WORLD ROUTES: The Landlord and the Tenant – an Aviation Twist!

Last month Eastern Group, parent company of UK regional carrier Eastern Airways, bought a controlling share in its home base, Humberside Airport in eastern England, potentially safeguarding the future of the facility.  In the weeks that followed Irish budget carrier Ryanair revealed an interest in bidding for Stansted Airport as part of BAA’s enforced sale tender of the predominantly low-cost London gateway.  Are we beginning to see a greater move towards business with airline interests taking over the ownership of airports or is this another manipulation of the media and industry by the budget airline’s out-spoken boss Michael O’Leary?
The lives of airlines and airports are intrinsically linked; one cannot survive without the other but can a business really succeed as both landlord and tenant.  Although deals are completed on a commercial basis, existing airline operators at Stansted but must be concerned about Ryanair’s potential involvement with the airport and the obvious advantages it would provide the low-cost carrier.  The story for Humberside is notably different, as was the case previously with Sutton Harbour, Air Southwest and Plymouth Airport.

Humberside Airport has witnessed a significant decline in scheduled demand over the past years and official Civil Aviation Authority (CAA) data shows numbers slipping by almost a half since 2006.  The start of the Millennium had been positive for the airport with passenger numbers exceeding 500,000 in 2003 and 2004, but five year-on-year declines has seen this number slip to just under 275,000 last year.
The airport currently has just two scheduled routes, a long-standing hub connection to Amsterdam Schiphol flown by KLM cityhopper and a four times daily link to Aberdeen by Eastern Airways.  Both routes are supported by the oil and gas industries.  Alongside these scheduled flights some seasonal charter routes provide leisure options to destinations in Bulgaria, Greece, Spain and Turkey.
After acquiring the 82.7% shareholding of former owner, Manchester Airports Group (MAG), for an undisclosed sum (council minutes suggest the figure was £2.3 million – almost £8 million less than MAG paid for its majority stake in 1999), Eastern Group says it will look after local interests and is studying how it can expand its own presence at Humberside and bring new links to North Lincolnshire.  In the past Eastern has offered links from Humberside to Edinburgh, Glasgow and Norwich, while the airport has had non-stop links to Brussels, Dusseldorf, Esbjerg, Paris CDG and many UK points, among others.
“We are making a strategic financial investment acquiring Humberside Airport.  The airport has potential for growth, and under the present airport management team, supported by Eastern Group, will develop in accordance with the business plan already in place,” said Bryan Huxford, Chairman, Eastern Group.
According to Cllr Liz Redfern, leader of North Lincolnshire Council, having a company with a local understanding and interest is key to the future of the airport.  For regional facilities like in this example, it seems that it is not simply about profitability and gaining a return on investment but also supporting social needs.  “These measures are vital in helping secure a viable future for Humberside Airport,” she explained.
“There are a number of unique opportunities to deliver jobs and growth and support, and underpin further investment in the area. The airport has a fantastic business park with huge potential. Its location is perfect with easy access to the ports and South Humber Gateway – vital to the future success of our region.  Working together, we will do all we can to attract further investment and development to North Lincolnshire and create more jobs for local people to secure a promising future,” she added.
It seems that Eastern Group’s purchase of Humberside Airport may be a good move for the airport, but this doesn’t necessarily mean that this business model will be successful in all examples.

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