City Council could make £67m by selling Birmingham Airport shares
Cash-strapped Birmingham City Council could make £67 million by disposing of its interest in Birmingham Airport.
The figure is contained in a valuation exercise the council conducted to establish how much its 18.6 per cent airport shareholding is worth.
And while council leaders insist they have no plans to sell, it has emerged that an opportunity to trade the shares is less than two years away.
A deal exists between the airport’s local authority owners – Birmingham and the six other West Midlands district councils – that they will not individually cash in their airport shares.
But the agreement runs out in 2012, potentially leaving the way open for Birmingham City Council to get rid of its interest in the airport.
Last month, city leader Mike Whitby was reported to be considering selling assets to wealthy Arab investors in order to raise cash to help the council cope with the £330 million of Government spending cuts it faces and to kick-start city centre regeneration projects.
But Coun Whitby said he was misunderstood and had no intention of selling the airport, the National Exhibition Centre and the International Convention Centre, although he did not rule out allowing Middle East investors “to be in partnership with our assets”.
This week the council leader signed a Memorandum of Understanding with Abu Dhabi, under which the country’s government will promote Birmingham as a favoured destination for Middle East investors whose wealth has remained untouched by the global credit crunch.
The £67 million price tag for the city’s 18.6 per cent airport shareholding is almost three times greater than a council valuation two years ago.
The figure emerged shortly before a Birmingham Airport board meeting which will consider approving a £65 million runway extension.
A longer runway will allow non-stop flights from Birmingham to China, India and the west coast of America for the first time, something that is likely to increase the value of the airport.
The Post has learnt that the board is now not expected to give final backing for the runway extension at its meeting on November 3. Sources have indicated the project is not in trouble and that the extension could still be signed off before Christmas.
The new airport valuation was discussed at a meeting of the city council audit committee.
District Auditor Mark Stocks explained that local authorities are facing new regulations forcing them to be more open about the assets they own.
Mr Stocks added: “I asked the council to look at the fair value of its Birmingham Airport shareholding and what it might be worth. This is an accounting exercise and does not reflect any position the council may have taken regarding this asset.’’
He said the valuation was arrived at by looking at the airport business plan and taking into account profits and dividend payments.
The calculation would value the airport at about £350 million. The seven West Midlands councils own 49 per cent of the airport shares, and might also be looking at the possibility of disposing of some or all of their allocation in order to offset cuts in Government grant.
A further 48.2 per cent or airport shares are owned by private investors the Ontario Teachers’ Pension Plan and Victorian Funds Management Corporation. The remaining 2.75 per cent is in the hands of an employee trust.
The possibility of local authorities selling their shares was backed by Business Voice WM council member Glyn Pitchford.
Mr Pitchford, a former business representative on the City Region Board, said the city council should not be over-protective about the continued ownership of assets such as the airport and the NEC.
He added: “Surely it makes sound financial sense to consider selling some interest at least in our largest and thus, by definition, our riskier investments in order to fund the development of for example an integrated transport system.”
If Birmingham and the other West Midlands councils did decide to sell, it would not be the first time.
The local authorities pocketed millions of pounds in 1993 by selling half the airport’s shares after the Government banned councils from borrowing money to expand and improve capital assets such as airports.
If the council did consider selling its airport shares, members would have to take into consideration the scale of future losses from sacrificing annual dividend payments, which fell from £2 million in 2008-09 to £400,000 in 2009-10.