The Welsh Government purchased Cardiff International Airport Limited (the Airport) in March 2013. Since then it has continued to invest in the Airport and has provided financial assistance to it through loans and grants. This article outlines how much the Welsh Government bought the Airport for, what has been spent since its purchase, and what financial support it may need in the future.
This is the first in a series of articles ahead of a Welsh Government debate on Cardiff Airport on 10 March 2020. Tomorrow’s article will analyse passenger numbers and the third article in the series will examine the Airport’s financial performance.
Buying the Airport
Commercial flights have operated from the Airport’s current site since the 1950s. Until it was bought by the TBI Group in 1995, the Airport was under public ownership. In 2005 Abertis Infraestructuras SA (Abertis) purchased the TBI Group and became owners of the Airport.
In May 2012 the then First Minister, Carwyn Jones AM, highlighted the Airport’s importance to Wales’ infrastructure and wider economy. This followed a period of decline in the Airport’s passenger numbers and a reported lack of investment (PDF 459KB). In December 2012, the Welsh Government released a statement that confirmed it was negotiating the purchase of the Airport:
If […] the Welsh Government is satisfied that this represents a sound investment then we may proceed towards a purchase.
In the statement the Welsh Government said that whilst it would “clearly exert a strong strategic interest” it would not be running the Airport, and it would operate on a commercial basis.
In March 2013, the First Minister announced that the Welsh Government had bought the Airport for £52 million. It subsequently established a holding company - WGC HoldCo Limited (‘HoldCo’) - to hold the shares and oversee the running of the Airport.
Following its purchase, the Welsh Government provided an additional £3.3 million (PDF 897 KB) in cash assistance to the Airport, which was subsequently converted to share capital. This raised the Welsh Government’s initial investment to £55.3 million.
Financial assistance so far
As the Welsh Government is the sole shareholder in the Airport, any private financing sought by the Airport counts against the Welsh Government’s borrowing limits. Therefore, the Welsh Government has restricted the Airport from seeking sources of private funds or investment and the Airport is reliant on the Welsh Government for financial assistance.
The form that the financial assistance can take is governed by detailed European Union (EU) State Aid rules. These prevent public bodies using resources in a way that could potentially distort competition and trade in the EU. As such, any loans made by the Welsh Government to the Airport are required to be on a commercial basis with interest charged in line with the EU’s framework. EU State Aid rules will continue to apply in the UK during 2020. Beyond this, the situation will depend on the outcome of the UK-EU negotiations on the future relationship.
Since its purchase, the Welsh Government has approved commercial loan facilities for the Airport and provided financial assistance by buying additional shares in the Airport via HoldCo. The infographic below shows a timeline of the Welsh Government’s investments in the Airport. In 2018, the Welsh Government also awarded a £1 million grant to the Airport for the installation of e-gates. While the accounts suggest that other Government grants have been awarded to the Airport, it is not possible to report the total value with certainty.
In January 2020, Simon Jones, Director of Economic Infrastructure in the Welsh Government and Chair of HoldCo, told the Assembly’s Economy, Infrastructure and Skills (EIS) Committee that the Airport had fully drawn down the loan facility of £38 million. He also said that the £21.2 million loan had been consolidated with the existing facility. This brings the total commercial loan facility to around £59 million. Repayment is not due until the latest extension of the loan facility – the award of £21.2 million - has been drawn down in full by the Airport.
In a letter to the Assembly’s Public Accounts Committee (PAC) in February 2020, the Welsh Government reported that the Airport had “requested a total additional loan value of £28 million”. The Welsh Government had to date only approved £21.2 million. The remaining £6.8 million was subject to approval, with supporting additional analysis and due diligence.
The Airport’s Masterplan
The Airport’s Masterplan 2040 sets out its “ambitious plans for growth over the next 20 years”. The Welsh Government's written evidence, ahead of a session in September 2019 on the Airport with PAC stated:
It is clear that further investment will be required to fulfil both our and the airport’s long term ambitions of growth and expansion, but we recognise that there is a limit to how this can be achieved solely via the public purse.
Simon Jones told PAC that Welsh Government was looking at other ways the Airport’s plans could be funded:
…there may be other means of [the Airport] getting that money in. So, there might be other sources of income for that that don’t involve an equity stake in the airport.
He said these could include “some kind of partnership deal” or “working with private sector partners to lever in their investment”.
However Andrew Slade said in a letter to the Chair of PAC in February 2020:
Airports are viewed as strategic, long-term investments by investors and tend to be held for periods of 25-30 years. Our position with [the Airport] is very much in line with this approach.
Find out more
On 10 March the Welsh Government will be holding a debate on the Airport which you can watch on SeneddTV.
In our next article in the Cardiff Airport series, we set out information about passenger numbers.