Low Gatwick Passenger Number May Hit Price
UK airports operator BAA may raise less than it hoped from the sale of London's Gatwick Airport after latest passenger numbers there disappointed, putting downward pressure on its valuation, bidders said on Thursday.
A source close to one of the bidders said that BAA, which is owned by debt-laden Spanish construction firm Ferrovial, significantly over-estimated passenger numbers for March, which anyone setting a price for a bid would take into account.
Gatwick airport was put up for sale last year to meet competition concerns and BAA was subsequently also ordered to sell London's Stansted and either Edinburgh or Glasgow airports.
The deadline for prospective buyers to put in bids for Gatwick is April 27.
"When the passenger numbers go down the price doesn't go up... Market conditions for BAA aren't the best for a sale," added another source associated with one of the bidders.
Passenger numbers in March were 17.7 percent down at Gatwick compared with the previous year, against a 7.5 percent fall at Heathrow and a 15.9 percent decline at Stansted.
Some analysts see Gatwick as particularly vulnerable to an economic downturn because of its reliance on revenues from "bucket and spade" summer charter flights.
Analyst Andrew Fitchie at Collins Stewart predicted that BAA owner Ferrovial would find it difficult to achieve a premium to the Regulatory Asset Base value of GBP1.6 billion pounds (USD$2.33 billion).
"I think they'll struggle in the current climate to achieve a premium to regulatory asset base," he said.
He added that it was "totally reasonable" that the passenger numbers would affect the price.
The expected price for the airport has fallen in the past few years from a high of GBP3 billion.
"There was some chit chat before the end of March... that it could be as low as GBP1.3 billion which is a 20 percent discount to RAB which wouldn't be out of line with other utilities in the UK," added Fitchie.
A spokesman for BAA remained optimistic.
"Given the volume of work being undertaken by potential buyers we expect a number of highly competitive bids next week," he said.
In March, BAA extended the deadline for final bids until the end of April from the end of March, giving bidders more time to complete due diligence and financing arrangements.
At that time, three groups of bidders remained in the running to buy Gatwick airport, which was valued at up to GBP2 billion.
The bidders are Global Infrastructure Partners (GIP), a joint venture between General Electric and Credit Suisse, which owns London City Airport; Lysander Gatwick Investment Group, comprising Citi Infrastructure Partners, Vancouver Airport Services and John Hancock Life Insurance; and a third consortium consisting of Manchester Airports Group, Borealis and Greater Manchester Pension Fund.
