M570 – Motion on selling Cardiff Airport Watch

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Andrew97
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M570 – "Motion on selling Cardiff Airport, Conservative & Unionist Party"

This house calls upon the government to prevent the Welsh government from loaning Cardiff Airport any more taxpayers’ money, and calls on the government to have the Airport sold to the private sector.

Cardiff Airport has borrowed more than the initial fee the Welsh government paid for it in 2013 (£52m) Cardiff Airport suffered a £6.6m pre-tax loss in 2017-18, which was a rise from £6.0m in 2016-17, and £4.9m in 2015-16. Patterns like this show there is little hope the situation for the airport will get any better. With all this in mind, the house believes continued borrowing to Cardiff Airport is an unacceptable use of taxpayers’ money.

The airport owes the Welsh government £30.6m. With the assets of the airport valued at £68.7m, selling it off would recover the money lost as a result of the borrowing, and more.
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SnowMiku
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A private airport... how would that even work? Could the company who owns it could start charging people money just to board a plane or sit down at a waiting area, regardless of how much they paid for their plane ticket in the first place?
Could the company also bar people from the premises (I mean it's an airport that some people need to use on a regular basis) and send cease and desist letters to anyone whom opposes?

Also, who would you sell this to? There's potential for exploitation any way you look at it.

I believe this is a bad course of action.

EDIT: After clarification, it doesn't seem a 100% bad idea, still not sure though.
Last edited by SnowMiku; 1 month ago
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Jammy Duel
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(Original post by SnowMiku)
A private airport... how would that even work? Could the company who owns it could start charging people money just to board a plane or sit down at a waiting area, regardless of how much they paid for their plane ticket in the first place?
Could the company also bar people from the premises (I mean it's an airport that some people need to use on a regular basis) and send cease and desist letters to anyone whom opposes?

Also, who would you sell this to? There's potential for exploitation any way you look at it.

I believe this is a bad course of action.
The same as it does for Heathrow, Gatwick, Stansted, Luton (operations wise), Manchester, East Midlands

The simple reality is your major airports are nearly all owned, part owned, or operated by the private sector. Those suggestions of what a private owner might do show a complete lack of understand of how markets work, should those things be done will airlines operate via Cardiff? No, they'd operate somewhere else, perhaps Bristol (which is privately owned btw)
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SnowMiku
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(Original post by Jammy Duel)
The same as it does for Heathrow, Gatwick, Stansted, Luton (operations wise), Manchester, East Midlands

The simple reality is your major airports are nearly all owned, part owned, or operated by the private sector. Those suggestions of what a private owner might do show a complete lack of understand of how markets work, should those things be done will airlines operate via Cardiff? No, they'd operate somewhere else, perhaps Bristol (which is privately owned btw)
oh,

Wasn't aware all of them were operated/owned by the private sector, hardly ever used one
fair point
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The Mogg
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No prizes for guessing which Tory made this one, so of course an easy aye from me. The airport can be run so much better in the private sector than the public sector, allowing the Welsh government to put more money into other areas, such as its failing NHS or its lacklustre education system.
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Cabin19
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It depends who it is sold too and what their plans are as it is important for a airport to remain in Cardiff as its the gateway too Wales internationally. As in 2003 Durham Tees Valley was sold for a similar reason however was asset stripped, even introducing a £6 passenger fee that lead to Ryan air leaving. Then this year was repurchased to be back under public ownership by a Conservative mayor. Therefore selling off isn't the way too go as this airport is a public good. However the airport does need to be made more profitable
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Jammy Duel
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Given the TSR Tories are such fans of borrowing billions of pounds to operate as a financial institution, perhaps the SWF could be used to prop it up?

Being slightly less flippant, I can only assume the author(s) haven't actually looked too closely at the annual report, instead just looking at the headline profit/loss figure. Reading the annual report for 2017-18 you would find that Qatar Airlines starter running flights last May and the core metrics for an airport are quite strong with growing passenger numbers, growing route counts, and a growing operator list.

Closer inspection would have also revealed that while there was a pre-tax loss the EBITDA was actually positive, only £7,000 however there was still a profit made based on that metric, the headline figure was brought down by the £5,108,000 depreciation and amortisation charge, cash flow from operating activities also looks to be healthy, although that does look to be on the back of borrowing.

That is not where the weakness of the argument presented ends, for if we assume the airport is sold purely based on the the value of its assets the Welsh government would not stand to profit off the nationalisation and privatisation, having paid £52m to nationalise the airport in 2013 it would be sold for a mere £34m, a real terms loss of £26m, it would need to be sold for nearly double the value of the assets for a profit to be turned.
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Jammy Duel
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(Original post by SnowMiku)
oh,

Wasn't aware all of them were operated/owned by the private sector, hardly ever used one
fair point
Yup, including Cardiff until 2013

(Original post by The Mogg)
No prizes for guessing which Tory made this one, so of course an easy aye from me. The airport can be run so much better in the private sector than the public sector, allowing the Welsh government to put more money into other areas, such as its failing NHS or its lacklustre education system.
The arguments presented simply do not stand up to scrutiny, and the real argument in favour is incompatible with TSR Tory policy, namely that the public sector should restrict itself to providing public goods and a small number of other services such as healthcare and education, bar in exceptional cases (such as being operator of last resort on the railways), and that when it strays away from these core functions it should be as limited as possible before returning the service to the private sector.
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SoggyCabbages
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At first read of the motion itself my thoughts were that yes this should be sold off.

But however, reading Jammy's comments has swung me slightly. If the author only read the headline big profit/loss number and neglected the other ways in which airport worthiness is measured, they could be getting the wrong end of the stick.

I shall abstain until further comments are made.

I would also be interested to know the future profit/loss, passenger numbers etc projections as it could be worth keeping it until demand increases, if that is likely.
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LiberOfLondon
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Aye. Airports are not something the Government should be involved in running.
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Jammy Duel
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(Original post by SoggyCabbages)
At first read of the motion itself my thoughts were that yes this should be sold off.

But however, reading Jammy's comments has swung me slightly. If the author only read the headline big profit/loss number and neglected the other ways in which airport worthiness is measured, they could be getting the wrong end of the stick.

I shall abstain until further comments are made.

I would also be interested to know the future profit/loss, passenger numbers etc projections as it could be worth keeping it until demand increases, if that is likely.
The 2018-19 annual report should be published soon, although surprised it hasn't been published yet given 2017-18 was published early October and the year end date has not been changed
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The Mogg
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(Original post by Jammy Duel)
The arguments presented simply do not stand up to scrutiny, and the real argument in favour is incompatible with TSR Tory policy
Well not a single Tory offered any objection, and this has been lying around our user group for like 4-6 weeks. I will happily admit that it didn't occur to me to look at the in-depth figures, but I still believe in privatisation of the airport anyway hence I will still back the motion. As you have mentioned above there are many airports part or almost completely owned by the private sector, and I don't see them crumbling to the ground. Furthermore, even if it ends up that the Welsh government wouldn't profit from selling it, surely selling it is still better than allowing it to build up more debt right? or is that another bad way of thinking?
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Saracen's Fez
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It's a devolved matter so not within this government's competence – what the Welsh Government spends its grant on is not this government's business. That said, if Cardiff Airport had been a financial success story, it would never have been nationalised in the first place. It was never bought to make money for the Welsh Government.
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Jammy Duel
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(Original post by The Mogg)
Well not a single Tory offered any objection, and this has been lying around our user group for like 4-6 weeks. I will happily admit that it didn't occur to me to look at the in-depth figures, but I still believe in privatisation of the airport anyway hence I will still back the motion. As you have mentioned above there are many airports part or almost completely owned by the private sector, and I don't see them crumbling to the ground. Furthermore, even if it ends up that the Welsh government wouldn't profit from selling it, surely selling it is still better than allowing it to build up more debt right? or is that another bad way of thinking?
I support privatising it because unlike the TSR Tories I believe in limited government, as opposed to a government that intends to get involved in sectors that should be the preserve of the private sector, operator of last resort etc aside.

From the pure standpoint of public finances it isn't exactly as bad as you perhaps make it out to be, or believe it to be. The debt owed to the Welsh Government certainly isn't of concern, in the event of liquidation there are more than enough tangible assets to cover the amount owing to the Welsh Government; it has returned a profit, however debt interest is potentially a concern given it stood just shy of £1.5m in the year to 31st March 2018. It should also be remembered that the Welsh government is effectively lending to itself.

On the matter of it being better to sell now because it's worth less than it was in 2013, that is a very short termist mindset and is broaldy irrelevant to sound decision making if we are to consider it from the perspective of a private sector investor. I went back and had a look at the old accounts and as at 31/12/2012 (the final accounting period before privatisation) the airport had net assets of £33bn, if the same premium were paid on privatisation there would be a nominal profit of about £1bn and real loss of about £7bn. The thing is though the relative book value now vs then is not a good measure to use if we are looking at it purely from the perspective of finances, what matters far more is the future and that is actually what its value would be based on. Say you owned some shares in Tesco, would you have sold them in 2017 because its total equity had fallen? As at 27/02/2016 the figure stood at £8,616m, a year later on 25/02/2017 it had fallen to £6,414m. The answer is you wouldn't because you know that the total equity figure is largely unimportant and that the business is robust, despite having in the year to 25/02/2017 the group having made a loss (due to exceptional items)
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CatusStarbright
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I see no benefit to keeping it in public hands, so I will support this.
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Paracosm
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Sell it to the highest bidder.
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Baron of Sealand
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(Original post by SnowMiku)
A private airport... how would that even work? Could the company who owns it could start charging people money just to board a plane or sit down at a waiting area, regardless of how much they paid for their plane ticket in the first place?
Could the company also bar people from the premises (I mean it's an airport that some people need to use on a regular basis) and send cease and desist letters to anyone whom opposes?

Also, who would you sell this to? There's potential for exploitation any way you look at it.

I believe this is a bad course of action.

EDIT: After clarification, it doesn't seem a 100% bad idea, still not sure though.
Having private airports is in fact the reason why flying in Europe and in southeast Asia is cheap. In Latin America, where private airports basically don't exist, flying is more expensive even without taking into account of the difference in living standards.
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Baron of Sealand
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(Original post by SoggyCabbages)
At first read of the motion itself my thoughts were that yes this should be sold off.

But however, reading Jammy's comments has swung me slightly. If the author only read the headline big profit/loss number and neglected the other ways in which airport worthiness is measured, they could be getting the wrong end of the stick.

I shall abstain until further comments are made.

I would also be interested to know the future profit/loss, passenger numbers etc projections as it could be worth keeping it until demand increases, if that is likely.
If you want flying to be more affordable, support privatisation.
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Thomp0
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We must be committed to allowing the people of Wales to maintain access to an airport in their capital city. Selling the airport opens the door to the unknown, where the most likely outcome is a private owner running the airport for a profit and cutting costs wherever possible leading to delays and compromising the safety of our country. It is important South Wales has a hub in order to do business with people overseas and with the airport remaining in government control we will be best placed to ensure that the airport is run successfully for passengers and workers.
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Jammy Duel
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(Original post by Thomp0)
We must be committed to allowing the people of Wales to maintain access to an airport in their capital city. Selling the airport opens the door to the unknown, where the most likely outcome is a private owner running the airport for a profit and cutting costs wherever possible leading to delays and compromising the safety of our country. It is important South Wales has a hub in order to do business with people overseas and with the airport remaining in government control we will be best placed to ensure that the airport is run successfully for passengers and workers.
Why is it important that Cardiff has an international airport, it's not like Wales is some remote land which is otherwise completely inaccessible to the outside world, it's only about 10 miles away from the civilised lands of England where sheep don't have to fear they're about to be molested.
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