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...?

 

I fully believe it’s in Peels interests to break early if the funding stalls, so to suggest they have to pay rent up to 2031 at least is certainly a worst case and I bet it wouldn’t apply in reality. I doubt very much that cancelling the project at this stage would cost anything near £48million.

I think so too. Peel can realise considerable profit from the site, they'll want the council out of the picture as quickly as possible. They'll offer early surrender of the lease in return for a free hand with regard to planning permissions won't they. The few million a year they're getting in rent is neither here nor there to Peel.

 

I think so too. Peel can realise considerable profit from the site, they'll want the council out of the picture as quickly as possible. They'll offer early surrender of the lease in return for a free hand with regard to planning permissions won't they. The few million a year they're getting in rent is neither here nor there to Peel.

I think so yes. It seems they’ve already shown a great deal of goodwill to the council. They do not believe the council should be running it hence the turnover clause, but they will also want reimbursing for the messing around and delaying/frustrating of trying to reopen an airport that two major operators have said is non viable. Peel will be well versed in handling this sort of thing, they’ve maintained a dignified silence throughout.

 

Yes, as footfall increases so does wear and tear etc. so you end up chasing your tail.

I don't know how they've been allowed to take it this far. They've obviously used every means available to suppress scrutiny, and the regulatory mechanisms appear only just to be springing to life. And the press have been pathetic. The red rating from Grant Thornton should have been headline news, not tucked away in an article in the YP that I think was behind a paywall. That's the council's own auditor telling them they're on a financial suicide mission, and I wouldn't mind betting that's based on the council's own cost estimates not the real ones.

Looking at the numbers in that report, I don't think they can even get it open. They need to be able to run on zero revenue for years, possibly indefinitely. There's no way they're flying any passengers before 2031, not a chance, and when they do they're going to have to pay airlines for the privilege. They won't have got through the ACP and aerodrome certification by Easter 2028, never mind have signed contracts with airlines. And this Gainshare funding that it looks like they aren't going to get anyway - it's £5.3m a year, it'll barely cover the base rent!

They need to stop this now, and if it costs £48m it'll be money very well spent.

The Gainshare will be used to guaranteee a £128m loan to FlyDoncaster and absorb a subsidy of £89m loan interest hence what is included to subsidy control

 

The Gainshare will be used to guaranteee a £128m loan to FlyDoncaster and absorb a subsidy of £89m loan interest hence what is included to subsidy control

Yes, that's what the table on page 11 of that report seems to suggest. It's scary stuff.

It looks like profitability is asserted and required by 2034 simply because that's the point at which the £57m credit limit is maxed out. There isn't a snowball in hell's chance of that.

£128m is anyway inadequate.

The whole thing depends critically on release of the gainshare funding... which looks like not happening due to the 20% skim.

We might wonder whether the S151 officer will sign off on the loan anyway in light of the red from the auditor.

And the £57m might be taken off the table on Monday.

Oh dear.

They can't carry on with this.

 

Yes, that's what the table on page 11 of that report seems to suggest. It's scary stuff.

It looks like profitability is asserted and required by 2034 simply because that's the point at which the £57m credit limit is maxed out. There isn't a snowball in hell's chance of that.

£128m is anyway inadequate.

The whole thing depends critically on release of the gainshare funding... which looks like not happening due to the 20% skim.

We might wonder whether the S151 officer will sign off on the loan anyway in light of the red from the auditor.

And the £57m might be taken off the table on Monday.

Oh dear.

They can't carry on with this.

So you’re suggesting profitability magically happens because of some numerical modelling (as another 151 officer put it) which is conveniently when the money runs out?

Far enough away for people to forget, and for those to be making these terrible decisions to be long retired and taking their pensions.

 

So you’re suggesting profitability magically happens because of some numerical modelling (as another 151 officer put it) which is conveniently when the money runs out?

Far enough away for people to forget, and for those to be making these terrible decisions to be long retired and taking their pensions.

That's what the spreadsheet implies, yes. Once they hit £57m borrowing essentially to plug the gap between what they're able to loan to FDL and whatever funding stream they have (gainshare etc) then that's it, they aren't allowed to borrow more and so FDL is deemed profitable at that point.

The document is deliberately opaque and hard to understand, but you can see what's going to happen: CDC lends FDL £128m over 10 years, under the pretext that it gets paid back; because it is a loan. Basically in 10 years time FDL has to be wildly profitable so that it requires no further subsidy and presumably can start repaying the £128m to CDC!

So when FDL folds, CDC holds the >£128m debt.

You obviously know a lot about aviation though. Scan the top line of table on page 11 and look at the figures. £128m sounds like a lot of money - and indeed it is a lot of money. But not in the context of essentially building and operating an international airport it isn't. The figures are more in line with a new FE college or a municipal leisure centre or something. This is why I say they aren't going to get it open, and therefore have zero prospect of profit. Not that there is any anyway!

 

So you’re suggesting profitability magically happens because of some numerical modelling (as another 151 officer put it) which is conveniently when the money runs out?

Far enough away for people to forget, and for those to be making these terrible decisions to be long retired and taking their pensions.

It’s exactly this. Hide things far enough away in the future for it to be someone else’s problem.

I see Spanner’s has posted another AI piece of slosh this morning. Basically claiming that any difference of opinion is merely opinion and not facts. Because clearly the only true facts are what he posts. The guy has absolutely no shame

 

It’s exactly this. Hide things far enough away in the future for it to be someone else’s problem.

I see Spanner’s has posted another AI piece of slosh this morning. Basically claiming that any difference of opinion is merely opinion and not facts. Because clearly the only true facts are what he posts. The guy has absolutely no shame

Not even all that far into the future, but yes, the chief architects of this madness will have retired or moved on. Ros Jones is in her late 70s, I don't know how old Damien Allen is but he looks like he must be coming up to retirement.

Enough money is being channelled into FDL to keep the executives on six figure salaries for the next few years but it won't be enough to open an international airport and it'd tank again even if they had the money.

 

That's what the spreadsheet implies, yes. Once they hit £57m borrowing essentially to plug the gap between what they're able to loan to FDL and whatever funding stream they have (gainshare etc) then that's it, they aren't allowed to borrow more and so FDL is deemed profitable at that point.

The document is deliberately opaque and hard to understand, but you can see what's going to happen: CDC lends FDL £128m over 10 years, under the pretext that it gets paid back; because it is a loan. Basically in 10 years time FDL has to be wildly profitable so that it requires no further subsidy and presumably can start repaying the £128m to CDC!

So when FDL folds, CDC holds the >£128m debt.

You obviously know a lot about aviation though. Scan the top line of table on page 11 and look at the figures. £128m sounds like a lot of money - and indeed it is a lot of money. But not in the context of essentially building and operating an international airport it isn't. The figures are more in line with a new FE college or a municipal leisure centre or something. This is why I say they aren't going to get it open, and therefore have zero prospect of profit. Not that there is any anyway!

I’d be very keen to learn what their revenue streams will be and how much they plan to take for all aeronautical and non-aeronautical. I wouldn’t be surprised if they’re still pretending that Peel syphoned off car parking to a different entity, Liverpools accounts show this isn’t their operating ethos. It’s just that their car parking revenue was quite low at £3.30 per departing passenger. Aeronautical revenue was low owing to the low ball deals required to keep the airlines there. I can only see them having to negotiate some much less attractive packages, not only to prevent any legal challenge but also because they simply don’t have access to the money that Peel did to help pay these costs.

I’d therefore be very interested to see how they’ve modelled it. Course this time we have a fixed cost lease plus this turnover skim which may or may not be realised, this will add over £5million per year to fixed costs, let’s not forget that Grant Thornton had to point out that the council had ‘accidentally’ forgot to factor in the increase in rent costs from £3.3million per year to £5million per year in 2029 leading to an understatement of liabilities of £24.5million! I don’t think that was an accident somehow.