to sell a further two of its seven British airports on Thursday, a move seen by analysts as bad news for the debt-laden infrastructure group.
Britain's competition regulator said in December it favored the sale of Edinburgh and London Stansted airports as well as London Gatwick, which Ferrovial is already trying to offload for up to GBP2 billion pounds (USD$2.78 billion).
The Competition Commission will publish its final report on Thursday and is not expected to have changed its stance that a break-up will boost competition between airports and benefit passengers, particularly in the London area.
Analysts said the decision would not favor Ferrovial, which bought the seven airport monopoly BAA for over GBP10 billion at the top of the market in 2006 and had over EUR24 billion euros (USD$31.3 billion) of debt at the end of last year.
"The value of the assets are going down, and its debt is going up. Ideally they would not want to sell the airports right now," said Collins Stewart airlines analyst Andrew Fitchie.
He added that the sale deadline and who would be in charge of running the auction would be key to the process.
"I think the British competition authorities are being excessively harsh," said Madrid-based fund manager Alejandro Varela at Renta4, which owns Ferrovial shares.
"Aside from the fact that this is a very difficult market in which to sell assets... it's happening at a time when things are getting harder for Ferrovial on all fronts," he added.
Gatwick, Britain's second busiest airport, which saw over 34 million passengers last year, has attracted bids from three separate consortia, but is suffering from falling passenger volumes as the recession bites.
BAA has said it expects to receive a premium to Gatwick's Regulated Asset Base (RAB) of GBP1.6 billion, but last week put back the bidding deadline until the end of April to allow more time for potential buyers to arrange financing.
Opinion has been divided over whether separate ownership of airports will improve the experience for the passenger and speed up the rate of airport expansion.
"It will do nothing for the consumer. There are a lot of airlines including Ryanair using Edinburgh and it is doing a good job, while Stansted has also been good for airlines," said Paul Whelan, head of industry body the Small to Medium Airports Group, adding that Britain's rail network was in greater need of an overhaul.
But Collins Stewart's Fitchie said different owners were more likely to improve each airport to gain an advantage over a competitor.
"If operators have cash in hand to spend souping up the airports it will be in the public interest... it would be best if they were sold cheaply," he said.
