How Much Is An Airport Worth
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How Much Is An Airport Worth
If for example a local council airport came up for sale how would you determine its worth? Lets say LBA where I live close to. If it was to be privatised (rumour), then where does the value come from? If I said I wanted to buy the airport or whatever the percentage the controlling councils wanted to sell, then how would the figures be calculated?
Just a question for you business orientated people interested in aviation.
ILS 119.5
Just a question for you business orientated people interested in aviation.
ILS 119.5
Most business valuations are based on the value of future free cash flows.
It's very complex to calculate, and includes the use of a number of assumptions, such as future revenue stream growth, future inflation, future interest rates, etc.
As a result, any business valuation is a guess.
The vendor wants as much as possible, the purchaser wants to pay as little as possible. So they haggle. Each party brings with them armies of lawyers and accountants (who win in any eventuality), whose objective is to earn fees for themselves.
It's jolly good fun. Unfortunately, the negotiations are often conducted by people who don't know the detail of the target business. That's why companies often get it wrong, usually purchasers paying too much.
Got the T-shirt.
It's very complex to calculate, and includes the use of a number of assumptions, such as future revenue stream growth, future inflation, future interest rates, etc.
As a result, any business valuation is a guess.
The vendor wants as much as possible, the purchaser wants to pay as little as possible. So they haggle. Each party brings with them armies of lawyers and accountants (who win in any eventuality), whose objective is to earn fees for themselves.
It's jolly good fun. Unfortunately, the negotiations are often conducted by people who don't know the detail of the target business. That's why companies often get it wrong, usually purchasers paying too much.
Got the T-shirt.
Brunel to Concorde
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In 2001 the Australian Macquarie Bank and Cintra acquired Bristol Airport from First group plc and Bristol City Council for £198 million.
At that time Bristol's annual pax throughput was around the same as LBA's is now (2½ million approx), so it might serve as a reasonably good guide as to what LBA is worth.
Since BRS went into private hands at the end of 1997 (initially in a 51% controlling interest by First Group plc followed by outright sale in 2001) the infrastructure has improved beyond measure.
Tens of millions of pounds have been spent on a new terminal building, a new control tower, the diversion of the A 38 main road, Cat III landing, increased apron size for airliners and many other things. The spend is continuing with another £14 recently announced.
Had it remained in the ownership of the City Council, I cannot think it would have made but a tiny fraction of the progress it has done in the past few years.
At that time Bristol's annual pax throughput was around the same as LBA's is now (2½ million approx), so it might serve as a reasonably good guide as to what LBA is worth.
Since BRS went into private hands at the end of 1997 (initially in a 51% controlling interest by First Group plc followed by outright sale in 2001) the infrastructure has improved beyond measure.
Tens of millions of pounds have been spent on a new terminal building, a new control tower, the diversion of the A 38 main road, Cat III landing, increased apron size for airliners and many other things. The spend is continuing with another £14 recently announced.
Had it remained in the ownership of the City Council, I cannot think it would have made but a tiny fraction of the progress it has done in the past few years.
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Nearly two years ago, Norwich Airport (owned by Norwich City Council and Norfolk County council), was put up for sale.
Various offers were made, the most commercially viable at the time seemed to be from the illustrious TBI at around £22m.
5 min's before contracts were due to be exchanged, ALLEDGEDLY, TBI reduce their offer to £11m, offer from TBI is immediately rejected, the whole tender process starts again.
At a later stage, in come Omniport, ( the management company who formerly ran Prestwick and also do something else), and offer the airport owners £9m, which is accepted and signed early 2004.
Of that sum, nearly £1m is paid to the Norfolk county council Pension Fund to preserve employees pension benefits, a further £750k + is paid in legal and professional fees and after other costs, each council gets less than £3.5m each, which is an absolute pittance to them and of relatively little compensation to the ratepayers.
Leeds Bradford is around the same size in acreage terms, as Norwich, commercially the land is probably worth about the same, but as an airport worth a lot more.
If privatised, I am sure there would be some major players in the running to buy Leeds, but the return to the ratepayers would be minimal in terms of the amount of their money that has been invested over the years.
Various offers were made, the most commercially viable at the time seemed to be from the illustrious TBI at around £22m.
5 min's before contracts were due to be exchanged, ALLEDGEDLY, TBI reduce their offer to £11m, offer from TBI is immediately rejected, the whole tender process starts again.
At a later stage, in come Omniport, ( the management company who formerly ran Prestwick and also do something else), and offer the airport owners £9m, which is accepted and signed early 2004.
Of that sum, nearly £1m is paid to the Norfolk county council Pension Fund to preserve employees pension benefits, a further £750k + is paid in legal and professional fees and after other costs, each council gets less than £3.5m each, which is an absolute pittance to them and of relatively little compensation to the ratepayers.
Leeds Bradford is around the same size in acreage terms, as Norwich, commercially the land is probably worth about the same, but as an airport worth a lot more.
If privatised, I am sure there would be some major players in the running to buy Leeds, but the return to the ratepayers would be minimal in terms of the amount of their money that has been invested over the years.
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Sometimes the 'value' is not necessarily reflected in the cash and other financial instruments which change hands- especially when the public sector are selling. Public to private sales often come with commitments that the buyer will invest in facilities, capacity etc.
I hope this isn't considered off topic, but I was wondering if anyone can corroborate this story about creating VALUE out of airports.
In 1984 Airports UK, a subsidiary of BAA, was appointed to manage Southampton Airport by the then owner, Nat Somers. In 1988 BAA wasn't interested in buying the airport from Mr Somers because of planning restrictions on the land.
So, in November 1988 Mr Somers sold Southampton (Eastleigh) Airport to the sharp eyed Peter de Savary (through his company Highland Participants) for £55m. Mr de Savery went to the local council(s) and said something like "If I get the investment to turn this into a major regional base and international airport for the city of Southampton, will you consent for me to build, grow and expand?". At the same time, he went to BAA and said something like "If I get you planning permission to allow this to be an International airport, will you build a new terminal befitting an International airport?". Clearly both parties accepted and Mr de Savery sold the airport to BAA only about 2 years after buying it (with the announcement of a £27m expansion commitment by BAA). As a private sale, I don't know how much BAA paid BUT I understand that Mr de Savery held onto some of the land and subsequently built a business park which would not have been possible without the planning permission he secured.
As a financier in the sector, I love the idea of this clever businessman thinking beyond the limits immediately facing an airport. Now that's value creation- the transition from Eastleigh Aerodrome to Southampton Airport to Southampton International Airport.
I hope this isn't considered off topic, but I was wondering if anyone can corroborate this story about creating VALUE out of airports.
In 1984 Airports UK, a subsidiary of BAA, was appointed to manage Southampton Airport by the then owner, Nat Somers. In 1988 BAA wasn't interested in buying the airport from Mr Somers because of planning restrictions on the land.
So, in November 1988 Mr Somers sold Southampton (Eastleigh) Airport to the sharp eyed Peter de Savary (through his company Highland Participants) for £55m. Mr de Savery went to the local council(s) and said something like "If I get the investment to turn this into a major regional base and international airport for the city of Southampton, will you consent for me to build, grow and expand?". At the same time, he went to BAA and said something like "If I get you planning permission to allow this to be an International airport, will you build a new terminal befitting an International airport?". Clearly both parties accepted and Mr de Savery sold the airport to BAA only about 2 years after buying it (with the announcement of a £27m expansion commitment by BAA). As a private sale, I don't know how much BAA paid BUT I understand that Mr de Savery held onto some of the land and subsequently built a business park which would not have been possible without the planning permission he secured.
As a financier in the sector, I love the idea of this clever businessman thinking beyond the limits immediately facing an airport. Now that's value creation- the transition from Eastleigh Aerodrome to Southampton Airport to Southampton International Airport.
Last edited by ClickRich; 15th Nov 2004 at 16:07.
