Saudi Arabia could take "majority control" of London Heathrow airport
3 Min Read
The oil-rich state's Public Investment Fund (PIF) joined forces with private equity firm Ardian last month to announce the purchase of a 25% share in Heathrow from Ferrovial, the Spanish infrastructure behemoth that had been the major owner of the airport for 17 years.
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A highway road in London leading to London Heathrow Airport (AFP)
According to reports, Saudi Arabia may gain effective majority control of London Heathrow, the UK's biggest airport, with other investors considering selling their holdings.
Riyadh's Public Investment Fund (PIF) joined forces with private equity firm Ardian last month to announce the purchase of a 25% share in Heathrow from Ferrovial, the Spanish infrastructure behemoth that had been the major owner of the airport for 17 years.
According to a Sunday Times article, at least one other stakeholder is close to selling their share, and more investment funds may follow.
Other investors, notably foreign pension funds with total stakes reaching 35%, can sell at the same price, which values Heathrow at around £9.5 billion, considered a generous appraisal.
An anonymous investor told the Sunday Times “At that price, we are a seller.”
The Saudi PIF and Ardian will maintain separate holdings, although the Saudis will be limited partners in Ardian's infrastructure funds.
The other shareholders in Heathrow's parent company are led by the Qatar Investment Authority, which owns 20% of the corporation and is said to be hesitant to sell to the Saudis. Five additional owners own between 10 and 12.6% of the company, including sovereign wealth funds from China and Singapore, both of which are considered unlikely sellers.
The other three investors are pension funds from Canada, Australia, and the United Kingdom.
Moves toward Saudi control of Heathrow might be contentious, even though the UK has historically been considerably more comfortable about Middle Eastern authority over ports than the US. DP World, located in Dubai, controls UK maritime ports and has been chosen to administer freeports across the country.
Saudi Arabia's crown prince, Mohammed bin Salman, controls PIF,which has over $700 billion in assets and has acquired Newcastle United football club and professional golf.
Heathrow's passenger counts tripled in 2022 when foreign travel recovered from Covid. It generated an adjusted loss of £684 million last year, compared to a loss of almost £1.3 billion in 2021.
The airport has been stymied in its efforts to put through its intended expansion, with legal challenges opposing its proposed third runway and the urgent need decreased with traffic remaining below 2019 levels. The airport has also stated that the Civil Aviation Authority's decision to reduce landing fees by a fifth next year will disincentivize investment, despite airlines' claims that they are too expensive.
