Council reviewing options to lower risks from Luton Airport

The council is developing a strategy to reduce the risk from its airport companyThe council is developing a strategy to reduce the risk from its airport company
The council is developing a strategy to reduce the risk from its airport company
Luton Borough Council is looking at options to lower its reliance on dividends from Luton Airport.

The council is working on a strategy to ensure the financial stability of its airport company, London Luton Airport Limited (LLAL), while reducing its own risks, according to its annual budget report.

The report stated that the council’s strategy of providing loans to LLAL to pay for capital projects such as the Luton direct air-rail transit (DART) and airport expansion application, had in turn affected its own borrowing requirement.

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"As a result, the overall level of borrowing is very high for a local authority of Luton’s size," explained the report.

"LBC has added a margin or risk premium to the debenture loan rate payable by LLAL, and also takes a fixed charge on the company’s assets as security for the loan.

"Thus the underlying financial stability of LLAL is a key issue for the council."

Despite the pandemic and the lack of dividend payment, LBC will still "benefit in net income from LLAL of £21.7m in 2021/22 and £22.3m in 2022/23 to support core service delivery".

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Opposition leader and Liberal Democrat Barnfield councillor David Franks warned that the airport company "could be overwhelmed by its debts".

Cllr Franks described the ruling Labour group's approach as "we know best where to spend £160m of your money" regarding the 2021/22 budget.

"It isn't a very encouraging response."

Asked whether the airport company is in a dangerous position, Labour High Town councillor Andy Malcolm responded: "I don't know why you're trying to sow division and scare people.

"The airport is operated on a concession term, which ceases in 2031. When that ends, we won't be giving someone the ability to operate the airport for free.

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"In a good year we get £50m income. So a new concessionaire would be buying that £50m income stream each and every year of the concession, if we go with that model.

"There are a range of other tools which might form part of this stabilisation package (for LLAL), added councillor Malcolm, who's the finance portfolio holder.

"Some of the loans from the emergency budget were allowing LLAL to draw down on reserves it held and already had on its balance sheet.

"We're at a stage where income to our airport company has all but ceased because there are next to no passengers going through.

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"But there's unanimity across the council's political groups of the value of the airport and none of us would consider selling it."

Councillor Franks said: "There's clearly a choice to be made, when the concession's agreed, between a huge upfront payment and smaller continuing income or a small upfront payment and a larger continuing income.

"You can't get both."

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