Cardiff Airport - General Thread

[Jerry]

Interesting. A lot of it seems to be them pleading with the UK government for help.

 

[TheLocalYokel]

Below is a link to evidence submitted by the airport to the Senedd for tomorrow’s committee. It is pretty bland and devoid of much new information. What surprises me is the lack of any future strategy for growth aside from the usual “we continue to talk to airlines”. I do hope the committee scrutinize the management thoroughly as there is a lot of taxpayers money at stake and I would like to see a more commercially aggressive approach (I hope they are not getting comfy behind state support and mentality). A lot of information is out of date around resumption of flying.

The only bit that caught my eye was the statement that Ken States and the WG have had to vary the terms of their commercial loan to keep them ‘solvent’ (inference that they are not solvent otherwise, which isn’t a big surprise). Maybe more will come out tomorrow but frankly they have to do better than this.

https://business.senedd.wales/documents/s101997/EIS5-13-20P5%20Evidence%20from%20Cardiff%20Airport.pdf

It is to be hoped that the members of the committee will interrogate the CWL evidence givers more intently than is usually the case. I've listened to evidence being taken by both the Westminster Welsh Affairs Committee and WG committees about CWL and Welsh aviation matters generally, and the knowledge of many committee members about the subject is appalling. This means they accept anything they are told because they have no base from which to cross-examine.

I'm not suggesting they should all be experts but at least they ought to do some research on the subject before the committee sits.

 

[TOM100]

Jerry - I never thought I would write this as an avid supporter (and large user) of CWL but I hope they can do better or I think I will resent my tax propping them up. Maybe those Wimpey homes are a better use of money.....,,

 

[mathers_wales_uk]

I’m shocked at Stobart considering they are about to close their base at Southend in an airport they also own.

In regards to Cardiff Airport there are aspects where they need to do better and could do better. (Issues I cannot go into detail over).

Cardiff Airport agreement with Flybe right or wrong boosted Cardiff Airports figures to a level which would have been highly unlikely to achieve otherwise.

People are also quite quick to forget the achievement of attracting Qatar.

The issues that Cardiff Airport are facing are not ones if their own making. Their largest operator in case of numbers has gone bust weeks before a global pandemic.

Airlines are struggling and going back to less risk strategies to save their respective airlines.

Many airports departure boards have been decimated by the loss of Flybe. Exeter, Belfast City, Cardiff are ones straight off the top of my head. After COVID-19 looks like we’re heading into a recession.

confidence is low but not only in the Aviation industry. People are being made redundant left right and centre even though furlough is still being offered.

There could be opportunities and the airport needs to be in a position financially to capitalise on them. The Welsh Government however until we are out of Europe may not legally be in a position to back certain things.

There are so many airports begging for routes to be restored in the U.K. at the moment and there lies the problem.

easy pie in the Sky idea would be start a national airline. Serious other suggestions is far more difficult to imagine.

 

[TOM100]

Mathers - I agree with you but I would like to see some forward thinking from CWL management (as difficult as it is at the moment). I know all the arguments about APD, Wales national airport etc) - if they can’t provide any then I don’t want my taxpayers money poured into a never ending black hole.

QR was great but we have no
Idea (as they haven’t told us) IF or when they might be back.

if you take public money you have to be open to public scrutiny. Simple, what conversations have they had ?

I resent paying Deb and Spencer’s salary unless they tell us.

 

[Barry Man]

QR is back in October

 

[Jerry]

Jerry - I never thought I would write this as an avid supporter (and large user) of CWL but I hope they can do better or I think I will resent my tax propping them up. Maybe those Wimpey homes are a better use of money.....,,

I think it's hard for an airport like Cardiff. In reality it is a small regional airport and that is how the industry will see it and how the UK government sees it.
Its frustrating to see airlines ignore CWL but I suspect that they can't match other airports incentive wise and that's why they mention PSOs and APD a lot.

 

[Jerry]

I resent paying Deb and Spencer’s salary unless they tell us.

Except that you don't. Cardiff airport ltd pays their salary. Yes the WG is the only shareholder but it's still run as a commercial operation not a government department. Yes WG has provided finance through commercial loans but that's only because UK government devolution rules meaning that they can't go to a bank.
Also any airline negotiations would be bound by commercial confidence.

 

[TOM100]

Jerry - if this were a commercial business run on commercial terms it would no longer be in business. Indirectly the welsh taxpayer subsidises the entire airport and its employees. Lots of more profitable businesses (but with poor cash flow in current circumstances) have gone under but do not have the WG (and taxpayers) to fall back on and ‘commercial’ lenders pulled the plug.

What normal lender on ‘commercial’ terms would lend to a business that has no obvious current means of paying back ?

Don’t get me wrong, I want CWL to succeed but not at any cost and want to see (at least hear) what they plan to do to TRY and grow the business as I do believe as a Welsh taxpayer I have a vested interest. Otherwise we are saddled with a pig in a poke.

 

[Jerry]

What normal lender on ‘commercial’ terms would lend to a business that has no obvious current means of paying back ?

A privately owned CWL would have 3 options a commercial loan from a bank which would be no doubt secured against assets like the land the airport is built on and another option is a shareholder loan which is what the WG are. They are the shareholders of the company. And they would have the ability to go to the Welsh government for a loan.
I'd also suggest that airports aren't like any normal business, would Coca cola only sell its products to Asda and Tesco and tell the smaller Spa shops no because we want our customers to go to Tesco and Asda?

 

[Jerry]

Don’t get me wrong, I want CWL to succeed but not at any cost and want to see (at least hear) what they plan to do to TRY and grow the business as I do believe as a Welsh taxpayer I have a vested interest. Otherwise we are saddled with a pig in a poke.

Well they have said that with the Masterplan.
What else can they say? They can mention airlines etc but in the end what routes and frequency etc is largely not up to them.
Looking at the other side of the business, is there room for more MRO or would they prefer that to go to St Athan? Does BAMC earn the business much revenue? Have they maximised the site itself ie could've a multi story car park have been built and other land used for car parking used for something else ie retail or commercial? Air cargo is another but again you need an airline or shipping company willing to to operate a service.

 

[TheLocalYokel]

Except that you don't. Cardiff airport ltd pays their salary. Yes the WG is the only shareholder but it's still run as a commercial operation not a government department. Yes WG has provided finance through commercial loans but that's only because UK government devolution rules meaning that they can't go to a bank.
Also any airline negotiations would be bound by commercial confidence.

There doesn't appear to be any reason why the WG could not source loans from a commercial provider such as a bank if it wished. An auditor's report published in 2016 that looked at the acquisition and ownership of CWL since the WG took it over suggests the reason why the WG provided the loans was a wish to avoid financial risk - see below link to the report and a reproduction (in italics) of para 25 within that report.

In any case third party loans would still count against the Welsh Government's own borrowing cap which stands at £1 billion from which £150 million can be borrowed each year for capital projects.

https://www.wao.gov.uk/system/files/publications/cardiff-airport-eng-final3.pdf

Under UK Government accounting rules, any borrowing by CIAL counts against the Welsh Government’s borrowing limits because CIAL is a subsidiary of the Welsh Government, even though CIAL is not itself a public authority. This is the case even if the loan is provided by a third party and not by the Welsh Government. The Welsh Government has therefore decided that it should provide any external finance directly in order to minimise financial risks, and alternative lenders such as banks were not considered.

 

[Jerry]

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Under UK Government accounting rules, any borrowing by CIAL counts against the Welsh Government’s borrowing limits because CIAL is a subsidiary of the Welsh Government, even though CIAL is not itself a public authority. This is the case even if the loan is provided by a third party and not by the Welsh Government. The Welsh Government has therefore decided that it should provide any external finance directly in order to minimise financial risks, and alternative lenders such as banks were not considered.

I thought the value of the loan got deducted from the Welsh government grant every year by Westminster?

 

[TheLocalYokel]

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I thought the value of the loan got deducted from the Welsh government grant every year by Westminster?

Not that I'm aware. If that was the case the WG would be borrowing money it was going to get anyway via the Westminster block grant. The borrowing powers were conferred under Wales Acts in the past few years (see below link).

https://senedd.wales/laid%20documents/cr-ld12846/cr-ld12846%20-e.pdf

 

[Foxlimayankee]

I'm not surprised this is the content of the pre-meeting information. What can they do? Airlines aren't looking to expand, they are looking to survive. Also don't forget that "we continue to talk to Airlines" is a common spin that has been mentioned by the CWL before in previous WG government meetings, where that's all they can say. Everything else is confidential and releasing such information, which quite frankly is on a need to know basis in the public domain, could put any such negotiations at risk. They start listing Airlines they are talking to, or routes they want to fill, and the competition (BRS) will be on it like hot cakes.
It does actually state in the report ....

the UK and subsequently Welsh Government in the case of Cardiff Airport need to create the right market condition for airlines to operate services and for the airport to thrive.

By that, one would assume they mean make the current routes viable under the current drop in demand. There's no doubt they've been talking to the likes of Eastern, Loganair and probably Blue Islands & Stobart about the domestic routes. But a key focus should be on current routes that will need support to get back on their feet.

 

[Foxlimayankee]

Mathers - I agree with you but I would like to see some forward thinking from CWL management (as difficult as it is at the moment). I know all the arguments about APD, Wales national airport etc) - if they can’t provide any then I don’t want my taxpayers money poured into a never ending black hole.

QR was great but we have no
Idea (as they haven’t told us) IF or when they might be back.

if you take public money you have to be open to public scrutiny. Simple, what conversations have they had ?

I resent paying Deb and Spencer’s salary unless they tell us.

What we need to accept is that things are VERY different now to how they have been. Previously the turnaround at CWL was due to poor running of the business over the past decade. The turnaround plan was working;

The Airport posted its third consecutive, positive EBITDA (earnings before interest, tax, depreciation and amortization) in 2019-20⁴ which is a measure of a company's operating performance, as well as it being the third consecutive year that revenue covered operating costs.

The business has diversified massively. CWL isn't just CWL anymore, its CWL, St Athan, Passenger services at Valley, along with a new private jet handler at CWL.
Then the Flybe saga hit, then Thomas Cook went bust, now COVID19. Without COVID19, there was a chance to recover from both Flybe and Thomas Cook and continue on the path of profitability. That has now, quite frankly, been shot to pieces by COVID19. Airlines don't queue up for regional Airports, they need to be coaxed. The issue now is none really want to be coaxed.

So now we face a situation where the WG purchased a poor performing business from it's previous owners that didn't really care, and we saw a decent turnaround over the past 5-7 years, so without COVID19 and the loss of Flybe and Thomas Cook, could be counted as a sound investment. Throw in the recent issues, all of which have happened within the last 12 months, and they now own a business that they are unlikely to be able to offload in the current climate. It is going to have to be a case of shut it down or put money in to it and start afresh. I really can't see the WG closing the national Airport down.

 

[mathers_wales_uk]

The business has diversified massively. CWL isn't just CWL anymore, its CWL, St Athan, Passenger services at Valley, along with a new private jet handler at CWL

it certainly has diversified and if this happened 12 months ago then the airport would be in a far worse position.

The Private Jet Handler mentioned (Global Trek Aviation) has brought in an array of new business too even in 12 months which has boosted not only Cardiff Airport but local suppliers.

(The Highwayman, Hotels, Coach Companies, Taxi Companies). In fairness COVID-19 arrived at the wrong time for them too as they were starting to get busier and busier.

 

[Nuffsaid]

Cargo is the way forward for the airport. Still unsure why it is not becoming a primary focus.

 

[aviatorconcorde]

Cargo is the way forward for the airport. Still unsure why it is not becoming a primary focus.

I remember raising it ages ago but was told the runway length was too short.

CWL is really running the risk of becoming another Bournemouth, or in worst case scenario a Kemble.

With the loss of flybe and without the attraction of Jet2 or Ryanair I really fail to see how the airport can grow again. TUI, Qatar, KLM and Vueling can only do so much.

Truth is, CWL just lacks the catchment and is based in a predominantly low wage, public sector reliant economy where people just don’t have the spending power compared to the Southwest and Southwest of England or the population catchment of the like’s of Manchester.

Cancellation of projects like the M4 relief road and Swansea Tidal also Lagoon Won’t of helped.

 

[Foxlimayankee]

CWL can't really be compared to Bournemouth and definitely not Kemble. There is still TUI with at least 2 based aircraft, KL, QR, VY and FR. Which is a bigger offering than TUI and FR at BOH with 1 aircraft each. Whats important in the short term is keeping the current carriers at CWL and maintaining what is currently offered.
The question regarding cargo, is where would the Cargo be coming from/going to in South Wales? Only really EMA sees a big Cargo operation in the UK as it's fairly central to everything.