Municipal capitalism comes down to London

Manchester Airport Group comes down to London

 

Following last weekend’s announcement that Manchester Airport Group (MAG) were successful in bid for Stansted airport, it appears that Greater Manchester local authorities will now have more say on the operational side of aviation in London & the South-East then any London authority, let alone the Mayor of London.  

The Stansted sale is part of the drive by Britain’s competition regulator, The Competition Commission to loosen the grip of Heathrow Airport Holdings – formerly BAA – on the UK airport market and in particular in London & the South-East.  When the Competition Commission broke-up the monopoly that BAA had over the London market, it precipitated BAA’s biggest marketing drive in a an effort to convince us how desperately we needed an expanded Heathrow for the sake of our economy.   This was not surprising in some ways, as BAA had in effect a private monopoly of airports in London & the South East with its holding, not only of Heathrow, but also Stansted & Gatwick.  If anything, this break up should have happened earlier, when BAA was first privatised.  For the London consumers of air travel, whether for business or leisure, this should result in more choice as we see all three airports now competing.     

So where are MAG getting the £1.5 billion to fund the acquisition? Well to reassure residents of the North West, it’s not their councils who sit on the board of MAG who are putting up the cash.  Its largest stake holder is Manchester City Council with 55 per cent; the other local councils in Greater Manchester – Bolton, Rochdale, Stockport, Wigan, Salford, Tameside, Oldham, Trafford & Bury – have a 5 per cent stake each.

As part of the transaction, Australian infrastructure investment group Industry Funds Management (IFM) will become an investor in MAG, invest new equity and take a 35.5 percent stake in the enlarged group. So whilst it is at present publically owned by local authorities from the North-West, its being partly privatised to fund the new acquisition, though the majority control will remain amongst the local authorities.

Interestingly, although we are growing accustomed to the annual adverse impact of snow on UK aviation, when the first recent bout occurred in December 2010, Manchester airport was seen as a beacon of good practise in the way it handled heavy snow “up North” much better then the “southern softie” Heathrow airport. In fact it was used to illustrate an instance where public ownership had out performed its private counterpart.

But lets not get to starry eyed about it all, as the leader of Manchester City Council, Sir Richard Leese has said ” MAG is a key driver  of jobs and growth in the north of England and the acquisition of Stansted will help us deliver maximum value for Manchester City Council and the other local authority shareholders”

So while London local authorities and the Mayor are kept out of the action, a majority publically owned airport operator like MAG, (albeit partly privatised to fund the purchase of Stansted) is leading the way when it comes to the implementation of competition policy. It has a ring of municipal capitalism from “up North” about it, which has made its way down South, nonetheless,  I certainly welcome it.