You would not normally associate the Civil Aviation Authority (CAA) with dynamic, master-of-the-universe financial manoeuvres.
The organisation is the regulator and overseer for the United Kingdom’s airports and aviation industry, and usually hits the headlines when chaos descends, as it often does in the form of bad weather or industrial disputes, on Britain’s creaking airport network, resulting in cancelled flights and passenger angst.
But now the CAA is acting rather like one of the sovereign wealth funds so criticised by Americans and Europeans.
I have argued before that the SWF “debate” is one of the great instances of Western hypocrisy. Politicians and members of the financial establishment from New York to Brussels rail against the concept of Abu Dhabi, or Singapore, or Beijing taking stakes in their great industrial corporations – but are happy to get the begging bowl out when those institutions get into trouble.
Now the CAA has confirmed my suspicion that the West is quite happy to use government money (sovereign wealth) to bail out its own failing industries, but suddenly changes its mind when that money comes from the Middle East or Asia. Just look what the CAA did earlier this week.
A little bit of history is required. Back in 2006, the company that owns and runs Britain’s airports, BAA, was taken over by a Spanish company, Ferrovial, in one of the more controversial corporate moves of recent years. The sceptics said that the Spanish were loading up with highly-leveraged debt – about £9 billion (Dh67.5bn) – and that they were only interested in the airports’ cash-flow and retailing opportunities, not in the vital investment in services the airports need.
Anybody who has flown through or from Heathrow recently will know exactly what I mean – squalor, delays and inconvenience are the norm at the world’s busiest airport, and Ferrovial seems to be unable to do anything about it.
The debt climate has moved dramatically against the Spanish since it took out the initial £9bn financing package. Now it has to renegotiate that deal against the background of a falling share price and severe cash flow constraints.
Normally the hard-headed banks who funded Ferrovial would be tempted to pull the plug, as they threatened to do with Spain’s Immobiliaria Colonial, the property company that has ended up under Dubai’s ownership. But just as it was looking decidedly ominous for Ferrovial, in rides the CAA to the rescue. As the regulator for Britain’s airports industry, one of its jobs is to set the level of charges paid by airlines for the use of airport facilities.
The CAA has just announced a surprisingly generous financing package for the period until 2013 – total airport charges will rise to £6.8bn over the period, an increase of £400 million for the airlines to find. Of course, this will get passed on to passengers in the form of higher fares.
The CAA is called an “independent regulator” but you should not take that too literally. Its bills are paid by the British Government, and its employees are on the government pay-roll as civil servants. In effect, the CAA is the aviation division of Gordon Brown’s sprawling public sector empire.
This is why the SWF analogy is relevant, and why Britain is once again exposed as a hypocrite in the great debate about SWFs.
In Brown’s twisted double-think, it is suspect when a Middle Eastern or Asian corporation makes an investment in a Western corporation. There are worries about “foreign government interference” in private business.
Yet when his government allows one of its agencies to bail out a vital sector of British industry placed under Spanish ownership, that is regarded as good business. Blatant double standards.
Revealed: Britain’s very own SWF