The parent company of London Heathrow Airport has a new investor, which is sure to be a bit controversial…
In this post:
Saudi Arabia’s PIF buys 10% stake in Heathrow
Saudi Arabia’s Public Investment Fund (PIF) has today announced that it has entered into a share purchase agreement to acquire a 10% stake in TopCo, the holding company of Heathrow Airport Holdings. This deal is subject to regulatory approval.
The stake is being purchased from Ferrovial, as the company is totally divesting its 25% stake in Heathrow Airport’s parent company. The company is also selling a 15% stake to French private equity firm Ardian, through its infrastructure funds. Up until 2013, Ferrovial owned a 56% stake in the airport’s parent company. The 25% stake is being sold for a total of £2.37 billion.
PIF states that it’s “pleased to be investing in Heathrow, a world-class airport, which acts as a key gateway to the world,” and says that the investment is “in line with its strategy to support the business as a long-term partner.”
Saudi Arabia’s PIF has been getting a ton of publicity in recent years, and is one of the world’s most active sovereign wealth funds, with more than $700 billion in assets. The intent of the fund is to diversify Saudi Arabia’s economy, though it’s pretty clear that many of the investments are also about soft power abroad, as well as making Saudi Arabia more mainstream. That’s especially true when you look at the PIF’s investments in sports like golf and soccer.
Heathrow Airport also has investments from Qatar & China
Saudi Arabia isn’t the first country to use its investment fund to buy a stake in Heathrow Airport. As it stands, the Qatar Investment Authority owns a 20% stake in the airport’s parent company. Assuming this deal is approved, Qatar will be the airport’s single biggest shareholder, replacing Ferrovial in that position.
Furthermore, the China Investment Corporation owns a 10% stake in TopCo. So when all is said and done, 40% of Heathrow Airport will be owned by Qatar, Saudi Arabia, and China.
When I write about airlines like Qatar Airways, Saudia, etc., some people chime in and say “you should boycott these airlines, they’re just arms of their governments, and you’re financially supporting them.” While I can appreciate that sentiment and see where people are coming from, I think investments like this also expose the complexity of taking such a stance.
When you fly British Airways out of Heathrow, you’re paying fees to an airport owned by Qatar, Saudi Arabia, and China, and you’re flying an airline that Qatar Airways has a 20%+ ownership stake in, making Qatar Airways the biggest shareholder of International Airlines Group (IAG).
If you think it’s unethical to fly with Qatar Airways, do you think it’s also unethical to fly out of airports and with airlines that are owned by the same company? There’s no right or wrong answer to this, but I do think some people try to oversimplify this.
Bottom line
Saudi Arabia’s Public Investment Fund is buying a 10% stake in TopCo, which is the parent company of Heathrow Airport. I think what’s most interesting about this development is that the airport is now 40% owned by the governments of Qatar, Saudi Arabia, and China.
What’s your take on Saudi Arabia’s investment in Heathrow Airport?
Maybe this is just a strategy to get some slots for Riyadh Air.
It simply shouldnt be allowed for one of the worlds primary airports to basically be owned by china and the middle east (and um canadas pension fund lol)
It's absurd that critical infrastructure, especially an airport as vital as Heathrow (most important airport in the world??), is held in the hands of private investment funds rather than the public. Even the U.S. hasn't bothered to privatize its airports.
First of all, 10% is hardly a significant stake that gives management control to PIF.
Secondly, this only continues the long tradition of the UK being sold to the highest bidder by its own people. For example, significant chunks of prime Central London areas are already owned by others - more than a third of Mayfair is owned by Qatar citizens, Knightsbridge by Saudi Arabian and UAE citizens, Chelsea by Russian citizens. DP World owns...
First of all, 10% is hardly a significant stake that gives management control to PIF.
Secondly, this only continues the long tradition of the UK being sold to the highest bidder by its own people. For example, significant chunks of prime Central London areas are already owned by others - more than a third of Mayfair is owned by Qatar citizens, Knightsbridge by Saudi Arabian and UAE citizens, Chelsea by Russian citizens. DP World owns two key deep water ports and the associated freight & transport infrastructure. Most of the country's electric utilities and railway service companies are owned by European companies. LGW is 51% owned by Vinci, a French company with the other 49% divided between Abu Dhabi and Australia's sovereign funds, and two pension funds from Korea and California.
I rest my case for not treating this transaction as anything special. I live in London, by the way.
Maybe the Saudi fund could spend a few riyals dressing up the gates in T3 (Delta, Virgin). Most date back to the late 70’s and look it.
Could have sworn I saw the ghost of Margret Thatcher at the controls of the Concord rolling down the tarmac chasing Labor party MPs.
Hilarious!!!!
"Concorde"
Some people here are overestimating the potential benefit of owning parts of LHR - esp. since there are 3 countries - each w/ their own agendas - involved. In reality, LHR has to follow its own slot rules which are tied to bilateral aviation agreements. Given that LHR is a major destination for scores of airlines, no country and esp. not 3, will gain any meaningful benefit.
The bigger issue is that more and...
Some people here are overestimating the potential benefit of owning parts of LHR - esp. since there are 3 countries - each w/ their own agendas - involved. In reality, LHR has to follow its own slot rules which are tied to bilateral aviation agreements. Given that LHR is a major destination for scores of airlines, no country and esp. not 3, will gain any meaningful benefit.
The bigger issue is that more and more countries are divesting and privatizing valuable infrastructure and, when you have open capital markets, investors from other countries will invest.
This is clearly a way for them to get first dibs at slots for Riyadh Air.
NATIONAL DISGRACE.
Ben, since you mentioned the 'ethical consumption' of products and services from regions considered 'corrupt' or 'uncivilized' in the global South, it's crucial to maintain a balanced perspective. It's important to acknowledge that many European corporations have foundations rooted in the legacies of colonialism, neo-colonialism, and the exploitation of the global South's population and resources. This includes numerous atrocities committed along the way. To be fair, those advocating for a boycott of airlines such as...
Ben, since you mentioned the 'ethical consumption' of products and services from regions considered 'corrupt' or 'uncivilized' in the global South, it's crucial to maintain a balanced perspective. It's important to acknowledge that many European corporations have foundations rooted in the legacies of colonialism, neo-colonialism, and the exploitation of the global South's population and resources. This includes numerous atrocities committed along the way. To be fair, those advocating for a boycott of airlines such as Qatar Airways or companies owned by China, solely based on the grounds that they may not uphold certain 'western' values, are either naive or driven by prejudice, to say the least.
100%
Watching the self described "ethically responsible" mob constantly getting tripped up by their hypocrisy and/or ignorance of historical fact is one of the joys of life today.
So because something happened 100 years ago that makes it okay for a country to act like it today? Nonsense.
You seem to be missing the key point tho.
'foundations rooted in', 'legacies', 'exploitation'.. ie things in the past. That doesnt give a free pass to regressive nations to be allowed to get away with it now.
Buy electric cars & trucks and never look back.
Buy electric cars as long as you have a personal source of electricity, i.e. solar.
Buy electric cars and don't worry about the dubious ways the battery materials are obtained.
Life is full of compromises, you cannot be an absolutist
Boycott if you don't agree with their governments, but rescind the boycott if they have a great business / first class product with easily bookable saver awards and a loyalty program that doesn't devalue its redemptions ;)
:-)
Saudi Arabia - 10%; Qatar - 20%, China - 10%, so 40% in total owned by these three?
@ simmonad -- Whoops, I'm sorry, not sure what I was thinking. Fixed.
I do wonder what they get that's of the most tangible value, in these stakes: first dibs at new slots? A say in how their specific terminals are configured/run?