MAG buy STN

[TOWTEAMBASE]

So MAG are the new owners. What are they like, are they able to drop fees and attract more airlines, or will they pander to FR.

[Barling Magna]

So Stansted returns to public ownership.......

[Fairdealfrank]

Quote: "So Stansted returns to public ownership....... "

Apparently not, according to the MAN thread.

[Barling Magna]

MAG will be 65% owned by the consortium of local authorities, so still majority publically owned.

[pwalhx]

Not sure why we need another thread on this as its being discussed at length on both Manchester and Stansted forums. However, perhaps you can explain why you feel there is a problem with MAG being, as it will be partly local authority owned.

[LGS6753]

What are they like, are they able to drop fees and attract more airlines, or will they pander to FR.

They certainly won't be "dropping fees" any time soon. They have just taken on a financing commitment of £1,500,000,000 so their first priority is servicing and repaying that debt (far larger than the debt ascribed to STN under BAA ownership).

I can't see them attracting new airlines, for a number of reasons:

Stansted is the worst located of the London area airports
It has a smaller catchment area than LHR, LGW or LTN
Ground links are poor - the M11 only links London and Cambridge, and rail services are infrequent and slow
New operators will be up against Ryanair
Gatwick and Luton both have some available capacity
Stansted will not be able to compete financially as long as it is saddled with debt


Of course they will look after Ryanair - they provide 70% of the passengers!!
MAG have overpaid, and overpaid seriously, for a white elephant.

[nt639]

Lgs of course if this was Luton you would be posting everything positive, I & probably a lot of other people on here are rather fed up with your constant trolling. Please take your rosé tinted specs & post on the ltn thread.

[Tableview]

I am sitting at Manchester Airport as I write this. I use the airport several times a year and can only say that if STN ends up being run as well as MAN, it will be a vast improvement. The last time I went to STN - admittedly 5 years or so ago - it was an experience I do not intend to repeat.

[pwalhx]

I am no expert in the field of finance, but others that do seem to have a grasp of such details say that in real terms this stacks up better than the deal for EDI.

Also as I stated to you elsewhere the deal is to a greater part financed by the part sale of MAG.

But seems from what I see the facts will not get in the way of a good rant.

[LGS6753]

NT -

If by 'trolling' you mean telling the truth, then I'm guilty as charged.
I am very concerned that so much of the (then) taxpayer's money was spent developing STN when everyone could see it was an error of judgement based on BAA's lobbying, and to enhance its value on privatization.
The fact that some time has passed doesn't change the fact that STN is in the wrong place, and has some serious shortcomings.
It has distorted competition in the London market for 20 years, which I consider to be disadvantageous to the aviation industry.
Yes, I support Luton Airport, and will continue to do so. When a new competitor springs up on your doorstep, subsidized to the hilt, and takes your business, you can't help but be concerned, and I am.

If that makers me a 'troll', fine, but my arguments will continue to be made, so either get used to the idea, or, if you can't take intelligent criticism, hit the 'ignore' button.

[daz211]

If that makers me a 'troll', fine, but my arguments will continue to be made, so either get used to the idea, or, if you can't take intelligent criticism, hit the 'ignore' button.

Ok give me an intelligent answer as to why BAA put up such a long and costly
Fight to keep stansted ???

After all according to you it's not got much going for it !
And the people who bought it haven't got a clue when it
Comes to business ! What do you think happened ? Maybe sat
Round a table and thought lets buy an airport that is over priced
And in the wrong place and has a bully of an airline as it main
Operator ??? I really don't think so ...

[TOWTEAMBASE]

LGS

I take your earlier point, but trains into London are every 15 mins so hardly infrequent. And also at peak times at LHR you can land, hold for a stand, and in the mean time at STN you could be half way into London by the time LHR pax have reclaimed their baggage. STN connecting flights into Europe let them down, unless you want ezy or FR, you don't have much choice

[JimNich]

....or, this could be a very shrewd move by MAG. Given that the long term goal of Gatwick is to get rid of the smaller (domestic) operators and cater solely for medium to long haul, and no-one can afford slots at Heathrow unless you're Virgin. It could just be that STN may, in time, become the London domestic hub of the future.

I'm sorry LGS, but that Luton airport - bus - train thing is a major pain. STN is not very quick, and you have to go to Liverpool Street, but its right on the doorstep.

[FRatSTN]

LGS,

I've already had this discussion with you about Stansted being in the "wrong place" on the Stansted thread (on page 98, from post #1941).

I think you should stop fooling yourself as to what you see as the "truth" and "intelligant criticism" and start being realistic and use evidence and statistical data instead of your biased and unwanted opinions, with no realistic substance what so ever.

Clearly you are so drowned by your support for Luton that you feel you have to hate it's neighbour. All I can say is that in order to think so little of Stansted, you must feel what you support is threatened by this change of ownership, and like it or not, it may well be!

[LTNman]

With plenty of spare capacity MAG know they need to invest nothing for a few years but just service the debt.

[DaveReidUK]

With plenty of spare capacity MAG know they need to invest nothing for a few years but just service the debt.I suspect MAG would disagree with that.

Investing in marketing would be a good idea, if they don't want that ample spare capacity to remain, well, spare capacity.

[ConstantFlyer]

I welcome MAG's acquisition of STN, and hope that it will bring improvements across the board for passengers, staff and airlines, local businesses and residents.

I'm a regular user of all the airports that purport to serve London (except Oxford 'London Oxford', and Lydd 'London Ashford'). However, it's not often that I'm actually going to London itself; I'm more often bound for various places in the Home Counties, and choose my airport accordingly.

I hope that the new owners of Stansted will recognise that the airport will benefit by becoming more of a multi-modal transport hub for towns to the north east of London; ease of access and connectivity across Essex, Hertfordshire, Cambridgeshire and Suffolk will be valuable in growing their market share.

[EI-BUD]

are they able to drop fees and attract more airlines, or will they pander to
FR


As I see it STN does not need to drop fees so low as to attract business. LGW is practically full and have recently drastically increase fees, LHR is full and LCY not much better and restrictive, LTN is quite full at peak times and SENs growth aspirations are circa 2 Million in its first decade. This collection of information presents the new owner with a unique opportunity. Exciting times ahead.....

[Captinbirdseye]

I also welcome this news. As well other members of this forum and getting a little tired with some of the contributions made by the same pro Luton / Anti Everywhere else North of the river.

As previously stated on an earlier post, I too am impressed with MAG's management of MAN and the turnaround of a run down airport.

With plenty of spare capacity MAG know they need to invest nothing for a few years but just service the debt.
I am struggling to find the logic of some people's understanding, in terms that MAG have bought and an Airport for £1.5 billion and now are not going to invest in the infrastructure and marketing.

Stansted is the worst located of the London area airports


I am quite sad and have done a quick look on transport direct website. The above search i have done was leaving the below airports at 8am on the 23rd January 2013 via public transport only.

LTN - Docklands - 1 hour 46 minutes
STN - Docklands - 1 hour 38 minutes

LTN - Bank of England - 1 hour 19 minutes
STN - Bank of England - 1 hour 7 minutes

LTN - Westminster - 1 hour 13 minutes
STN - Westminster - 1 hour 14 minutes

It has a smaller catchment area than LHR, LGW or LTN

Although catchment areas provide some sort of useful data, this should not be used soley for an argument. Firstly, 18 million pax a year in 2011 through STN would say that this argument does not really hold too much water Travellers also take into account the price of flights, destinations flown from the departure airport, timing of flights. Its more complicated than just saying "smaller catchment areas" would not attract airlines.

Ground links are poor - the M11 only links London and Cambridge, and rail services are infrequent and slow

Although not ideal, rail travel is expensive and slow, every 15 minutes is not infrequent. on the plus side, Coach travel into C.London is fairly cheap and frequent. Roadwise, the M11 past the M25 can get rammed, so can the M4 from LHR to C.London and the M1 down to the M25 can be murder as well. There is no real direct route in c.London that I can think off that doesnt involve a painful wait in traffic.

New operators will be up against Ryanair
Ryanair on the main fly to out of town airfields not airports. EZY have / can compete. The change to SEN was mainly due to the financial rewards Stobarts were offering not so much due to the the direct competition from FR.

Gatwick and Luton both have some available capacity
Struggling to find what the point you are making with this. More competition can only be good a thing for all involved surely?

Stansted will not be able to compete financially as long as it is saddled with debt
The only way to pay off debt is to make a profit. Investment will be one of the highest priorities for MAG.

I for one am looking forward to MAG joining in the competition for London Traffic. Let the competing commence!!

[Fairdealfrank]

Quote: "....or, this could be a very shrewd move by MAG. Given that the long term goal of Gatwick is to get rid of the smaller (domestic) operators and cater solely for medium to long haul, and no-one can afford slots at Heathrow unless you're Virgin. It could just be that STN may, in time, become the London domestic hub of the future."

Not going to happen: most domestic routes have transfer pax as well, so need to go where there's connectivity, that means LHR, which is difficult at present, maybe in the long term. For now they're at LGW.

LGW is probably ill-advised to squeeze out domestic operators. It is primarily a short haul airport. If it wants to attract more long haul, it needs domestic flights to provide transfer pax.

STN's future is FR and cargo, cargo, cargo.

[TOWTEAMBASE]

Yep, rumours are cargo flights could be leaving manston, and putting down roots in STN ( roots and routes) the place is a ghost town best parts of the day,bring em on

[LTNman]

I am struggling to find the logic of some people's understanding, in terms that MAG have bought and an Airport for £1.5 billion and now are not going to invest in the infrastructure and marketing.

The point I was trying to make is that there is nothing fundamentally wrong with Stansted that needs urgent attention so does not need huge amounts of investment. Due to the loss of passengers in recent years it already has plenty of spare capacity in the short to medium term so spending could be put on hold so not to burden the company with more debt.

[JimNich]

Frank

I couldn't agree with you more ref LGW. However, the reality is that domestic is being rather aggressively ethnically cleansed and ultimately they'll have to go somewhere else, if they ever want to make any money. It's my thought that MAG also knows this and are in the process of supplying a viable-ish alternative.

[caiman27]

Ground links are poor - the M11 only links London and Cambridge, and rail services are infrequent and slow

Utter rubbish. At the northern end of the M11 the road continues to near-motorway standard until it links with the A1.

And I'm at a loss to understand how a fast 15 minute interval train service can be described as "infrequent and slow". I use it five days a week into London. The trains are the newest of any of the airport links - built last year.

[FRatSTN]

Just take no notice of LGS. Very biased. I've had the dicsussion on the Stansted thread and all they can say is this complete and utter rubbish like that above.

I guarantee that if Luton had its own railway station with a 45-50 minutes journey departing every 15 minutes it would be great and if Stansted required bus ride but rail links were 30 minutes, LGS would still say Luton was best and majorly complain about how rubbish Stansted is for not having it's own railway station! So despite what happens, for LGS, it will always be all positive for Luton and all negative for Stansted.

And I bet the M1 would be a nightmare if Stansted was on it and the M11 would be the nicest, least congested motorway if it had Luton sitting on the side of it!!!

[PAXboy]

Overall, good research Captinbirdseye but I think you did not mean Southampton?
The change to SOU was mainly due to the financial rewards Stobarts were offering not so much due to the the direct competition from FR.Probably Southend-on-Sea aka SEN.

[Captinbirdseye]

Noted and Changed!!

[Buster the Bear]

£1.5 billion! What are the repayments on that! GIP paid the same amount for Gatwick back in 2009 with a much better chance of recouping the investment long-term.

Chuckles from Whipsnade!

[LGS6753]

daz211 -

Ok give me an intelligent answer as to why BAA put up such a long and costly Fight to keep stansted ???

1. Because of the regulatory framework governing charges, they were able to make a profit from Stansted.
2. The profit exceeded their cost of capital, and was therefore making a contribution to the mountain of debt they took on when acquiring BAA.
3. As an airport operator, they did not wish to relinquish one of their assets, which would concentrate their overheads, and reduce their overall market strength.
4. As the regulatory framework guaranteed a certain return on capital, it could be argued that it was in their interests to increase capital employed.

TOWTEAMBASE -

at peak times at LHR you can land, hold for a stand, and in the mean time at STN you could be half way into London by the time LHR pax have reclaimed their baggage.

You are quite right, but I can't see STN competing with LHR under any ownership!

FRatSTN -

I think you should stop fooling yourself as to what you see as the "truth" and "intelligant criticism" and start being realistic and use evidence and statistical data instead of your biased and unwanted opinions, with no realistic substance what so ever.

Clearly you are so drowned by your support for Luton that you feel you have to hate it's neighbour. All I can say is that in order to think so little of Stansted, you must feel what you support is threatened by this change of ownership, and like it or not, it may well be!

Can one argue against such erudition?

Captain Birdseye -

Generally a well-argued rebuttal of my points. However, you say
Ryanair on the main fly to out of town airfields not airports. EZY have / can compete. The change to SEN was mainly due to the financial rewards Stobarts were offering not so much due to the the direct competition from FR.

I agree that this was Ryanair's original business plan. However, in recent years they have been moving strongly into bucket & spade routes, as well as serving Eastern European cities. It is on those routes that they will fight to retain a monopoly ex-STN. A second operator serving the likes of Poitiers or Perugia are unlikely to survive long. Also, EZY is the most capable competitor FR have, with deep pockets, economies of scale and a strong brand. A lesser company would have folded sooner.

caiman27 -

Utter rubbish. At the northern end of the M11 the road continues to near-motorway standard until it links with the A1.

The A14 - not a motorway - is notoriously congested north of Cambridge. Before it joins the A1(M) it is down to 2 lanes.


Generally -

I actually welcome the acquisition of STN by MAG, however misguided I think they are. For one thing, a key UK asset will return to (largely) British ownership. Secondly, MAG would not be likely to cross-subsidize STN, as BAA did. That has to be good for the aviation industry as a whole. Subsidies, whether public or private always eventually act against the interests of the public. Free competition is more likely to determine where traffic goes, and that is good.

[FRatSTN]

To be quite frank, no one really wants to hear it mate. I have nothing else to say to you apart from this... Do you not think it's time to admit defeat with so many people against you, and no one with you on this?

[LGS6753]

A brilliant post on the Manchester thread from Shed-on-a-Pole:

STANCHESTER AIRPORT: A Marriage Made In Essex!
Greetings PPRuNeR's!

I have resisted commenting on the grand acquisition announcement until now. And with good reason. I did not wish to write - in haste - a string of naughty words which would likely get me banned from here. Also, my * button is virtually worn out due to copious overuse elsewhere. And, having slept on the news, I find that the pool of blood from my slashed wrists is at last beginning to congeal. Computer keyboards and fluids just don't mix well. Thus, the time has come to (briefly) set aside the vimto and comfort food in public consideration of the prospects for this awkward marriage.

The MAG deal for Stansted is fantastic news! The MAG deal for Stansted is terrible news! In fact, both statements are quite correct. From a Stansted Airport perspective the deal is fantastic news. But from a Manchester Airport perspective the deal is an unmitigated calamity. East Midlands and Bournemouth Airports have plenty at stake too; this doesn't look good for them.

So this is a deal of winners and losers. For some elation, for others despair. It all depends on where you are standing and what factors best serve your personal agenda.

Being a secretive soul, there is much I haven't told you folks about myself. Foremost amongst the information withheld until now is the fact that I am not actually a human being. I am in reality the progenitor of an entirely new species - the Greater Ten-Toed Sloth [Slothus Mancunianus] - a creature with remarkable abilities to survive for long periods on only vimto and chocolate, and to forecast the future. Thus armed with the two key essentials of life, I shall set forth for you some of the consequences of this deal, exclusively revealing some of the key winners and losers as we go forward.

And, of course, heading the list, the biggest winner of all is our good friend MR MICHAEL O' LEARY. Whilst he is not noted for unrestrained spending on his staff, I do suspect that it will be champagne and crisps all round when he sets foot in Ryanair Towers on Monday morning. His life just got a whole lot easier in so many ways. And not just because Man City won again (astute man of good taste is our Michael). Multiple problems resolved at a stroke! Unbelievable maybe ... but it turns out that the turkeys really did vote for an early Christmas!

Just look at things from MOL's point of view. In the past, whenever he wanted to ensure ultra-cheap charges from the Stansted bods he had to disrupt operations at his own largest base ... pulling out planes, dropping routes ... pain now for gain later. Inconvenient, but necessary. Now that problem is resolved. Need to make a point to keep costs low at STN? But don't want to disrupt your biggest base operation? No problem! Just pull a bunch of planes out of MAN, EMA and BOH. It hurts the turkeys in the same wallet, but inconveniences just afew of Ryanair's regional ops rather than the main London base. Bargain! And you just know MAG'll have to bend over in the end. They're not very financially astute after all ... if there was any doubt before, paying one and a half bill GBP for STN has dispelled it. And each time you need a concession, Michael, just rinse and repeat. The beauty is the simplicity of it all. You get what you want and don't have to mess up the Stansted operation any more. What's not to like? No wonder the PPRuNe Stansted fanboys are elated! MAN, EMA and BOH will be completely screw ... I mean mightily inconvenienced ... but that is MAG's problem isn't it?

Just think about your future discussions with MAG, Michael. You'll be like the cocky Tomcat 'negotiating' with a wounded pigeon ... how your mouth must be watering! I'll bet you can't wait! Deep fried pigeon for dinner tonight!

But hold on ... could the introduction of MAG's extraordinary team of experts attract a raft of new competition to Stansted? After all, MAG must believe that STN's previous management were a bunch of numpties ... they will be able to do so much better with the introduction of their negotiating genius. The very same genius which knocked the STN price-tag down to a bargain 1.5 Bill! Competitors will surely be flocking into the STN honeypot based purely upon MAG's astounding marketing skills ... well no other factor has changed, has it?

I can just see the letters now:

Dear Air France / KLM,

MAG here. Your mates from Northern England. Remember us? That's right ... we're the guys who issue "No Diversions" NOTAM's just when you need us. Anyway, we've got this fantastic proposition for you. Why not fly from our shiny new airport at Stansted? Yes, its pretty close to the Channel Tunnel but don't let that put you off. And OK, its true that the most ruthless LCC in the world dominates the slots here and they've vowed to crush you into the deepest depths of Hell. But set against that the fact that we can offer you really low fees and a catchment area of afew folks who don't like trains or LHR ... it has to be a winner? Come and talk to us!

Love, MAG.


Dear Latehansa Group,

Is that name spelt correctly? There is a guy in the office here who tells us that is how you spell your name. Please come and fly from our shiny new airport at Stansted. It's really great, and the new MAG management team here is really talented ... we're financial whizzkids. Picked up Stansted for just 1.5 Bill. We're genii ... not like the last lot at all. They were so stupid they sold this jewel-in-the-crown airport for just 1.5 Bill. How we sniggered when their negotiators left the room! We robbed 'em! But anyway, back to the point. Come and fly your planes from Stansted. Apparently, there is a small number of passengers who would consider flying from here to Germany, Belgium, Switzerland and Austria with you. All you have to do is undercut Ruinair who have pledged a price war to cast you into the hottest fires of Mordor if you set so much as one tyre down on the runway they call their own. It's an unmissable opportunity. Call us!

Love, MAG.


Dear American Airlines,

Please fly from our shiny new airport at Stansted. It's run by MAG now, not that bunch of idiots who used to run it. They were so stupid we fooled 'em into selling cheap! Just 1.5 Bill. And that's Pounds, mate, not your cheapo Dollars, oh no! Anyway, now that we're in charge everything here is different. Remember how there were so few premium pax at STN when you tried here last time? Well, we believe that hanging the name "MAG" over the door will change all that for you! The punters will flood in. I know that you said you're now heavily invested with your partner Cockney Airways at Hounslow ... but hey, that's on the other side of London. So come on. Give us another go!

Love, MAG.


Dear Emirates,

Your mates at MAG here. We know that you fly frequently from two London airports already, but we were just wondering ... ? Err ... OK ... but we could do you a really great deal. I mean, say we let you fly in for free? What percentage of overall costs on a premium long-haul scheduled service do our airport user charges represent ... must be a MASSIVE saving for you, eh? Come on ... you know you want to!

Love, MAG.


Dear E t i h a d,

MAG here. Awfully sorry about hacking off your Abu Dhabi pals by snubbing their outstanding offer of investment in favour of an Australian Private Equity Fund. And after all you'd done for the Manchester area as well. But hey ... that's how the cookie crumbles! So anyway, we've got this amazing proposition for you ...

Love, MAG.


Dear DHL & UPS,

MAG here. We've just bought a fantastic airport in Essex called Stansted. Not on the M1, but it's really brill. We'd love you to move your UK operations to it. It's a bit of a cargo specialist, you know ... bound to be better than the rubbish place you use at the moment. Where's that again? Oh ... hold on a minute ... just forget all that! As you were. Have a nice day!

Love, MAG.


Dear Gatwick / Luton based IT Charter Behemoth,

Whilst we realise that you have massive fixed infrastructure investment in place at your current London bases which are perfectly located for your affluent South East customer base, we'd like you to consider a change ...

And you'd be head to head with Ruinair who have pledged to murder you and feed your rotting carcass to rabid dogs! Call us!

Love, MAG.


So, Mr O' Leary ... it looks like you are the big winner. But who else comes up smelling of roses? Well, Heathrow Holdings [BAA]. GBP1.5 Billion! What a deal. Who was your chief negotiator? Give that man a Knighthood! MAG ... hire him ... please! If he can be persuaded to work for a company that just blew 1.5 Bill!

Any other winners? Tough one.

So who loses out, then?

Well, for starters all those ratepayers residing in the ten boroughs which comprise Greater Manchester. Councillors ... don't you just love 'em? Instant experts on all topics ... civic pride to the fore ... pompous soundbites their stock-in-trade! And how the spokespeople for Greater Manchester's councils have welcomed this deal. "The acquisition of Stansted will help us to deliver maximum value for Manchester Council and the other local authority shareholders," says Sir Richard, knowingly. "This represents a good deal for local authority shareholders," says Lord Peter (who clearly recognises that STN is a mere snip at just GBP1.5 Billion). Nice words, chaps. Just one question, though. How are your plans for the post-airport dividend era progressing? You know, the bit where the money stops flowing in? It'll affect you a bit like the government cuts!

What about the other airports ... MAN, EMA and BOH. Big infrastructure investments required? Dream on! Poor Manchester ... not the main focus now, eh? Which brings us to another little conundrum.

Surely MAG - Manchester Airports Group - sounds far too parochial for this newly aggrandised organisation? A name change is in order! Hire expensive consultants to devise a new corporate image right now ... what's afew million to get something this important right? Some suggestions from me, though, to get the ball rolling. How about DEBTSLAVE GLOBAL CONCEPTS ... nicely descriptive and has a certain ring to it, don't you think? Or maybe HUBRIS HOLDINGS, reflecting the diversity of your portfolio? Or perhaps you would favour the new more eclectic type of name popularised by newcomers such as Moonpig and Red Spotted Hanky. I suggest WOUNDED PIGEON GROUP to reflect your status in the eyes of your largest customer.

What is the upside for Manchester Airport ... this is the Manchester thread, after all. Well, not much that I can see. Infrastructure investment limitations on the airport site itself (as opposed to Airport City office blocks) ... long-term debt concerns? Please reassure me if you can!

At least Manchester Airport itself will always be an asset with intrinsic value. Even if MAG withers in a future of higher interest rates, a falling pound, recession and debt service concerns, someone somewhere will always want the core asset. Maybe an investor from China, India or the UAE. The airport will still be here, waiting.

We may face a five year financial 'nuclear winter' in the meantime, but the airport will still be here. Doing its job. Sidelined. Underloved. Neglected. Unappreciated. Awaiting the heroes of a new era to restore the squandered legacy of the great Sir Gil Thompson and his predecessors.

Yesterday's announcement is comfortably the worst commercial news affecting Manchester Airport in my living memory. The withdrawal of BA based ops, the collapse of Intasun and XL, the Gulf War 1 downturn, the MAplc shunning of early LCC's, eco-fanaticism, recessions, industrial disputes, the decline of the package tour ... all dwarfed by this news. But MAN / EGCC will survive. It will remain a desirable asset even as it is sidelined by bonus-driven beancounters.

Time for another Vimto!

SHED.

Waiter! Fetch the Razor Blades!

[pwalhx]

£1.5 billion! What are the repayments on that! GIP paid the same amount for Gatwick back in 2009 with a much better chance of recouping the investment long-term.

Chuckles from Whipsnade!

To repeat once again, the majority is coming from the sale of 36% of the group to IFM the balance comes from reserves and loans already in place by MAG, sorry to dissapoint probably not as much as you would like.

[Aero Mad]

The source of the funding is irrelevant - the volume thereof remains £1.5bn. An awful lot of money, I think we'll all agree.

[Ringwayman]

Manchester Evening News take (http://menmedia.co.uk/manchestereveningnews/news/s/1598581_manchester-airport-buys-stansted---but-what-does-it-mean-for-you-we-find-out)

"The councils have not had to pay anything towards the deal, which is set to be finalised at the end of February. The cash has been raised through a combination of MAG selling a 35.5 per cent stake in itself to an Australian company called Industry Funds Management and agreeing a new debt package with its banks"

[pwalhx]

Aero Mad, sorry but the funding is extremely relevant in any deal.

As above to quote the Manchester Evening News

When weighing up whether a deal represents value-for-money, analysts tend to look at the purchase price as a multiple of a company's underlying profits. The £1.5bn price tag was 15.6 times Stansted's 2012 earnings. When looking at other airport deals, Newcastle sold a 49 per cent stake in itself for a reported £150m, which was 16.1 times its profits, while Edinburgh Airport was sold for £807m – 16.7 times its earnings. On that basis, the Stansted deal has been viewed as a good one from MAG's perspective by some industry commentators.

[davidjohnson6]

Ringwayman - from my limited understanding, you're saying that the Manchester councils went from a 100% ownership of a company with less debt, to a 64.5% ownership of a company with more debt.

UK company law generally requires that dividends should be paid to shareholders in the same proportion of the amount of the company that they own. As an example, if you own 10% of the shares you are entitled to 10% of the dividend. I am of course ignoring things like preference shares or unusual classes of shares (e.g. golden shares which are typically held by central Govt). The cost of servicing the debt may not be negligible. As to whether 100% of 3 airports or 64.5% of 4 airports plus £1bn of cash that can be used to complete on the purchase of STN is worth more, I don't know - company valuations / m&a is not really my speciality.

I am willing to accept that this may be a good deal for Manchester councils in the long term, but I would expect the dividend paid by MAG to the councils to be rather less predictable than it has been in the past.

[PAXboy]

Thanks for the repost LGS6753, I don't read the MAN thread but please give Shed-on-a-Pole a Gold Star for a very good laugh. Like him, I am always glad to hear of news that will delight dear MoL, who has such a hard life.

[canberra97]

IF MAG does secure any long haul flights into Stansted I bet that Emirates would be the first to arrive thus giving the airline three London airports to operate from as well as giving them a new and large catchment area, think of all those Essex folk that go to Dubai I am sure there are loads.

[A4]

So if the price is based on 15.6 earnings for 2012 there is definitely a lot of potential at STN. Pax figures have been declining since 2008 (circa 24million?) to around 17 million last year? So if MAG can turn it round and attract new business (and stop incumbent operators reducing/leaving) then it could prove to be a very shrewd move.

The decline at STN in terms of pax numbers has been pretty spectacular - almost a third of your customers in 5 years :eek::eek: You have to ask the question about the management strategy over the last few years.....

A4

[Skipness One Echo]

The management at STN were naive. They kept trying to make Ryanair pay money to use their airport. Silly billys.

[JimNich]

....but, passenger numbers aren't as important as yield. As SOE rightly points out, if you've let your main customer use your airport without paying anything, then it doeasn't matter how many pax come through the gate (okay, important for the retailers I agree). I seem to recall rumblings last year that some of the foriegn town airports that MOL uses were starting to actually ask for some money (and a go of their bike on a sunday) to use their facilities.

I vaguelly remember (someone from MAN may well be able to correct me) that a couple of years ago Ryanair and MAG had a bit of a fall out over this very issue. Can we expect to see more of this in the future?

[FRatSTN]

Does anybody know what MAG logo will be like yet?

will it be..

(stansted
airport

or...

(london stansted
airport


(of course the bracket is supposed to be their curved shape logo!:\)

[chaps2011]

it`s not suprising figures down as They lost most of Air Berlin and quite a lot of
Easyjet and several Ryanair aircraft. When I was down in July you could see the difference in the number of Ryanair flights it was very noticable

Ryanair seem to have a good working relationship with MAN so hope this can
continue and also EMA, BOH and STN. It`s like walking a tightrope to
get balance right for both airport and airlines

Chaps

[LGS6753]

I've been wondering how MAG were so badly affected by hubris that they continued with their bid for STN. It seems to me that their corporate governance leaves something to be desired.

The MAG website has no Director profiles on it, but information is hidden away in the report & accounts. There is a main board comprising the key executive directors, plus a smattering of non-execs and a part-time non-exec chairman. So far, so good. However, despite its ownership by Manchester area councils, there is only one representative of the shareholder group on the board (was two until May 2012).

The sole representative of any Manchester area council is Bernard Priest, a Labour time-server who represents the inner-city ward of Ardwick. He seems to have no business or travel experience, and is a former FE lecturer.

Effectively the taxpayers of Greater Manchester, who own this business, have minimal representation on its board of directors. If I were a council taxpayer in that area I would be writing to my councillor asking how this state of affairs had arisen.

[FRatSTN]

When I was down in July you could see the difference in the number of Ryanair flights it was very noticable

Are you sure it wasn't the time of day that you went. Between 2 and 4 in the afternoon there isn't much in the way of Ryanair traffic or really any other traffic for that matter. When I went in August between 11am and 2pm, there were Ryanair flights every few minutes and coming in litterally one straight after the other for a time.

I have a couple of interesting links below. It shows us a little more about what we can expect to see under the new ownership:

Manchester Airport buys Stansted - but what does it mean for you? We find out | Manchester Evening News - menmedia.co.uk (http://menmedia.co.uk/manchestereveningnews/news/s/1598581_manchester-airport-buys-stansted---but-what-does-it-mean-for-you-we-find-out)

Simon Calder's Q&A: Manchester airport buys Stansted - Business Analysis & Features - Business - The Independent (http://www.independent.co.uk/news/business/analysis-and-features/simon-calders-qa-manchester-airport-buys-stansted-8458342.html)

It appears that their aims are to:

- Fight for short-haul traffic from Gatwick and Luton by offering airlines good financial deals

- Diversify Stansted's traffic away from the dominance of Ryanair

- Attract airlines big at Manchester like EasyJet, Flybe and Jet2 to add new routes to Stansted

THERE WILL BE NO AIR LINK BETWEEN STANSTED AND MANCHESTER!!!

[chaps2011]

No I go to STN quite often and it has been the same for a couple of years
some quite big gaps in traffic where there used to be none and the last time I was there it was for 10 hours

Chaps

[LGS6753]

Simon Calder, in The Independent seems to support my idea about Stansted's location:

Stansted occupies a beautiful building, but one with awkward rail links – the journey by train from central London has actually significantly slowed down in the 20 years since the rail line opened.

Of the big four London airports – the other three being Heathrow, Gatwick and Luton – Stansted is the furthest from the centre, and also furthest from the key road and rail arteries. It’s only a little bit unfair to describe it as an airport people use because they have to.

[pamann]

I sit back and read the same old tripe being churned out time and time again by the 'Luton-ites' of PPRuNe.

For the un-educated on here: Stansted offers over 150 destinations, on a choice a choice of 13 airlines presently. Approximately 18,000,000 passengers used the facilities in 2011. It is London's third airport and the UK's forth busiest airport in terms of passenger numbers.

Exactly how does Luton compare on these figures? :p

[hammerb32]

Have to say the bit I struggle with is the enforced selling of STN to break up the unfair monopoly of BAA to sell it to the owners of 3 other English airports to create a new monopoly, what was the point....

[daz211]

Stop banging on about rail links ! Southend international
Has a closer train station than Luton Airport has.
The trouble with Luton fans is they have always wanted
Luton to be Stansted !

[pamann]

Luton will always be Luton = Dreadful town, awful airport. End of really.

[Barling Magna]

Bernard Priest, a Labour time-server who represents the inner-city ward of Ardwick. He seems to have no business or travel experience, and is a former FE lecturer.

To be fair to Mr Priest, he was actually Senior Vice Principal of MANCAT, one of the largest FE/HE colleges in the land with over 60,000 students and 4,000 staff; FE colleges are big businesses these days, independent of local authorities and sinking or swimming through their own commercial activities.

[FRatSTN]

The trouble with Luton fans is they have always wanted
Luton to be Stansted !

I agree, it's just pure jealousy.

[Suzeman]

As the No 1 LTN fan on here has been posting the same message on the Manchester thread, I thought I should copy my response to him here too.


However, despite its ownership by Manchester area councils, there is only one representative of the shareholder group on the board (was two until May 2012).

Dave Goddard had to resign in May 2012 as he lost his seat as leader of Stockport Council. As the annual report only covers up to March 2012, how do you know he hasn't been replaced?

And what about the shareholders committee on which all the 10 local authorities are represented?

And finally methinks you underestimate the influence of the majority shareholder....

The proof of the pudding for the locals will be whether the dividend is at least retained or preferably increased in future years. By which time the local reps probably have changed. Like all politics, it's light the blue touch paper, retire immediately and someone will pick up the bits (or sometime the rewards) later

[LTNman]

Well I have risen to the bait. As I always say there is nothing wrong with Stansted as it is a fine airport. Can't really see what needs improving that can be inproved by MAG.

BUT:


Exactly how does Luton compare on these figures?

You have missed the point. Stansted is operating at around half capacity while Luton is almost at capacity.

Stop banging on about rail links ! Southend international
Has a closer train station than Luton Airport has.

Which is useless for much of the day as there are no trains for the airports peak periods in the morning and late at night.

Luton will always be Luton = Dreadful town, awful airport. End of really.

Agree with your comment about the town. Bit unfair about the airport which due to massive demand is having to nearly double capacity while Stansted is struggling to hang on to its passengers.

The trouble with Luton fans is they have always wanted
Luton to be Stansted !

If Luton was Stansted Luton would have a second runway by now due to its location.

As I keep saying Stansted is a fine low cost Ryanair type airport.:ok:

[pamann]

You have missed the point. Stansted is operating at around half capacity while Luton is almost at capacity.

Agree with your comment about the town. Bit unfair about the airport which due to massive demand is having the nearly double capacity while Stansted is struggling to hang on to its passengers.

Think you miss understand my points...

Stansted circa 18,000,000 passengers in 2011

Luton circa 9,500,000 passengers in 2011

Yes Stansted has seen a decline since it's 2007 triumph, something that MAG intends to address.

Luton is seeing an increase in passenger numbers but, despite this Stansted still has double the number of passengers that Luton has.

Stansted has the infrastructure in place and is in a better position now to expand as Luton will get left behind.

Maybe it's time to put this rather tedious debate to bed, once and for all. ;)

[daz211]

None of your points matter you still don't understand that even if one train a day stopped at Southend airport it would be twice as many as Luton airport.
* Luton Airport does not have a direct rail link or a train station *
Yes Luton is almost full but Stansted is much bigger ! Luton is not as busy as Stansted.

Luton would not have another runway already as the locals would put up a fight and a lengthy inquiry would delay any decision for years.

[nt639]

Stansted has also returned to Passenger growth for the last 2 months of 2012 (+6.2% Nov/+4.2% Dec) outperforming Luton in percentage growth terms by a large margin, & no doubt once MAG entice airlines away from Luton the margin will increase:ok:

[Barling Magna]

Which is useless for much of the day as there are no trains for the airports peak periods in the morning and late at night.

Don't ruin your point by over-egging it, LTNman. The first train from Liverpool Street arrives at Southend Airport at 6.31 a.m. and the last train leaves SEN at 11.05 p.m. Only three flights are affected by this. Nonetheless, it should be sorted out quickly if SEN hopes to reach its 2 million pax target.

Good luck to STN; I can't see that it's likely growth will have much impact on SEN which has carved out a small but valuable niche within the London area.

[LTNman]

Think you miss understand my points...

Stansted circa 18,000,000 passengers in 2011

Luton circa 9,500,000 passengers in 2011

Yes Stansted has seen a decline since it's 2007 triumph, something that MAG intends to address.

Luton is seeing an increase in passenger numbers but, despite this Stansted still has double the number of passengers that Luton has.

Stansted has the infrastructure in place and is in a better position now to expand as Luton will get left behind.

All your points are valid as Luton is running at around 95% capacity and can’t expand much beyond 10 million for another couple of years then the gloves will be off as Luton will be looking at Stansted for passenger growth while Stansted will be looking at Luton and Southend for its extra passengers.

As Aer Arran found out with its Waterford route you can kill a route by switching airports if the passengers don’t want to go.

None of your points matter you still don't understand that even if one train a day stopped at Southend airport it would be twice as many as Luton airport.
* Luton Airport does not have a direct rail link or a train station *

No doubt about it Luton could do with a railway station by the terminal but 2.3 million people still used it in 2011. With a journey time as little as 22 minutes non-stop Luton is looking to increase the frequency of these non stop trains.

no doubt once MAG entice airlines away from Luton the margin will increase

Stansted built its success from cross subsidies from Heathrow. No doubt the profits from Manchester will once again subsidies Stansted. Stansted is an airport that has never been successful when it has had to stand alone.

Don't ruin your point by over-egging it, LTNman. The first train from Liverpool Street arrives at Southend Airport at 6.31 a.m. and the last train leaves SEN at 11.05 p.m. Only three flights are affected by this.

Thought Easyjet only had 3 aircraft based at Southend or is that 4 now.

First train of the day in reality means any passenger catching a departure before 8am is pushing their luck. Any passenger arriving at Southend after 22:15 is also pushing their luck to catch the train.

It could be worse as there is a night time ban at Southend so aircraft are limited to when they can use Southend but even so the train is not an option for many passengers.

[pamann]

LTNman

Time to put this all to bed, it's going off topic.

We (I think I speak for a fair few on here) do understand your complete and devoted love for Bedfordshire International. Unfortunately it's the same regurgitated clap trap from the Luton regulars time and time again.

I think the Southend thread might be missing you? Nothing happening at Luton that you can discuss to death on the Luton thread?

[vectisman]

Maybe its me, but I struggle to understand those who champion various airports over others. Personally I would like to see all airports and airlines succeed in the UK bringing in much needed business, tourists and trade. Some airports are more specialist in certain markets, others have a broader based approach. Does it really matter who is the biggest, smallest or whatever? As long as all are allowed to play to their strengths fairly there should be no issue.
To those on here who at times allow personal prejudices to blind them from reasoned argument and economic reality I say step back and get a sense of perspective.

V.

[pamann]

Yes lets get back to discussing the sale of Stansted to MAG. :ok:

[LTNman]

Agree, time will tell who are the winners and losers but buying Stansted could well be a smart move in the long term for MAG if they can attract new non Ryanair business. Maybe the place to start is to try and pick up some of the IT market that seems to be concentrated at Gatwick.

[daz211]

Agree back to the main topic

[Andy_S]

Jeez. I thought I was going to read an interesting discussion on the business merits of MAG’s takeover of STN. What I actually see is a 3-way bitch fight…….

Can anyone tell me why a group of local authorities in North West England have ambitions to run a portfolio of airports throughout the country? MAN I can just about understand, but what business do MAG have operating an airport in Essex?

[Skipness One Echo]

What do we think that MAG will do differently from the team at BAA Stansted?
How will they accomplish this?
Will lowering charges mean no return for the airport operator etc?

[Fairdealfrank]

Quote: "No doubt about it Luton could do with a railway station by the terminal but 2.3 million people still used it in 2011. With a journey time as little as 22 minutes non-stop Luton is looking to increase the frequency of these non stop trains."

One-stop might be better: West Hampstead. It has a large catchment area, potentially linking up areas east, west and south west of London on the new "Overground" system, and the Underground.

Indeed if some of the fast trains on the Chiltern, East Midlands, Thameslink and Metropolitan lines also stopped there, West Hampstead could be a very useful hub/interchange, and not just in relation to access to/from LTN (or LGW).

To come back on-thread (in part), it would be the equivelant of the Stansted express stopping at Tottenham.

[pug]

Andy S, you may be interested in the article below.

Manchester Airport buys Stansted - but what does it mean for you? We find out | Manchester Evening News - menmedia.co.uk (http://menmedia.co.uk/manchestereveningnews/news/s/1598581_manchester-airport-buys-stansted---but-what-does-it-mean-for-you-we-find-out)

Can anyone tell me why a group of local authorities in North West England have ambitions to run a portfolio of airports throughout the country

The ten authorities are mere shareholders, MAG look after the assets on behalf of them However, they will have voted in favour of this move in order for it to go through. Also, Manchester City Council no longer own a controlling stake in MAG, as IFM bought 35% of MAG, with MCC's share reducing to 35%. So effectively STN has been purchased at no cost to the tax payer.

Not sure on the financial situation at STN however?

[LGS6753]

According to the Financial Times, the deal has been done for £1.5bn at an EBITDA of 15.6 times.

Simple maths tells us that Stansted's EBITDA is therefore £96.1m. For those unfamiliar with such terminology, EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation.

So, assuming no increases in revenue or decreases in costs, out of £96.1m per annum, MAG has to pay:

interest on £1.5bn - at a mere 5% that is £75m
Depreciation on any short life plant/machinery
Amortisation of any other assets
Tax on anything left


Call me cynical, or biased, or anything else, but IMHO that doesn't add up to a brilliant deal. It also shows that there isn't much cash left to invest in reducing fees to encourage new users, or upgrading facilities.

Of course, depreciation and amortisation are non-cash items, but they still need to be accounted for in the P&L. Even if some of the capital outlay is not direct borrowings, a return still has to be made on it.

So, when asked what MAG will do with their shiny new acquisition, I'm not sure. Having made the commitment, they will try to make it work, but I hope, for the sake of Manchester's ratepayers, that they manage it conservatively, at least to start with. Non-cost improvements would be uppermost in my mind, such as staff training, strict control of overheads and combination of functions and sharing resources within the group. They may try to sell off or outsource some of the assets or activities included in the sale.

It's a major management challenge...

[FRatSTN]

Have a look at these:

Stansted sale welcomed by business | Cambridge Business News | Cambridgeshire Local Business & Corporate News (http://www.cambridge-news.co.uk/Business/Business-News/Stansted-sale-welcomed-by-business-21012013.htm)

Manchester's £1.5bn acquisition of Stansted backed by loan - The Irish Times - Tue, Jan 22, 2013 (http://www.irishtimes.com/newspaper/finance/2013/0122/1224329147366.html)

[pwalhx]

LGS why are they having to pay interest on £1.5 billion?

[LGS6753]

Because the money has come from somewhere.

If it's been borrowed from a bank, the bank will require interest.
If it's shareholder's funds (retained profits) the shareholders will require to earn a dividend on it. (If they aren't going to get a dividend on it, the company should return it to shareholders).
Any money or asset that a company applies to a specific project will be judged by its opportunity cost, i.e. what could otherwise have been done with it.

It's easiest to use the example of bank borrowings because that's an understandable concept, but all money carries a cost.

[pwalhx]

OK taking that point on board then I guess it is ridiculous anyone would buy Stansted.
Thank you for the clarification.

[LGS6753]

OK taking that point on board then I guess it is ridiculous anyone would buy Stansted.

I disagree. What's ridiculous is the price paid, which I really struggle to understand.

[SWBKCB]

Non-cost improvements would be uppermost in my mind, such as staff training

LGS6753 - do you work in my HR department??

[North West]

I disagree. What's ridiculous is the price paid, which I really struggle to understand.


Unless you were close to the months of negotiation, due dilligence and funding, then it would be difficult to understand. Without the details, impossible to say

I would point out that I can borrow against my house at well below 5%, so borrowing against airport infrastructure and revenue will be significantly below the 5% you assume

Maybe its me, but I struggle to understand those who champion various airports over others.


Most are people who are championing their own city and airport "support" is part of a bigger thing of championing anything to do with their local town or city. Explains why the Heathrow thread is relatively quiet. No one in London feels the need to "big up" the airport or the city in the same way people from regional cities do.

[LGS6753]

SWBKCB -

LGS6753 - do you work in my HR department??

Unfortunately not.

However, the success of GIP at Gatwick has been based partly on improving service standards, and I would expect MAG would want to emulate that, as well as instilling their own corporate culture on newly 'acquired' staff.

Northwest -

You are right to say that airports are cheaper to finance than other types of business, particularly if a securitisation deal can be done. It's a while since I was involved with that type of financing, so my estimate is just that - an estimate. Although LIBOR is only 0.5%, UK Gilts are trading at over 2%, so there are certainly steep gradients in interest rates. Many UK utilities are paying dividends of around 5%, so for the moment I'll stand by my estimate.

[FANS]

MAG was owned by the local councils. Can someone clarify why bringing in an investment fund to dilute the council's shareholding and then buying an airport hundreds of miles away benefits the councils and their populations?

They would have been off focusing on extracting further dividends from MAG to support local services than allowing management to go off on a trophy buying spree, which then requires their service contracts to be re-adjusted for this "extra responsibility" after benchmarking with their peers.

[Andy_S]

The ten authorities are mere shareholders, MAG look after the assets on behalf of them However, they will have voted in favour of this move in order for it to go through. Also, Manchester City Council no longer own a controlling stake in MAG, as IFM bought 35% of MAG, with MCC's share reducing to 35%. So effectively STN has been purchased at no cost to the tax payer.

I understand, of course, that the local authorities are not directly running the airports. Nevertheless, as shareholders, they will presumably be receiving dividends, which raises the question of why the users of an airport in Essex should be topping up the coffers of councils in Greater Manchester.

Unless, of course, the profits from STN are simply servicing MAG's debt. In which case what is the point? Empire building??

[pug]

which raises the question of why the users of an airport in Essex should be topping up the coffers of councils in Greater Manchester.

What odds does it make to the users of STN as to who owns the airport? Provided they reinvest sufficiently into infrastructure and improve service does it matter where the owners are based?

As the shareholders have voted in favour, there must be a convincing reason put forward for making the purchase. We may have to wait until the annual report is released in August to get a better insight into their decision.

[FANS]

The question is very simple: why do the council tax payers of Manchester want to own an airport in Essex?

[pug]

The question (http://www.pprune.org/newreply.php?do=newreply&noquote=1&p=7650857#) is very simple: why do the council tax payers of Manchester want to own an airport in Essex?

The answer is very simple, profit :D

[LGS6753]

The point is that the council tax payers in Manchester have not voiced an opinion. It is the faceless bureaucrats and their political masters that have made the decision by the power they believe has been vested in them by Manchester's electorate.
I would venture to suggest that no elector in Greater Manchester cast his or her vote on the basis that their council was about to commit £1.5bn to buying an airport 200 miles from home.
The post facto rationale will be that the transaction will benefit the taxpayers through increased dividends, and therefore better services/lower council tax. As I have argued above, this is an optimistic view of the eventual outcome - and I hope that Manchester's taxpayers don't suffer a loss if their new acquisition doesn't work out in the way they hope it does.

[FANS]

The answer is very simple, profit

But it's not pug. The airport has a history of damaging acquisitions that have ultimately distracted management.

From memory, the dividends received by the councils over the years have been very low from an asset of this worth. The focus should be on increasing dividends not spending time raising external funding from equity and bank funders for an acquisition that has been competitively priced (i.e. it's not an offmarket, low price deal).

[pug]

From memory, the dividends received by the councils over the years have been very low from an asset of this worth. The focus should be on increasing dividends not spending time raising external funding from equity (http://www.pprune.org/airlines-airports-routes/505669-mag-buy-stn-5.html#) and bank funders for an acquisition that has been competitively priced (i.e. it's not an offmarket, low price deal).

I cannot imagine them achieving shareholder support where there to be an increased risk of reduced dividends. Whether the population of Greater Manchester supports the acquisition or not is irrelevant IMO for as long as they are not subsidising MAG, but where MAG are effectively reducing council tax/subsidising other capital projects in the Manchester area.

As for the strategic standpoint, I've no idea how it will play out. Surely the increase in competition in the South East will be good for the London passenger? The bargaining power may help bring more airlines and routes into Manchester eventually. Who knows?

[Andy_S]

The answer is very simple, profit :D

And yet there seems some doubt as to exactly how much profit will be made……

Perhaps I didn’t make my point about STN users funding Manchester councils very well. Let me put it another way. Why should local authorities in Manchester, rather than local authorities in Essex, be allowed to profit from running STN?

Call me old fashioned, but I expect local authorities to be responsible for things like running libraries, cutting the grass in public parks, providing sports centres etc. Activities specific to and adding value to their own governmental area. I can just about accept that their remit, since it includes transport, could extend to a local airport, but becoming a significant investor in a major business with interests in several other parts of the country? It doesn’t seem appropriate to me.

[FANS]

I cannot imagine them achieving shareholder support where there to be an increased risk of reduced dividends. Whether the population of Greater Manchester supports the acquisition or not is irrelevant IMO for as long as they are not subsidising MAG, but where MAG are effectively reducing council tax/subsidising other capital projects in the Manchester area.

You're completely missing the point. It's like saying I've got a £1bn but I only get a 1% return. The councils should maximise the value of their dividends and drive the current financial performance of this asset BEFORE letting management embark on another acquisition.

[pug]

FANS, I think you are missing my point. That being you dont know the details behind the acquisition therefore, even though you can pluck out soundbites like 'increase dividends' and 'drive current financial performance', doesnt really answer any of your own, or anyone elses questions at the minute.

Due dilligence will have been practiced, and shareholders consulted. We have to therefore put faith in the fact that MAG know what they are doing before taking such a risk.

And yet there seems some doubt as to exactly how much profit will be made……


From where, from hard analysis of facts or from opinions of people on a forum? I think a bit of perspective is needed here.

As for the rest of your post. I agree in essence, however surely there is nothing wrong with a consortium of local authorities increasing revenue streams to keep the park benches maintained and the streets lit, whilst trying to keep council tax low for their population.

[FANS]

That being you dont know the details behind the acquisition therefore, even though you can pluck out soundbites like 'increase dividends' and 'drive current financial performance', doesnt really answer any of your own, or anyone elses questions at the minute

Pug, you're the one telling me it's been done because of profit and yet you don't "know the details behind the acquisition" !!

Yet again: why do the council tax payers of Manchester want to own an airport in Essex?


Due dilligence will have been practiced, and shareholders consulted. We have to therefore put faith in the fact that MAG know what they are doing before taking such a risk.

Is this the same MAG that paid £17m for Humberside then sold it for £2.3m. They should not be allowed near acquisitions until the current house is producing meaningful returns to local councils & taxpayers.

MAG sells its majority stake in Humberside Airport - Manchester Evening News (http://www.manchestereveningnews.co.uk/business/business-news/mag-sells-its-majority-stake-in-humberside-692250)

[pug]

Pug, you're the one telling me it's been done because of profit and yet you don't "know the details behind the acquisition"

You asked a 'simple question' I gave a simple answer. Afterall, why do businesses exist?

Is this the same MAG that paid £17m for Humberside then sold it for £2.3m. They should not be allowed near acquisitions until the current house is producing meaningful returns to local councils & taxpayers.

I'd say a pretty shrewd move for all concerned. Clearly a small airport with limited scope is not going to generate a sufficient return for the public sector shareholders. Those same shareholders voted in favour of the sale of Humberside Airport at that price. You can speculate all you want about why Manchester Airport bought Humberside back in 1999, but they subsequently got their second runway, and HUY was in profit for most of the 2000's..

[FRatSTN]

On a slightly different topic, a slight rumour that Monarch and Jet2 will be MAG's first targets for opening a base at Stansted. Personally if I had to choose I think it would be Jet2. If Monarch were to open a base, I wonder what that would mean for Gatwick and Luton??

Manchester Airports Group buys London Stansted Airport (http://www.anna.aero/2013/01/23/manchester-airports-group-buys-london-stansted-airport-monarch-and-jet2-com-on-route-shopping-list/)

[LGS6753]

The same article contains this interesting chart on the largest users at each MAG airport:

Manchester: 1,Ryanair. 2,easyJet. 3,Flybe. 4, Thomson. 5,Monarch.
London Stansted: 1, Ryanair. 2, easyJet. 3, Germanwings. 4, Pegasus 5, Thomson
East Midlands: 1, Ryanair. 2, Flybe. 3, Jet2.com. 4, Thomson. 5, Thomas Cook.
Bournemouth: 1, Ryanair. 2, Thomson. 3, Aer Arann.

They make the point that Ryanair is the largest client of the group, but also state that FR have 78% of the market capacity at STN (only 14% at MAN) - even more than has been quoted elsewhere.

[FRatSTN]

FR have 78% of the market capacity at STN

Ryanair accounted for 68% of capacity at Stansted the last I heard, with EasyJet as 21%, making it 89% combined. Is that a typo?

[FANS]

a pretty shrewd move for all concerned

Buying a business for £17m and then selling for £2m is not my idea of a shrewd move. Then again, my company can't just fall back on the taxpayer to pick up the tab.

Please tell me that you're not connected to MAG?

[Ringwayman]

They should not be allowed near acquisitions until the current house is producing meaningful returns to local councils & taxpayers.

the dividends received by the councils over the years have been very low from an asset of this worth

Last year = £20million in dividend payout: £1 million each for 9 councils and £11 million for Manchester Council. £65.5 million profit - not too bad a return?

Why should local authorities in Manchester, rather than local authorities in Essex, be allowed to profit from running STN?

There was nothing stopping the local authorities in Essex from bidding in association with other investors. Perhaps this question needs to be asked to the various Essex councils?

[LTNman]

Last year = £20million in dividend payout: £1 million each for 9 councils and £11 million for Manchester Council. £65.5 million profit - not too bad a return?

Luton council rents out its airport on a 30 year concession to a private operator. Last year the council received just under £25 million in fees based on less than 10 million passengers. The operating profit was £23.8 million.

[FANS]

Last year = £20million in dividend payout: £1 million each for 9 councils and £11 million for Manchester Council. £65.5 million profit - not too bad a return?


I do think that is a very very low return for an asset of this size and type. As one example only, if the shareholders are getting £20m and they should be aiming for at least a basic 5% return on this type of asset (and really a lot higher), this implies that the equity is only worth £400m. It is worth a damsight more, but is simply not delivering appropriate shareholder returns.

The councils' overriding focus should be on maximising what they have rather than being sucked into management's agenda.

Again, why do the council tax payers of Manchester want to own an airport in Essex?

[Barling Magna]

Again, why do the council tax payers of Manchester want to own an airport in Essex?

As an Essex dweller I can't understand your question. Why shouldn't Manchester taxpayers own an airport in Essex? Why do all our airports have to be owned by Spaniards and Canadians ...? Do you have a problem with public ownership? Most of our airports started as council-run organisations.

[pug]

Please tell me that you're not connected to MAG?

No Im not.

Buying a business for £17m and then selling for £2m is not my idea of a shrewd move. Then again, my company can't just fall back on the taxpayer to pick up the tab.

They didn't buy the airport for £17m. They sold the airport for the £2.3m with the £6.6m pension deficit being taken on by ERYC, with the debts having been serviced and the airport having returned a profit for much of the time under their ownership. Unfortunately, with DSA having opened not far away, the lost revenue from leisure passengers has meant the airport is now operating at a (small) loss. The local authorities of Manchester have no interest in owning a majority stake in a loss making operation. They voted in favour of a sale at that price, to Eastern Airways who arguably also got an excellent deal. Must be remembered that Manchester got their second runway....

Anyway, will leave you to keep asking your hypothetical questions.

[Andy_S]

Why shouldn't Manchester taxpayers own an airport in Essex? Why do all our airports have to be owned by Spaniards and Canadians ...? Do you have a problem with public ownership?

To answer those questions in turn.

Manchester taxpayers shouldn’t own an airport in Essex for the simple reason that it’s in Essex rather than Manchester. The operative word in Local Authorities is ‘Local’; councils in Greater Manchester exist to provide a variety of services in Greater Manchester. Not Essex.

While I would prefer, for emotional reasons as much as anything else, that our airports have British owners, I don’t have a problem with foreign ownership or control of our airports provided that we have equal access to ownership of foreign infrastructure assets. That’s clearly not the case in Spain for example.

I don’t have any ideological problem with public ownership, although I would make the point that the public sector doesn’t have a particularly good track record in running businesses. What I do have a problem with is local authorities, who should be looking after parks, libraries and emptying the bins, expanding their activities into the business world. Of course you can make the argument that it generates extra income that can be invested in public services, but what happens if the business struggles or fails? Who picks up the tab? The point has already been made that MAG operated Humberside at a modest profit for a number of years but then sold it at a cracking loss. Was that really a good deal for the taxpayers of Greater Manchester? Or were MAG more driven by ambition and hubris than a commitment to public service?

[FANS]

Anyway, will leave you to keep asking your hypothetical questions

There's nothing hypothetical with loosing over £10m on buying & selling Humberside airport, which could have been used for public services.

I can't understand why the council tax payers of Manchester want to own an airport in Essex, especially in light of the public sector making such a hash of running businesses (newcastle airport directors payoff!), and MAG's own disastrous track record of acquisitions and low dividend payouts.

[chaps2011]

I was under the impression that no Council monies were involved as MAG is allowed to borrow money on the open market as is any other company.

Chaps

[FANS]

You're absolutely right that no new money is put in by the councils, but if MAG looses £10m+ on Humberside that's £10m less to pay to the councils.

The STN deal has involved a new financing, but this is probably cross-collaterised against the wider MAG rather than just STN. I haven't looked into any of the details of this.

[pug]

You're absolutely right that no new money is put in by the councils, but if MAG looses £10m+ on Humberside that's £10m less to pay to the councils.

:rolleyes: You need to fact check that one. For a start they didnt buy HUY for £17m..

[FANS]

Acquiring it for £10m + spending £7m on investment is the same as buying it for £17m, bar timing.

If you know how much they lost in total, let us all know as I can't see how it's a shrewd move.

[LGS6753]

For comparison:

LLAOL (LTN's operator) declared EBITDA profit of £35.1m in 2011. This is after paying Luton Borough Council around £3 per passenger under its licensing agreement (the airport freehold is owned by the Council), or around £25m.
Thus the equivalent profit emanating from Luton is just over £60m, on 8.5 million passengers, or around £7 per passenger. The only borrowings/depreciation relate to plant, machinery, buildings and constructions.

STN has just been sold for an amount that implies an EBITDA of £96.1m, on 17.416 million passengers, or around £5.50 per passenger. It is carrying an enterprise capital employed of £1,500,000,000.

No wonder BAA didn't take long to accept MAG's bid!

[pug]

Perhaps my post shouldn't be taken out of context FANS.

I'd say a pretty shrewd move for all concerned. Clearly a small airport with limited scope is not going to generate a sufficient return for the public sector shareholders. Those same shareholders voted in favour of the sale of Humberside Airport at that price. You can speculate all you want about why Manchester Airport bought Humberside back in 1999, but they subsequently got their second runway, and HUY was in profit for most of the 2000's..

I didn't know that the majority of funds invested in keeping the place operational for the 13 years was classed as part the purchase price..? I dont believe the councils recieved any money from the sale of HUY shares, as there was a negative net value when Manchester took over. Could be wrong? But thats my understanding.

I'm not sure how its comparative anyway, as MAG weren't even formed when HUY was purchased. Comparing apples with oranges.

[FANS]

I didn't know that the majority of funds invested in keeping the place operational for the 13 years was classed as part the purchase price..?

They bought a business for £10m, spent a further £7m on capex + supported it during their ownership period and then sold it for only £2.3m. That is cash that has been lost forever and hence not benefiting the council tax payers.

Rather than getting lost on what's the definition of purchase price and contextualising this as a good deal, you should focus on the cash that has gone.

I dont believe the councils recieved any money from the sale of HUY shares, as there was a negative net value when Manchester took over.

The councils didn't own HUY, the airport group did. Therefore any cash receipts would have flowed to the airport group from this sale. Again, the point is that this disastrous acquisition resulted in £10m+ less that could be paid out in dividends to the councils of Manchester.

Comparing apples and oranges.

Both HUY and STN are airports and acquisitions that were done by the corporate business that is Manchester airport. It is completely comparing apples & apples. The corporate legal entity which does the acquiring is not relevant.

The policy of undertaking a massive acquisition in another part of the country is not something that a council controlled business should ever be undertaking.

[pug]

The councils didn't own HUY

Hull City Council, East Riring Council and North East Lincolnshire Council all sold their shares in HUY to Manchester Airport in 1999..

The corporate legal entity which does the acquiring is not relevant.

Even though it is a completely different apparatus, with completely different leadership, under completely different circumstances?

Are you a GM council tax payer?

[FANS]

It's Manchester airport undertaking an acquisition of an another UK airport, so it's not that completely completely completely different.

The management team should focus on maximising their dividends out to the councils before embarking on a massive acquisition in a different part of the country.

You keep putting your faith in management and let them tell you what another shrewd move this is.

[pwalhx]

I don't recall all this concern over the GM council tax payers owning BOH, EMA and HUY (till it was sold). Seems all these concerns have floated to the surface because they have purchased Stansted.

[LGS6753]

....possibly because they didn't spend such a grotesque amount of dosh on EMA, BOH and HUY?

[FANS]

and they made a complete hash of previous acquisitions.

I'm sure it's a great deal for management however; I bet the remuneration committee are already revisiting the bonuses and LTIP for all of this additional pressure and responsibility.

[KS1000]

Expanding from your poor rail services comments - between Bishops Stortford and London there are I think 8 level crossings
It is all well and good for various sites to waffle on in corporatese about Stanstead in 30 and links to crossrail but it is my belief that fast frequent trains and level crossings do not go together
I have recently spent 40 mins at Spellbrook crossing hoping to get home a couple of miles away
Does anyone think a road fairy will miraculously built flyovers to replace the level crossings? That would be interesting at Spellbrook and Sawbridgeworth! Or will they just close them permanently? God help Bishops Stortford town centre then
The rail line is in part still in the 1950's
Without major investment (paid by who?) good rail links surely will not happen