Councils fear having to ‘bail out’ airport
Dec 16 2009 by Adrian Pearson, The Journal
A SPECIAL meeting will be held on Tyneside as cash-hit councils seek assurances their investment in Newcastle Airport is safe. Airport bosses will be asked for guarantees that taxpayers’ cash will not be used when a £300m debt is refinanced.
North Tyneside Council has agreed to hold a special cabinet meeting next month amid concerns they could be asked to hand over extra cash to Newcastle International Airport in a few years. Tyneside councils are the majority shareholders behind the airport, and as such have benefited from multi-million pound pay-outs in previous years.
Controversial former airport boss John Parkin secured the last £80m dividend in 2006, three months before he was suspended. Mr Parkin received a bonus worth nearly £6m, eventually reduced to £2m, for bringing about the bumper payday.
Just three years later the council is eyeing up a refinancing deal which is expected to be nowhere near as profitable, and could cost councils.
The airport has some £300m of debt, built around loans which are due to be refinanced within three years. Councillors are worried that when airport bosses sit down with bank managers to restructure the debt they may find bad news waiting for them. If the banks do not offer good enough terms, councillors say, councils need to be told if they will then be asked to help recapitalise the airport.
One councillor told The Journal the meeting had been set up to seek reassurances that “the council will not have to bail out the airport” at a time when local authorities are cutting spending.
Changes in the value of the airport have also prompted concerns from the Audit Commission.
The Government’s council watchdog told Newcastle City Council in its annual audit letter to adjust the documents which underpin its financial planning as a result of airport changes. Last night Graeme Brett, chairman of North Tyneside’s finance sub-committee, said the meeting was needed to clear up issues regarding the airport’s debt. “We need a much clearer idea of what will happen when it comes to refinancing the loan.
“As a shareholder it is important we know what is happening here, what the liabilities are for us and for Copenhagen Airports.”
A spokesman for South Tyneside Council, the lead authority on the airport, said: "When the original refinancing took place we knew that we would need to refinance at the end of 2013. “The Board and airport management team have a strategy in place which will lead to a successful refinancing at the appropriate time."
A Newcastle City Council spokesman said: “We are not reviewing our commitment. The airport is a vibrant international airport which is critically important to the city and to the economy of the region. “We do expect the dividend to be lower than it has been in previous years because of the recession and we are taking this into account in our medium- term budget plans.''