London City Airport was put up for sale last August for 2bn and it has attracted a few buyers. There has been no word of negotiations or offers, but British Airways has been critical of the price tag for the airport.
BA is concerned that the cost of the airport is 44 times that of their annual profits before interest, tax, depreciation and amortization. If that is the case, British Airways doesn’t see how any buyer can hope to recoup any profit at that price. They believe the only way new owners will be able to do so will be through passing the costs off via airport charges.
British Airways has stated they will leave the airport if this happens. They say their own profit margins are narrow enough that a hike would necessitate their withdrawal from the airport. Currently British Airways takes about 40% of the passengers that currently fly in and out of the docklands airport. So if they withdraw this could be a huge blow for the new owners of the airport.
London City Airport does hold appeal for investors as it is mostly used by business travelers as well as being one of the only airports located within a reasonable distance from London’s financial center.
The airport has doubled its passenger growth over the last two years, and perhaps buyers are projecting this growth to continue over the next few years. It is difficult to say as no one can predict with any certainty what will happen over the next few years.
Again, it will have to be a wait and see approach. First, wait to see if the airport is purchased at its current selling price and then based on those numbers; see what the new owners decide to do.