Entrepreneurs Forum
Success story

Reach for the skies

Monday 25 June 2012 6:00

The new owners of Edinburgh Airport landed at their £807m asset in June and, as BQ discovers,the airport is in good shape for the battles ahead.

During the Battle of Britain some of the earliest sorties of Hurricanes against the Luftwaffe were flown from Turnhouse aerodrome.

Now a new battle has begun for Edinburgh Airport as it locks swords with its commercial opponent in Glasgow.

This is exactly what the UK regulators wanted when they demanded that Spanish-owned BAA, who once owned Heathrow, Gatwick and Stansted, along with Edinburgh, Glasgow and Aberdeen, split up Edinburgh and Glasgow.

BAA chose to dispose of Edinburgh, keeping Glasgow and hanging onto Aberdeen, which is one of the fastest growing in the UK [an 11.7% increase on traffic last month].

Now for Scotland’s two Central Belt airports, only 52 miles part, the friendly battle has commenced.

The £807m was handed over to BAA on Thursday 31st May, and the GIP executive team for Edinburgh Airport Limited arrived for its first day in charge on June 1.

BQ Scotland caught up with Michael McGhee, the front man for Edinburgh’s new owners, Global Infrastructure Partners, on his first day in his new asset.

“We have a meeting today with our new executive team this morning to outline our vision and plans, and how we work together.” Days before taking over, Sir John Elvidge, the Permanent Secretary in the Scottish Government until 2010, was appointed chairman of Edinburgh Airport.

"Michael McGhee said: “Our investment in Scotland is a significant one, so we are delighted to have secured Sir John as chair. His knowledge of Scotland will be particularly important as we raise Edinburgh Airport’s profile around the world, and build strong relationships in the city and beyond.”

Sir John, his full appointment pending a review, said he hoped to establish the airport as a highly competitive force that grows and develops in tune with the needs and aspirations of Scotland and its capital city.

Gordon Dewar, who ran both Glasgow airport, from 2007-2008, and Edinburgh, from 2008 to 2010, is returning as chief executive officer. He is finishing off his work with Bahrain International Airport, and his recent knowledge of the Middle East market will be useful for Edinburgh.

David Wilson is coming as chief operating officer, who has been head of airfield operations at Gatwick and is returning to his home town.

“We will be making some more Scottish appointments over the next few months, to complement the board we already have and strengthen the operational side,” he said. The whole team had time to tour the airport’s sections, gaining their first full impression and introducing themselves to the staff.

“Everyone seems enthusiastic,” said McGhee.

“We have a different approach from BAA, which meant each airport was part of the system. We run each airport on a stand-alone basis. This means we do what is best for Edinburgh and proceed accordingly.

“We’re looking forward to competing with Glasgow and offering an alternative. The passengers will benefit as both airports sharpen their acts. We won’t lose all our traffic, and they want lose all theirs, but the margin of traffic does make a difference. So it’s important for both airports to do well,” he added.

It has been a quick turnaround after the deal was agreed on 23 April that GIP, an independent global infrastructure fund manager, reached with BAA.

Adebayo Ogunlesi, Chairman and Managing Partner of GIP said: “Edinburgh Airport is a high quality infrastructure asset.

“Its acquisition is a landmark deal for GIP and represents the first investment by GIP II. We see significant opportunity to apply our tested and successful operational expertise and our knowledge of the global airports sector to develop and enhance the performance of Edinburgh Airport in years to come.

“We plan to work closely with the airlines to improve customer service and quality in a similar fashion to the strategy we are successfully executing at our existing UK airports London Gatwick and London City. We expect to continue to develop Edinburgh Airport into an attractive and efficient capital city gateway by improving the experience of our passengers, business and leisure alike,” said McGhee.

He explained that the long-term key priorities will be similar to those of Gatwick and London City Airport, which is about maximising capacity.

“Our take-over timing isn’t great because over the next three weeks we are entering the really busy season for Edinburgh. So the immediate priority is to keep our eye on the ball and ensure that everything is done to handle the volumes then, when we come up for air, we will be focusing on seeing how we can improve the check-in and security, which is where people are held-up most at the moment. We want to cut the queues. We could do with a bit more space for security, so we will be looking at how best to do that.”

He explained that the airport’s security area is likely to be re-vamped in the coming 12 months. Punctuality is clearly a major matter and he said the new owners will be looking at international arrivals to see if this can be handled more easily and efficiently.

“We will be trying to get service levels and efficiency levels up. Once you do that, you make it more attractive and then we will be looking around for new business.” The board has wasted no time in authorising some capital projects to improve the airport where the condition isn’t as good as it hould be, on the taxiways and on the car-parking outside the terminal which need resurfacing.

“Otherwise, we’ve found the airport to be in good condition so far.

“It has just come out of a significant capital expenditure programme.” But Glasgow was not about to sit back and let Edinburgh do the running.

It released figures that showed a resurgence in holiday flights that helped Glasgow Airport regain significant ground on Edinburgh five years after it was overtaken as Scotland’s most popular airport.

Figures by owner BAA showed Glasgow had 6.7% more passengers in April than a year earlier, its third consecutive month of growth, while Edinburgh had a decline of 1%.

In this war for bums on airline seats, this kind of statistic matters. More recent stats show this upwards trend continuing at Glasgow, with 660,000 people travelling through the airport in May.

Part of this increase can be attributed to the impact of the Icelandic ash cloud which caused disruption in May 2011.

But even after adjusting for the ash cloud, passenger growth was still significant at 6.2%. Glasgow’s growth has been largely down to a resurgence in the holiday market, which has formed the backbone of its traffic, in contrast to the business travel and inward-bound tourism that dominates at Edinburgh.

And Michael McGhee is realistic. “The economic environment is not very positive, so we are going to have to work very hard to make it work.”

Amanda McMillan, managing director of Glasgow Airport, said: “Despite the challenges presented by rising fuel costs and further increases in Air Passenger Duty, we have enjoyed considerable success in expanding our route network.

“This has been a major factor in encouraging more people to fly from Glasgow Airport.” Passenger growth at Glasgow Airport has continued with almost 550,000 people travelling through the airport in April 2012, representing an increase of 6.7% compared to the same period last year.

An increase in demand for both international and domestic travel, which grew by 5.6% and 7.7% respectively, ensured it was another busy month for Glasgow Airport which has succeeded in adding a number of new routes in recent months, including direct flights to Barcelona, Rome and Venice.

“April’s figures were extremely encouraging and with a number of services such as Canadian Affair’s direct flights to Vancouver and Calgary, and US Airways’ Philadelphia route getting underway in May, we hope to maintain this pattern of growth.

"We also have the launch on Friday 1 June of Emirates Airline’s second daily service to Dubai to look forward to, which will play a vital role in further enhancing Scotland’s connectivity with important global markets.”

In April, Loganair introduced a direct service to Newquay and Jet2.com announced it is to add the Turkish resort of Bodrum and Gran Canaria to its 2013 summer schedule.

Glasgow Airport also learned it is to become the first airport in Scotland to welcome one of the world’s newest passenger planes after Thomson Airways confirmed it will fly its Boeing 787 Dreamliner from the airport when it is delivered next year.

For McGhee, the arrival of the Boeing 787 into Edinburgh will also make a dramatic change in that it is a more efficient, longer-range aircraft able to fly point-to-point, rather than the hub and spoke systems favoured by the major airlines, such as BA and KLM.

“On longer hauls, our priorities are North America and the Middle East. In due course, and we have to be realistic and see how the market goes, we would like to encourage operators to serve Edinburgh directly. It has a lot going for it as a destination and that is something we would want to build on.”

GIP’s financial adviser on the Edinburgh deal was RBS, with Slaughter and May, the legal advisers.

Global Infrastructure Partners is an independent infrastructure fund manager that invests worldwide in assets and businesses in both the OECD and emerging market countries.

GIP targets investments in single assets, and portfolios of assets, in power and utilities, natural resources infrastructure, air transport infrastructure, seaports, freight railroad, water distribution and treatment and waste management.

GIP has offices in New York and London and its other airport investments are a 75% interest in London City Airport and a 42% controlling stake in London Gatwick Airport.