Cardiff Airport is sold to the Welsh government for £52m

The Welsh government agrees a £52m to buy Cardiff International Airport.

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Troubled Cardiff Airport has been sold to the Welsh government for £52m.

First Minister Carwyn Jones said it would not be operated by the government and would be managed "at arm's length" and "on a commercial basis".

Mr Jones has been critical of the airport after a slump in passenger numbers from a peak of two million in 2007 to just over one million in 2012.

Rival airport Bristol raised concerns that Cardiff would unfairly benefit from state support.

Speaking after the government announced the deal, Mr Jones said it was vital for the number of passengers to be increased.

REACTION TO AIRPORT SALE

Inside Cardiff Airport

Reaction has been mixed to the Welsh government's purchase of Cardiff Airport but almost everyone agrees a thriving airport would be good for the economy.

Business organisation CBI Wales said "strong and effective commercial stewardship" was required.

"To compete on the world stage, Wales needs world class infrastructure and a key part of that is a modern and effective international airport," said director Emma Watkins.

"Welsh business needs a dynamic and thriving airport that can drive investment and deliver growth."

The Federation of Small Businesses in Wales said infrastructure around the airport, such as roads and rail, needed to be improved.

"Increasing the number of flights and destinations would no doubt enable businesses to search for new markets and boost their trade internationally," added Janet Jones, FSB Wales policy unit chair.

South Wales Chamber of Commerce "warmly welcomed" the sale.

"We need to see an effective plan developed that will enable a smooth transition of ownership and ensure that the commercial operator appointed has significant international experience to bring new initiatives to the airport model," said director Graham Morgan.

Figures showed just over one million passengers used Cardiff in 2012, down about 200,000 in a year.

Meanwhile, nearby competitor Bristol Airport, which has sought assurances that Cardiff will not get state handouts, had seen almost six million passengers last year.

Cardiff was hit by the withdrawal of flights by budget airline bmibaby in 2011, but has said it expects 5% - 8% growth during 2013.

Last May, Mr Jones called on the then owners TBI to invest in its future or put it up for sale.

"Cardiff Airport is a vital gateway to Wales for business, tourists and general travellers alike," he said on Wednesday.

"It is essential that its future is secured and that we develop high-quality sustainable services.

"The airport will not be operated by the Welsh government. It will be managed at arm's length from government on a commercial basis and, over time, I expect to see a return to the public purse on the investment.

"A chief executive of the airport will be announced in due course. In the meantime, I am delighted that Lord Rowe-Beddoe has agreed to serve as chairman of the airport board."

In the longer term, the board will look at the possibility of bringing in a commercial operator and Mr Jones also opened up the prospect of the airport looking to attract long haul and transatlantic flights.

Mr Jones said the Welsh government had been contacted by a number of interested parties.

After hearing of the sale, Bristol Airport chief executive Robert Sinclair was sceptical that government involvement would be "arm's length".

'Highly competitive'

"However, the purchase price of £52m paid by the Welsh government - which is well above market value when compared to recent transactions involving UK airports - gives us concern that ongoing government involvement and support is highly likely," he said.

Analysis

The debate will now begin on whether £52m is a good price for the Welsh taxpayer.

The Welsh government says it follows intensive negotiations and was based on independent valuations.

When Abertis bought Cardiff Airport in 2005, it was said then to have a valuation of £150m.

So today's price is well below that, but back then the airport was in a healthier state. Since then passengers numbers have dropped and latest figures show it made a loss of more than £300,000 in 2011.

Whatever your views on the price, it has always been striking how passionate people feel about Cardiff Airport.

Bringing it back into public ownership, in what is one of the most high profile acquisitions ever undertaken by the Welsh government, will inevitably heighten those passions.

"Airports across the world are commercial businesses operating in highly competitive markets and the global trend is towards privatisation of these assets, not nationalisation.

"Bristol Airport has never been concerned about competition from Cardiff or other airports, provided that competition is on a level playing field without any form of state subsidy or government support."

The airport's existing staff will remain but only 40 are employed directly.

An average of around 1,000 staff work on the site as sub-contractors but that figure can vary considerably.

In the months leading up to today, Mr Jones said the airport gave a bad impression of Wales as it fell behind its rivals.

The owners said at the time that they had no plans to sell but would listen to offers.

Only this month there was bad news when Swiss carrier Helvetic announced it was pulling out, two years after the Welsh government spent £500,000 marketing Wales in Switzerland.

Helvetic started flying to Zurich from Cardiff in 2011, but had already dropped winter services after low demand and will not fly this summer.

'1970s-style nationalisation'

However, Spanish airline Vueling said it was increasing services to Malaga and Alicante from Cardiff after a "positive response from Welsh travellers".

Cardiff Airport

Cardiff Airport in 1998
  • The airfield at Rhoose in the Vale of Glamorgan was built in 1941.
  • Control was transferred from the Ministry of Defence to the former Glamorgan County Council in 1965, and then to its three successor councils of West, Mid and South Glamorgan in the 1970s.
  • The airport was privatised in 1995, with TBI now owned mainly by the Spanish company Abertis with a minority stake held by the Spanish airports operator AENA.
  • Just over one million passengers used Cardiff in 2012, down about 200,000 in a year
  • Passenger numbers peaked at two million in 2007

Asked if the purchase was a gamble, Business Minister Edwina Hart said it was "the right thing to do."

But opposition politicians were sceptical of the Welsh government's involvement in trying to turn around the airport's fortunes.

"I have yet to be convinced that a 1970s-style nationalisation is the answer to the airport's problems," said the leader of the Welsh Conservatives, Andrew RT Davies.

"When you consider the recent decision by Helvetic to withdraw, in spite of the Welsh government having invested around half-a-million pounds, it is far from clear that the first minister is the best man for the job of rescuing this airport."

Eluned Parrott, Welsh Liberal Democrat economy and transport spokesperson, called on the Welsh government to "urgently announce its plans to transform the airport".

Plaid Cymru also said it wanted to see the detail of the government's plans.

"There is no reason why a publicly-owned national airport for Wales could not be far more successful than the airport in its present state," said party leader Leanne Wood.

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