Wednesday, December 29, 2010

Heathrow Farce Shows Dangers of Selling National Assets

As the snow in the south of England melts, it leaves an enduring lesson about the dangers of selling off strategically important assets to foreign firms.
London was hit with five inches of snow on December 18, closing the airfield of Heathrow, Britain’s biggest airport. The next day, only 4 percent of normal flights took off. It took until December 21 for the airport to get its second runway going, and until December 23 for flights to resume in close to their normal number.
Bad luck for Britain caused by bad snow? Heathrow can hardly be blamed for being shut down by a snowstorm. But, as several British commentators point out, its slow recovery shows the danger of selling important national assets to foreign companies.
By way of comparison, Gatwick, Britain’s second-biggest airport, was shut for only four hours by the initial snowstorm. A second bout of snow shut it for less than two hours. It is no surprise that Gatwick fared much better.
The smaller airport, half the size of Heathrow, spent £1 million on snow- and ice-clearing equipment over the last year. Heathrow spent half that. The bbc said that Gatwick’s total “snow fleet” is reported to be made up of 150 vehicles. Heathrow has 69.
In 2006, Spanish company Ferrovial led a consortium that bought the British Airports Authority (baa), which at the time owned both these airports. It later sold Gatwick off to an American company called Global Infrastructure Partners (gip).
Apparently gip cares about keeping its airport open. Ferrovial, it seems, doesn’t. As Alex Brummer writes about the baa sale in the Mail Online:
This was just the latest squalid example of a British government selling key parts of this country’s infrastructure to foreign buyers. For example, control of our ports passed from one of the nation’s great historic companies, P&O, into the hands of Dubai World; and most of our power utilities have been sold to continental giants edf of France and E.ON of Germany.

The problem with our airports is that the government is powerless to force the foreign owners to ensure there are the necessary systems to prevent flights being grounded in bad weather ….

The truth is that the Spanish owners of baa and its main asset, Heathrow (with annual passenger numbers of more than 66 million), had no experience of running airports, or indeed consumer-orientated businesses, and was only interested in taking advantage of easy credit conditions in order to make quick profits.

While the Spaniards were contractually committed to carry on with the modernization plans for Heathrow that had already been agreed (such as the construction of Terminal 5 and the redevelopment of older terminals), they made little money available to improve maintenance and existing services by, for example, investing in bad weather equipment. Instead, baa management’s priority over the last few years, as credit has tightened, has been to reorganize its debts of £12.6 billion—more than was paid for the company—and to cut its interest rate bills.

The truth is that baa has never had the willpower to invest in the equipment needed to make sure Heathrow stays open in adverse weather conditions ….

It is no exaggeration to say that Gatwick, Heathrow and the countless jobs that depend on them are vital to the economy of the Southeast. If they lose their position as the aviation gateway to Europe—and … the fiasco that marked the opening of Heathrow’s Terminal 5 and the disastrous BA cabin crew strikes have inflicted huge reputational damage—it would be a very serious blow for the British economy. Not only are they vital to the export and import of air freight but they are vital for global business and tourism.

When airports freeze, so does the British economy, along with the nation’s growth, prosperity and job creation.
The sale of important British assets to foreign companies puts vital parts of Britain’s economy, and in some cases even national defense, in the hands of foreign countries. Sometimes the assets get bought by companies like gip, which cares. Other times they get bought by Ferrovial, which apparently doesn’t. But either way, once they are sold, the nation has lost control. It is powerless to ensure they are managed well and not ruined.
As Melanie Phillips wrote, “The British public is now at the mercy of indifferent foreign companies to keep the national show on the road.”