A new airport.... South Yorkshire Airport City?

Doncaster Sheffield Airport Strategic Review Announcement​

Forums4airports discusses the latest press release from Doncaster Sheffield airport where the airport questions the future of the airport. The owners of the airport, the Peel Group have announced they are looking at their options as the group has decided the airport is no longer viable as an operational airport. Here's the press release:

"The Board of Doncaster Sheffield Airport (DSA) has begun a review of strategic options for the Airport. This review follows lengthy deliberations by the Board of DSA which has reluctantly concluded that aviation activity on the site may no longer be commercially viable.

DSA’s owner, the Peel Group, as the Airport’s principal funder, has reviewed the conclusions of the Board of DSA and commissioned external independent advice in order to evaluate and test the conclusions drawn, which concurs with the Board’s initial findings.

Since the Peel Group acquired the Airport site in 1999 and converted it into an international commercial airport, which opened in 2005, significant amounts have been invested in the terminal, the airfield and its operations, both in relation to the original conversion and subsequently to improve the facilities and infrastructure on offer to create an award winning airport.

However, despite growth in passenger numbers, DSA has never achieved the critical mass required to become profitable and this fundamental issue of a shortfall in passenger numbers is exacerbated by the announcement on 10 June 2022 of the unilateral withdrawal of the Wizz Air based aircraft, leaving the Airport with only one base carrier, namely TUI.

This challenge has been increased by other changes in the aviation market, the well-publicised impact of the COVID-19 pandemic and increasingly important environmental considerations. It has therefore been concluded that aviation activity may no longer be the use for the site which delivers the maximum economic and environmental benefit to the region. Against this backdrop, DSA and the Peel Group, will initiate a consultation and engagement programme with stakeholders on the future of the site and how best to maximise and capitalise on future economic growth opportunities for Doncaster and the wider Sheffield City Region.

The wider Peel Group is already delivering significant development and business opportunities on its adjoining GatewayEast development including the recent deal for over 400,000 sq ft logistics and advanced manufacturing development on site, creating hundreds of new jobs and delivering further economic investment in the region.

Robert Hough, Chairman of Peel Airports Group, which includes Doncaster Sheffield Airport, said: “It is a critical time for aviation globally. Despite pandemic related travel restrictions slowly drawing to a close, we are still facing ongoing obstacles and dynamic long-term threats to the future of the aviation industry. The actions by Wizz to sacrifice its base at Doncaster to shore up its business opportunities at other bases in the South of England are a significant blow for the Airport.

Now is the right time to review how DSA can best create future growth opportunities for Doncaster and for South Yorkshire. The Peel Group remains committed to delivering economic growth, job opportunities and prosperity for Doncaster and the wider region.”

DSA and the Peel Group pride themselves on being forward-thinking whilst prioritising the welfare of staff and customers alike. As such, no further public comments will be made whilst they undertake this engagement period with all stakeholders.
During the Strategic Review, the Airport will operate as normal. Therefore passengers who are due to travel to the airport, please arrive and check in as normal. If there are any disruptions with your flight, you will be contacted by your airline in good time.
For all press enquiries, please contact Charlotte Leach at [email protected]."

"Not great news for DSA or the region"

Should the government or local council foot the bill and provide a financial subsidy to keep the airport open, thoughts...?

 

This is really what even the uneducated and uninformed amongst us probably thought. There is a reason businesses decide to close of their own free will. And usually that is because they are losing a shed load of money. And when you are talking something like an airport then those potential losses are huge. And it’s been said over and over, the longer the site remains empty/unoperational, it’s going to take even more money to bring it back up to speed. One final flip-side comment here is that plenty of Middle East backer enjoy throwing money into football - so why not also aviation? And yes I do think it’s unlikely but possibly never say never!

 

Totally agree. I've read the financial statements and certainly eye opening details. With the closure, they have used this financial results statement to disclose a lot of information that otherwise wouldn't be published.
What's more is the share capital by Peel into DSA. That will give you an idea of what it would take before talks could progress towards a completion.
Looking at it as just the DSA airport business the value is relatively small. Could it be this that the Mayors have said have been over market value offers made.
It is the freehold price that is eye wateringly high. So I'd presume that any interested parties would be wanting to buy the full freehold when buying the airport, rather than on a lease. So very very deep pockets required.
I don't have any hopes of it ever reopening. I think that the publication of these results has drilled the final nail into the coffin.

So could the local authorities really afford to purchase it even if through a CPO. Would it be even deemed wise for soo much public funds to be used.
My gut feeling is that it is only a matter of time that we hear that talks have faded away and failed, especially after seeing the financial report.

I think the Freehold argument is one which some of the Save DSA supporters have used as an example if Peel ‘fudging’ their books to make it look like it’s loss making.. I need clarity on this as I genuinely don’t understand, but my grasp of it to stand to be corrected is thus;

Peel Holdings (Tokenhouse) must operate DSA as a separate entity to avoid anything that could be construed as illegal cross subsidy. Therefore, Peel Holdings own the land and lease the freehold to Doncaster Sheffield Airpory Ltd. which must be able to stand on its own two feet. The wider Peel Group have shifted equity around the group in order to avoid the company (DSA LTD.) going into insolvency, they have done this a number of times. It could be argued that Peel Holdings could effectively cross subsidise the airport by adding DSA LTD to a more profitable segment of Peel Holdings, but my understanding is that would be illegal?

I am to assume the freehold costs include the sunk capital (this is where people tend to get confused, I.e why build the new jet bridges and close the airport just a few months later), as the sunk costs are not part of the business as a going concern. So DSA LTD itself is worth nothing, but the land is worth say £250million? So anyone wishing to purchase the leasehold would still be bound by the same constraints, they would need to purchase the land which is clearly worth more as something else and is where Peel Holdings have a lot of capital shored up.

I think this is why people are able to argue that Peel have been underhand with this, but I fail to see how it could be any different with a different operator? I would argue given what we know, that Peel have shifted equity around the group, that they have actually given the airport a number of lifelines and it would have gone under much sooner had they not?

If someone reads this and sees that my understanding is way off the mark please do tell us on here and correct me.

 

Strategic Report referred to above.

 

Another Friday evening update from Ros Jones. This time no mention of the UAE Bidder (wonder why?), but now they are talking about freeholds and leaseholds.

Peel have refused to sell the freehold to the council, they have approached Peel with an offer (as would be necessary given their plans to pursue a CPO), but Peel have apparently been open to DMBC purchasing the leasehold. Possible brinksmanship? Surely the council can’t be that blinded to follow this path and spend millions in tax payer money to reopen an airport that they don’t even own? Peel will know this, whilst being seen to be looking at alternative options to keep the airport open.

 

It’s probably just a box ticking exercise for the CPO.

 

It’s probably just a box ticking exercise for the CPO.

But one which Ros Jones nevertheless publicises as part of her 'Big Bad Peel' campaign.

She's still adamant that DSA can be a successful airport. I'd love to know where she became an expert in running an airport and on aviation generally and what evidence she has that another operator could make DSA into a success, justifying her blowing huge amounts of public money on it, and especially when all councils are struggling to fund even the basics.

 

Subtext - negotiations on the ‘above market value’ offer from the Middle East are no longer happening. Might have been over weeks ago, for all anyone knows.

We are now firmly into CPO territory, and there can’t be a CPO unless the council has already tried to buy it - hence today’s statement. Peel will be countering with a leasehold proposal so that they can claim good faith when the CPO ends up in court.

I suspect Peel’s proposal will be priced for a piece of land with excellent surface connections and prospects to develop profitable industrial and commercial enterprises, and not as an airport that loses £10m/year.

 

Subtext - negotiations on the ‘above market value’ offer from the Middle East are no longer happening. Might have been over weeks ago, for all anyone knows.

We are now firmly into CPO territory, and there can’t be a CPO unless the council has already tried to buy it - hence today’s statement. Peel will be countering with a leasehold proposal so that they can claim good faith when the CPO ends up in court.

I suspect Peel’s proposal will be priced for a piece of land with excellent surface connections and prospects to develop profitable industrial and commercial enterprises, and not as an airport that loses £10m/year.

Indeed, generally how I interpret it also.

DMBC as part of the CPO will need to prove it will be in the public interest. In reality they need to prove there is a viable aviation related business post acquisition. To date they (DMBC or SYMCA) have yet to answer that question. This did not escape the notice of the judge in his summarisation in the judicial review request. Peel on the other hand, can and have proved the lack of viability of the site as an aviation facility. I am sure their business case for the tech hub will be significantly more robust than any counter proposition from the council.

Peel offering a leasehold puts that ball firmly in back in DMBCs court. If it is viable, take it on. Otherwise, prove it in court.

 

I think it is game set and match/ checkmate. How many years of operation could DMBC afford before calling time. So Peel win either way. But massive costs either way for DMBC, CPO challenge or lease and operations.

Or is someone hoping that the longer things take, the less the public calls for the airport. With case becoming stronger for the plans of huge number of jobs on offered in new development so consent gets passed earlier.

 

Indeed, generally how I interpret it also.

DMBC as part of the CPO will need to prove it will be in the public interest. In reality they need to prove there is a viable aviation related business post acquisition. To date they (DMBC or SYMCA) have yet to answer that question. This did not escape the notice of the judge in his summarisation in the judicial review request. Peel on the other hand, can and have proved the lack of viability of the site as an aviation facility. I am sure their business case for the tech hub will be significantly more robust than any counter proposition from the council.

Peel offering a leasehold puts that ball firmly in back in DMBCs court. If it is viable, take it on. Otherwise, prove it in court.

Empire and Radar, great insightful posts as always. Interested you mention the judge in his summarisation of the judicial review request, do you happen to know where I could see this in writing?

Actually scratch that, I’ve seen the report.

 

According to the latest social media update by Save DSA DMBC are seriously considering taking on the lease of the airport. This in the face of the CPO which they claim would be costly (it would!) and therefore the easiest way to reopen would be the leasehold.

A few things, Peel have now stated they are not open to selling the land. Whether this is the case for the interested investor (with whom talks are apparently still ongoing) remains to be seen. However if it’s not good enough for DMBC the. I can’t see why they would be open to selling to someone else.

DMBC have apparently suggested that their legal team are to go through anything with a fine tooth comb to see whether there are any caveats, not sure whether Peel would allow the land to be sub-let to an actual airport operator? In my experience this is unlikely but someone may know more than me. In this case it would fall to DMBC to own the lease and operate the airport.

How much of the land is classed as the airport? I read somewhere that the car parks are not all part of the airport land. If this is the case, and the airport is forced to rely solely on aviation revenue then the whole thing is a non-starter. Perhaps Peel being confident of the airports lack of viability would happily allow the council to run it for a while before they too find its not viable. That would solve a lot of short to medium term issues with legal challenges for redevelopment as they would be forced to concede this fact.

I feel the airport at this stage may well reopen at some point this year, the council seem to steadfast in their belief that it should still be open and a success that they will stop at nothing to get it back up and running regardless of what evidence is placed in front of them to the contrary.

This will have implications on neighbouring airports. They key here is whether TUI have agreed anything with LBA, I’m pretty confident we wouldn’t see Wizz returning any time soon.

 

This will have implications on neighbouring airports. They key here is whether TUI have agreed anything with LBA, I’m pretty confident we wouldn’t see Wizz returning any time soon.

That will be the big problem. Even if the airport re-opens, it's going to need to get airlines to operate and fast. There must be a 'critical mass' of landings/passenger throughput in order to make the airport a viable business. Don't get me wrong, I'm very sad to see DSA close but the reality is that it has never been a financial success.

 

Realised I posted my latest in the General thread in error. In summary, DMBC seriously considering the lease and having their legal team scrutinising the option at the minute. Questions over whether sub-leasing to an airport operator is possible? Still a chance in my view that it may reopen this year or next if this goes ahead. Problem will be attracting the airline back, Wizz won’t return I wouldn’t have thought so it would rest on TUI. From what I gather airlines with little presence in Yorkshire and the East Midlands like easyJet are not pursuing any expansion strategies so there is unlikely to be any significant new uptake. Ongoing cost of living crisis and the very likely economic downturn and lethargic recovery will also prove to be a difficult time for aviation in general, let alone an airport that has failed to gain any reasonable ground.

I hope the Doncaster tax payers don’t see vital funds diverted to this. Common sense must prevail, surely?

 

Realised I posted my latest in the General thread in error.

And I replied to your post in the same thread. For clarity, I've moved both posts to this thread, but they will appear above your most recent post here.

 

I think personally Wizz would stick with LBA if DSA did reopen. There would still be a lot of uncertainty surrounding its future if it did reopen so can’t see them taking the risk. Even if DSA did reopen I would like to know what they could do to make it more viable than it was in the 17 years it was open for. And what qualifications dos Ros Jones have to be able to make it a successful airport.

 

I think personally Wizz would stick with LBA if DSA did reopen. There would still be a lot of uncertainty surrounding its future if it did reopen so can’t see them taking the risk. Even if DSA did reopen I would like to know what they could do to make it more viable than it was in the 17 years it was open for. And what qualifications dos Ros Jones have to be able to make it a successful airport.

As you will be well aware, I fully agree. There is one point in struggling to find confirmation of thought, and that is where the car parking revenue went. It has been mentioned a few times that the car parks were a separate entity to Doncaster Sheffield Airport Ltd. If this is the case, and that revenue was going to a delegate company, then losses would have been inevitable. After all, for most regional airports car parking is probably the biggest source of revenue. If this is the case then it may prove that the airport could be financially viable, or at least run at a much reduced loss than it may otherwise have done. No idea where this information may be available though and unless if skimmed past it I don’t believe I have noticed it mentioned in their annual reports.

That said, the fundamental lack of airline and freight but in is the reason Peel haven’t kept it open. To the council I’m sure they status quo would have suited them, and the Save DSA group (though I notice the admin of the group suggesting A380’s might start using it if it reopens yesterday!), but if they are to pursue a resumption of normal operations then they need to be sure that they can at least get it to cover its costs.

 

There was an A380 circling over DSA this morning. I guess that’s as close as they’re going to see one of those. (Went to BHX in the end)

 

Without stating the obvious, probably as close as they're going to see another aeroplane of any sort. I know that sounds harsh but the reality check needs to kick in here!

 

Without stating the obvious, probably as close as they're going to see another aeroplane of any sort. I know that sounds harsh but the reality check needs to kick in here!

Of course but as the A380 we talked about in the post I mentioned this mornings flight.

 

According to the latest social media update by Save DSA DMBC are seriously considering taking on the lease of the airport. This in the face of the CPO which they claim would be costly (it would!) and therefore the easiest way to reopen would be the leasehold.

A few things, Peel have now stated they are not open to selling the land. Whether this is the case for the interested investor (with whom talks are apparently still ongoing) remains to be seen. However if it’s not good enough for DMBC the. I can’t see why they would be open to selling to someone else.

DMBC have apparently suggested that their legal team are to go through anything with a fine tooth comb to see whether there are any caveats, not sure whether Peel would allow the land to be sub-let to an actual airport operator? In my experience this is unlikely but someone may know more than me. In this case it would fall to DMBC to own the lease and operate the airport.

How much of the land is classed as the airport? I read somewhere that the car parks are not all part of the airport land. If this is the case, and the airport is forced to rely solely on aviation revenue then the whole thing is a non-starter. Perhaps Peel being confident of the airports lack of viability would happily allow the council to run it for a while before they too find its not viable. That would solve a lot of short to medium term issues with legal challenges for redevelopment as they would be forced to concede this fact.

I feel the airport at this stage may well reopen at some point this year, the council seem to steadfast in their belief that it should still be open and a success that they will stop at nothing to get it back up and running regardless of what evidence is placed in front of them to the contrary.

This will have implications on neighbouring airports. They key here is whether TUI have agreed anything with LBA, I’m pretty confident we wouldn’t see Wizz returning any time soon.

Frankly, the additional TUI flights from LBA are peanuts although I suppose every little helps. EMA and Manchester are the man beneficiaries and subsequent 'losers' should the airport re-open and TUI eventually move back to DSA. WIZZ would be the more interesting issue where at the moment a few routes are duplicated by FR and one wonders about 'overcapacity'. So long as WIZZ do ok from Leeds I doubt that they will be in a rush to return.