The sale of Gatwick Airport - Case Study Example

Running Head: THE SALE OF GATWICK AIRPORT The Sale of Gatwick Airport 298774 The Sale of Gatwick Airport Gatwick Airport, the second largest airport in the United Kingdom, has been offered for sale by BAA, its owner following a move by the competition commission to push the Company to dispose three of its British airports due to dominance concerns of the Airline business market. Gatwick, being the country's second biggest airport, acts as a major component of the national infrastructure as well as a significant constituent of the British aviation industry. There have been misgivings through out the country's economic sector with many feeling that the airport has been flogged off with less attention to the bigger social effects. According to BBC NEWS (2008), the competition committee, which is charged with the job of ensuring and regulation the operations of airports in UK ruled that the BAA had no option but to give away three of the company's airports based in the UK to create more competition in the sector. It insisted that the organization have to sell two of the South East airports which comprises of Heathrow, Gatwick and Stansted. Regarding this, BAA which is possessed by Spanish company Ferrovial ruled out the sell of Heathrow and Stansted thus leaving Gatwick airport for bidding. Other airports ran by the BAA includes Glasgow, Edinburgh and Scotland based Aberdeen as well as southern England based Southampton. The competition commission has been trying to make to an end the monopolistic control on airport operations to install quality of the services offered in order to provide its clients with efficiency. As a result of this, different companies have indicated their interest in purchasing the airport that has been estimated to have a value of around $ 1.8 billion as per regulators although the price for the airport is likely to be set by the current market circumstances.. Some of the major companies who have indicated there interest in Gatwick include Manchester Airports Group Plc (MAG), Global Infrastructure partners and Lysander Gatwick Investment. Since early 1970s , the control of Gatwick, Heathrow and Stansted airports has been under BAA which the competition commission blames for the insufficient competition between south-east English airports and the central Scotland based ones. As per BBC NEWS(2008), this monopoly control has resulted to low levels of service provision to passengers and airline companies and as well lower the incentives for more chances of improvement. BAA has been blamed for slow implementation of new route development plans at several airports as well as being sluggish in venturing into fresh terminals and creating more runways. This situation has been contrasted with other airports such as London city and Manchester airports which have been in the front line in implementing these changes. They have been trying to expand the facilities and services and lowering charges as well as being more responsive to the special needs of the customers. . Major Airport Operators in UK and Europe Manchester Airports Group Plc (MAG) It is the second biggest airport operator in the country and runs Manchester Airport, the third largest airport in the United Kingdom, presently handling 20 million freight passengers annually and having flights to more than 180 destinations globally with over 90 airlines. Other airports ran by the operator includes Nottingham East Midlands airport, Humberside airport and Bournemouth airport. The company also runs Borealis Capital Corporation and Manchester Pension Fund. Global Infrastructure partners Is an organization that possesses London City Airport. It has a brand value of $5.64 billion fund. It is run by professional investment executives' partners who experience direct investment to the fund. London City airport is the leading commercial airport in UK. It has ten airlines operating 32 destinations all over UK and the rest of Europe. It also connects to the rest of the world via significant Europeans hubs. The airport has of late achieved growth with more than 2.9 million passengers using it. This was 265 more than the previous year. Lysander Gatwick Investment This is a corporation that comprises of Vancouver Airport services, City infrastructure partners Co. It is one of the main competitors for the bid to purchase Gatwick airport. Vancouver Airport services is managed by Vancouver international Airport Authority and runs several airports around the world. It has several international terminals with recent renovations and handles a big number of airlines from all over the world. AirportSmart Limited It is a company founded by a joint venture of BAA plc, Airports de Paris and Copenhagen Airports. Other airport operating companies have been increasingly using the airport. AirportSmart Limited generally handles a capacity of 180 million freight passengers per year globally. It runs several airports including ones in Europe, America, and Australia as well as in Asia. All the airport operators making up AirportSmart limited jointly have a purchasing power of US $ # billion. BAA is in charge of management and development of Heathrow Terminal 5 ('T5'), one of the biggest building projects in the continent.AirportSmart is a registered private organization in England. It has been built up to enhance the contracting of suppliers with customers in the airport running sector of the economy and the joint management of purchasing procedures. It runs independently from its founding companies. Aviance It is a universal alliance involved in providing airport services. Aviance was founded in 1999 to render services such as co-operate approach to global handling to carries. Alliance members include; Flight Care, Aviance France, Aviance Ghana, Aviance UK, Celibi, Fraport Austria, Jet Aviation, ATS and SATA. Of all these companies, Manchester Airports Group Plc (MAG) would be the most favorable candidate for bid. It is based in the UK, in addition to being big enough to provide resources that would promote the airport to be a major competitor in the region which would be more responsive the needs of the customers and passengers. The future strategies for Gatwick Airport Although the decision to sell the airport might have been a tough one for BAA, but it was the most appropriate for passengers, customers, the staff as well as the entire industry. The airport management had faced a lot of uncertainties for some time regarding its future. But after the decision to dispose it, it started to have a feeling of some hope in future development and as well keep on playing its crucial role in supporting the community, regional and global economies. The airport management has leveraged itself to revitalize the airport and change the passenger operations in the few years to come. There has been a downward spiral of the trend of passenger traffic that shows the general situation of the aviation market. Passenger traffic to Heathrow indicates that it is low and the trend is likely to continue considering the on going economic woes, despite the traffic at Gatwick's runway being at capacity. All these biding to purchase the company are already promising to construct a second runway at the Gatwick airport to increase its efficiency and capacity. This would imply the fresh owners of the airport would have traffic at the airport growing to the target of 60 million. This would also assist in getting freight opportunities and consequently become a niche for freight destinations in the continent. In order to see the airport develop to the expectations, the bidding company that would be awarded should have the required skills comprising of civil engineering expertise, rail infrastructure that can assist in building a positive effect on the development strategies The new owners of the airport need to take up the challenge of developing the airport to provide efficient services. There would be the need to employ supply-chain process re-engineering experience, membership will be using their direct experience of supply-chain process re-engineering systems, sourcing of Supplier and venturing in collaborations to create an on-line market place. It should also offer knowledge and skills to airport supply-chain management to enhance planning of its operations as well as creating transparency of information flow between the company, its customers, partners and suppliers to improve the efficiency of the sector while at the same time reducing overall running costs. Gatwick airport has great future since it already have some lucrative facilities; it has been making about $198 million in average in profit annually. The new owner of the airport would have to make more improvements in order to get some more airlines from other airports which would help it even scope more than 41 billion if innovated. This would increase competition between the airports hence more responsive needs to clients since the airports which were initially under BAA would now be rivals hence liberalization of the industry. The charges imposed on airlines should be regulated to safeguard and let airport operators be responsible. The government's expansion plan for aviation industry should be reviewed. By selling the airport to a competitor, the new airport operator would get much more incentive to be more responsive to the needs of the customers, passengers as well as airlines. Letting monopolies control airports is unfavorable for both the airline and customers since the only single player is the one who makes all regulations and decisions. Thus creating competition would be health for all stake holders. Gatwick through its new owner have greater chances of expansion by building new runways at airport, to boost the capacity of passenger and as well keep the competition against its fresh rival competitors who were formally sister airports: Heathrow and Stansted. Many airlines would have many options on the airports to use. Through this competition, there would be some force to the new owner to make additional facilities and lower charges to attract the airlines, reduce the hiked of prices, do away with the long queues and consequentially obtain lethargy of development. Many businesses are dependent of airports, since they are not presently getting these services they feel they deserve, creating this competition would give Gatwick good chance to change the situation. References BBC NEWS, (2008). Gatwick Airport put up for Sale, retrieved on 7 May 2009 from http://news.bbc.co.uk/1/hi/business/7620293.stm BBC NEWS, (2008). Q & A: the Future of British Airports, retrieved on 7 May, 2009 from http://news.bbc.co.uk/1/hi/business/7571930.stm Read More