Airlines threaten to quit London City Airport as deadline approaches

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Airlines threaten to quit London City Airport as deadline approaches

But British Airways, CityJet and Flybe could quit London City Airport if a new owner raises airline charges.

The three airlines, which together account for 70% of all passengers, have raised concerns that the £2 billion (US$2.86 billion) deal could increase the charges for the use of the airport. They believe that the only way to reach those deal figures if by raising the fees.

A £2 billion transaction would mean a multiple of 27 times its EBITDA of £71.5 million (US$107.7 million) in 2015. 

In December 2015 Global Infrastructure Partners (GIP) shortlisted five teams for the bidding process to sell the airport. GIP currently owns a 75% stake in the airport while the remaining 25% stake is owned by Oaktree Capital. GIP has hired Credit Suisse to handle the disposal of the airport.

According to sources, the teams running for the airport include the company owned by Li Ka-Shing, Cheung Kong Infrastructure; Chinese aviation firm HNA; and a consortium made up of the Kuwait Investment Authority, Borealis Infrastructure, AIMCo Hermes and the Ontario Teachers’ Pension Plan.

The airport is located in the Royal Docks in the London Borough of Newham, some 11 km east of the City of London. It has a single 1,500 m long runway and due to its proximity to the City, mainly serves business travellers.

In 2014, London City served 3.6 million passengers, an 8% increase compared with 2013 and a record total for the airport. It was the fifth busiest airport in passengers and aircraft movements serving the London area after Heathrow, Gatwick, Stansted and Luton and the 15th busiest in the UK. A total of 10 airlines operate flights to 50 European destinations, as well as a New York service.

GIP bougth its stake in the east London airport from Irish businessman Dermot Desmond for £750 million in 2006.

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