It might never happen. All of this may be speculation. But if Manchester Airport were to be sold there would be a feeding frenzy of interested buyers. Michael Taylor looks at the question from all sides
There's a conspiracy theory doing the rounds that goes something like this: the government has been boxed into a corner regarding the funding of Manchester's Metrolink tram system.The case has been made for the system to be built. However, the eagerness from Alistair Darling, transport secretary, to pay for any light rail system is still tinged with grave reluctance.
The policy imperative is still to reduce congestion in city centres, but the government is insistent that all options are examined. Road charging should be seriously considered. This, however, as
Sir Howard Bernstein, the city council chief executive, said at an Insider event in September last year, would be impossible to sell to city centre retailers still facing competition from the Trafford Centre.
Other funding options, such as raising bonds won't go far enough.
OK, says the government, you can't charge for the roads, there isn't a private sector option for you, how else will you be able to pay for what you want?
What about that enormous asset you own; Manchester Airport?
Not only does the Manchester Airport Group own and operate Manchester Airport, but gateways at Humberside, East Midlands and Bournemouth. With turnover of £3373.5m last year and pre-tax profits of £366.4m, carrying almost 27 million passengers, it is a gold mine that could net a cash windfall to pay for an expansion and an upgrade of the Metrolink system.
There is substantial private sector interest in airports; the business is on the rise and the targets are there to be seen and are achievable within a realistic timeframe - 40 million passengers by 2015.
The balance sheet values the shareholders' funds at just short of £31bn. There is net debt of £3272m and the business has an A grade credit rating.
It is profitable to the tune of £366.4m last year and paid out a windfall dividend to its shareholders of £325m.
The rest of the story is just a matter of negotiation and clearly there would be no shortage of interested parties.
Also, the airport management knows all of this. The shareholders anticipate this and, though publicly the city council's policy is one of opposition to privatisation in any form, all good businesses plan for a different set of commercial circumstances and different risks to the long-term future of the business.
The appointment of Richard Pike, the new heavyweight finance director of the group, is further circumstantial evidence of the bolstering of the management team at Ringway. A strong commercial player, recruited from St Helens glassmaker Pilkington, where he was chief finance officer for its building products and automotive divisions, Pike brings just the kind of financial muscle required to see the business through a potential change of ownership and make the transition to public company status.
Equally, his recruitment into the £3260,000-a-year position makes sense as Manchester Airport is about to embark upon a massive £3500m investment programme in a new terminal and retail facilities. The group is tipping ever further away from being a pure-play aviation business towards a property and retail operation.
Pike certainly knows about running the finances of a public company from all angles. He was business development manager at North West tapes manufacturer Scapa.
In the aviation industry this issue is not even on the radar. There is no noisy campaign from free-marketeers to unshackle the business from state control. The last time the issue was raised was when Manchester City Council faced a shortfall from the funding of the Commonwealth Games in 2002.
And when Insider tested the waters on the issue in January 2006 and asked ten regional business figures whether the airport should be sold off, opinion was split 50-50. Predictably, the view from Manchester City Council was a firm "no" from Bernstein.
Tantalisingly, the view from Peel Airports' chairman, Robert Hough, was equally forthright: "Yes, wise shareholders would consider some divestment to crystallise value."
Also in: February 2006
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