Glasgow Prestwick airport is set to go back on the market, but what interest is there today for what was once Scotland’s primary air gateway?

Now, almost six years after the Government took back control of Glasgow Prestwick airport, it will invite expressions of interest for the sale of the airport through an advertisement in the Official Journal of the European Union and a management team is engaging with potential buyers and investors.


Summary:

  • Six years after the Scottish government took over Prestwick Airport it will try to sell it;
  • A once primary UK airport now handles less than 700,000 passengers per annum and management seems to have written it off;
  • But it is still a significant piece of real estate and a saviour could unexpectedly emerge.

Prestwick was once a Category A gateway airport, one of only two in the UK outside London – along with Manchester – to handle long-haul services, and it did – mainly important trans-Atlantic ones. However, under private ownership successively by a Canadian entrepreneur, Matthew Hudson,  the Scotland-based Stagecoach Group, the airport investment company Omniport and latterly the New Zealand fund manager Infratil the airport the airport saw mixed fortunes and lost much of its traffic to Glasgow’s main airport.

At times it has seen traffic peak courtesy of the arrival of Ryanair, but gain it has as quickly fallen off as the budget airline opened routes at other Scottish airports and reduced its Prestwick presence. In fact, by the time the airport was sold by Infratil to the Scottish Government (for GBP1) in Nov-2013 the former had lost GBP2 million on it.

Prestwick has a long and chequered history, its glory days being in the mid-late 1900s when it hosted trans-Atlantic flights not only by British Airways by but other major airlines of the day such as Northwest Orient. It is famously the only place where Elvis Presley put a foot on British soil, during a refuelling stopover in 1960, although that is now disputed.

At the time the government took over the airport the then Deputy Prime Minister, Nicola Sturgeon (now First Minister) stated that work would begin for “turning Prestwick around and making it a viable enterprise”. Has that been the case? If the passenger traffic figures tell the story the answer is no.

The usual staccato pattern of growth followed by (industry buzz word) ‘negative growth’ has proven to be the case during the last five years, as it was previously, ranging between a high of +10.2% and a low of -33.1% (and they were in consecutive years). Numbers varied from 610,000 to 682,000 from 2015 to 2018 and so far this year (1Q2019) the numbers are down again, this time by -21%. The highest passenger tally since 1997 was in 2007 (2.42 million).

CHART – There has been a mixed performance of positive and negative growth at Glasgow Prestwick airport this decadeSource: CAPA – Centre for Aviation and UK Civil Aviation Authority

However there are other revenue streams such as income from manufacturing facilities on-site, property leases and a US government fuel contract. (GBP1 million of its annual income comes from military flights). Access to detailed recent financial statements for a government-owned entity (TS Prestwick Holdco Ltd) is difficult but it is known that the management company suffered a GBP9.2 million pre-tax loss in 2015/16 following one of GBP8.9 million in 2014/15. In 2017 it informed Scottish ministers it could not repay a GBP40 million loan until 2032, setting a return to profitability target of 2022.

Since then it has taken out two further government loans, of GBP9.6 million (2017) and GBP6 million (2018) and around this time last year the CEO, Stewart Adams, addressing a Scottish Parliament committee, said: “The cost of passenger operations will be looked at… the passenger side of the business does not make money”. Addressing the same committee, the Finance Director Ian Forgie stated the airport would be “wound up” if obliged to repay its loans.

The passenger side of the business has clearly deteriorated since then and neither has the airport been able to achieve his desire to attract more carriers, decreasing its dependence on Ryanair and developing London routes. According to schedule data for the of week commencing 17-Jun-2019 the only scheduled passenger airline operating at Prestwick is Ryanair.

What’s more, Glasgow International airport has developed rapidly. Now under the ownership of AGS Airports, a consortium of Ferrovial and Macquarie Infrastructure, it has trans-Atlantic services to North and Central America, while over 50% of its seat capacity is ‘low-cost’. Last year it handled 14 times as many passengers as Prestwick. It seems all bases are covered.

Does Prestwick have anything going for it? Well it has two runways, the longer of which is almost 3000m, and masses of land. It is the only Scottish airport to have its own railway station, since 1994, which it owns. There are regular services to and from Glasgow Central station with occasional onward services to Edinburgh and there is a discounted fare scheme for air passengers. But that is just about all.

Who might buy it? The days of the old operators from other transport sectors such as Stagecoach, and fund investors dabbling in secondary airports such as Infratil, are over. The modern breed of investor, from the private equity, pension and even sovereign wealth segments is unlikely to be interested even though there is plenty of land available. There are still Scottish entrepreneurs, based largely in Edinburgh and which have bid for airports previously, who might be tempted.

But its future might lie instead from something coming out of left field. It has been proposed as a spaceport and local agencies are putting money into that challenge. That would change its status completely. As would a takeover by the Trump Organisation. The US President owns a nearby golf course and has a significant investment in the area. He has previously hinted at acquiring the land, if not the airport.