Overview of the Current UK Airport Sales
The Ontario Teachers’ Pension Plan (OTPP), a major investor in global infrastructure, has initiated the sale process for its shares in three prominent UK airports: Birmingham (BHX), Bristol (BRS), and London-City (LCY). This move comes as the OTPP aims to capitalize on the increasing demand for air travel following the pandemic downturn. Holding stakes between 25% to 70% in these airports, OTPP has offered these shares to the current minority shareholders, providing them a 30-day first refusal period. This strategic decision could potentially influence other shareholders to reconsider their investment positions, especially if a new investor seeks a majority control.
Amidst these developments, the OTPP has been actively engaging with potential external investors, including notable entities like Macquarie, an Australian investment group with a history in airport operations. The escalating value of airport assets in response to the surge in air travel demand makes this an opportune moment for such significant transactions.
Financial Performance and Market Dynamics
London-City Airport, one of the assets on sale, has recently reported a return to profitability, with a pre-tax profit of £6.6m ($8.64m) in 2023, marking its first profitable year since 2019. The airport, strategically located near key financial districts like Canary Wharf, has demonstrated a robust recovery, signaling a positive outlook for potential investors. In contrast, the pre-pandemic year of 2019 saw a significantly higher profit of £47.8m ($62.6m), highlighting the impact of the global health crisis on air travel, particularly business travel which is a major revenue source for London-City Airport.
The broader UK airport sector is witnessing similar trends of recovery and growth. For instance, London-Heathrow and London-Stansted have reported record-breaking traffic figures in 2024, further underscoring the sector’s rebound. The increasing passenger volumes not only reflect a recovering industry but also enhance the commercial appeal of the airports involved in the current sales discussions.
Implications of the Sale and Potential Buyers
The potential exit of OTPP from the UK airports’ scene could attract a range of global investors seeking to expand their portfolios in the lucrative airport market. Speculations suggest that AviAlliance, another heavyweight in airport investment, might show interest in acquiring the airports to strengthen its presence in the UK, following their recent acquisition of AGS Airports. This group, backed by PSP Investments, manages substantial Canadian pension funds and exhibits a strong appetite for infrastructure investments.
Furthermore, the involvement of Vinci, a Paris-based transport conglomerate which acquired a majority stake in Edinburgh Airport in April 2024, demonstrates the continued interest of international firms in UK airport assets. The strategic positioning and the robust financial performance of UK airports make them attractive targets for global infrastructure investors looking for stable and profitable opportunities.