British Airways (BA) has threatened to cut down its services at the London City Airport as it fears that the new owner of the airport might increase airport charges to cover £2bn it would pay to acquire the airport.
This step taken by BA to pull out the majority of its flight services from the London City Airport might affect the sale of the airport itself.
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The airport was put up for sale in August 2014 by US firm Global Infrastructure Partners. It has been valued at £2bn, and has already received offers from several buyers.
As reported by Reuters, the buyers include Hong Kong’s Cheung Kong Infrastructure Holdings, Atlantia Spa and other three consortia, of which one is headed by Macquarie Infrastructure.
Willie Walsh, the chief executive of International Airlines Group, BA’s parent company, has been much worried regarding the consequences of the price.
According to Walsh, if the airport fetches £2bn price, it would be a multiple of 44 times of the airport’s earnings before interest, tax, depreciation and amortisation in 2014.
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By GlobalDataWalsh was quoted by Financial Times as saying: "If the owners succeed in selling this for £2bn we cannot see how a buyer will be able to recover or make any return on that investment unless they make a significant increase in airport charges."
BA is one of the major airlines at London City that carries approximately 40% of the airport’s passengers each year.
Walsh added: "We will not stay in London City at the levels we are today if these charges increase.
"Quite honestly the margins we make at London City would not support any increase in charges."
About two-thirds of passengers of the airport are business travellers owing to its proximity to Canary Wharf and the heart of the city.
