Running UK airports used to be a monopolistic licence to print money, and an attractive cash cow for outside investors. At the moment, however, BAA, which runs many UK airports, is suffering several attacks - from financial losses; from falls in passenger numbers; and from the Competition Commission's quest to break up its market power.
Passenger volumes have fallen by around 10%, but BAA's main problems relate to financing issues, include interest charges and losses on financial instruments. BAA refinanced its debt (currently around £10bn) last summer.
BAA (majority-owned by Spanish company Ferrovial) has been ordered by the Competition Commission to sell Gatwick and Stansted airports, as well as Glasgow or Edinburgh. The Gatwick sale is well under way, and BAA are considering three rival bids - from Global Infrastructure Partners; Manchester Airport Group and Borealis; and Citi Infrastructure Investors.
The question for me is whether, once the sales are completed, BAA has enough cash-generating ability to finance whatever debt remains on the books. In a buyer's market, this isn't guaranteed. The situation reminds me of BT, a one-time perennial cash-earner, which is now saddled with debt as well as periodic de-monopolising pressure.
