Meeting of the Parliament (Hybrid)

Meeting date: Thursday, January 20, 2022

Official Report 990KB pdf

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Prestwick Airport

The next item of business is a statement by Kate Forbes on Prestwick airport. The cabinet secretary will take questions at the end of her statement, so there should be no interventions or interruptions.

15:33  

I will make a statement on the conclusion of the most recent sales process for Glasgow Prestwick airport and our ambitions for the business. Parliament was updated on the decision to retain the business in public ownership on 21 December last year, but I am aware that it remains a topic of interest, so I wish to provide as much information as I am able to.

We have been clear since the acquisition of the business that our intention is to return it to the private sector at the appropriate time. That position has not changed, nor has our commitment to securing a long-term future for the business, which would have ceased to operate in 2013 without intervention. In recognition of the legitimate interest in the future of the business, I will provide a timeline of the most recent sales process.

We received a credible expression of interest in acquisition of the business in November 2020. Any such commercial process benefits from competition so, following receipt of the expression of interest, we invited further bids on the open market.

We were encouraged by the fact that the process attracted three potential bidders that met our eligibility criteria. In summary, those criteria were that the business should continue as an operational airport, that bidders should develop and maximise the associated economic benefits and employment potential, and that bidders should demonstrate a strong financial capability and the ability to achieve their proposed plans for Glasgow Prestwick Airport.

One of the three potential bidders withdrew at an early stage, and two bids were subsequently received and evaluated, with input from independent legal and commercial advisers and support from the management team at the business. A preferred bidder was identified in February 2021, and more detailed negotiations commenced.

Commercial confidentiality prevents me from naming those bidders or disclosing the details of the bids. That is entirely standard practice in such a process, regardless of whether the parties involved are in the public or the private sector. Members will, I hope, understand that important point. Nor would it be desirable for me to publicly discuss detail that might prejudice any future negotiation. However, I can say that much of the media speculation in recent weeks has been wholly inaccurate.

The commercial negotiation with the preferred bidder was constructive. Both sides committed significant energy and resource to the process of diligence and commercial negotiation. However, in May 2021, the preferred bidder withdrew from the process. For the reasons that I have outlined, I will not get into the detail of the underlying rationale for that decision, save to record that there was mutual agreement that that was the appropriate outcome.

That enabled us to re-engage with the second-placed bidder. A revised bid was submitted on 30 June 2021, and was given detailed consideration. Following detailed analysis over several months, various concerns were identified. Following a clear recommendation from the board, informed by independent advice, I determined that the bid should not be pursued further.

Presiding Officer, you will appreciate that those decisions were not taken lightly. However, I wish to be clear that ministers have a long-term commitment to the business. We wish to secure for it a sustainable future that recognises not just the commercial value in the business itself but the wider contribution that it makes to the local and regional economies that it serves. We want to return the business to the private sector, but that must be on the right terms and in the right circumstances. We remain open to any future credible expressions of interest. We are a willing seller—but we are not a distressed seller.

To look to the future, the business is performing well. It continues to steadily strengthen its position as a niche airport with a reputation for being innovative and flexible in meeting customers’ needs. Significant progress has been made in winning a bigger share of the fixed-base operator market. Property around the campus has high occupancy rates. It supports a range of important tenants, including maintenance, repair and overhaul providers and search and rescue. As set out in the business’s most recent accounts, a modest profit was achieved in 2020-21.

The success of the 26th United Nations climate change conference of the parties—COP26—has been a particular highlight. It showed, once again, that the business can handle traffic for global events. The entire Prestwick team is to be commended. Its members rose to the challenge of COP26 and delivered for their customers, thus further enhancing the global reputation of the business.

Members will recall that both the former chair of Prestwick, Mr Andrew Miller, and the former chief executive, Mr Stewart Adams, postponed their planned retirement dates to support the completion of the most recent sale process. That process having now concluded, both have retired. I put on record my sincere thanks to them for their significant contributions to the business in recent years. I also welcome the newly appointed chair and chief executive. Their role is to build on recent success and to drive the business forward, so that profitability can be sustained and Glasgow Prestwick Airport can continue to make an important contribution to Scotland’s economy. I look forward to supporting them in that task.

As do all parts of the aviation industry, Prestwick faces challenges. Recovery from the pandemic will not be easy. However, I am confident that the business is in a much better shape than when the Scottish Government bought it eight years ago. At that time, we said that there were no quick fixes. We stand by our long-term commitment.

It is in the public interest to see Prestwick succeed, as it is in the interest of the staff who work there and the businesses that rely on it. Politicians from all parties have championed Prestwick over the years and I hope that that support will continue as the business grows in line with the ambitions that we have for it.

The cabinet secretary will now take questions on the issues that were raised in her statement. I intend to allow around 20 ministers for questions, after which we will move on to the next item of business. I would be grateful if members who wish to ask a question were to press their request-to-speak buttons now.

I thank the cabinet secretary for the advance sight of her statement.

I firmly believe that Prestwick can be a success, and we all hope for that. The Scottish Government bought Prestwick airport for £1 in 2013. Nicola Sturgeon said that the aim was

“turning Prestwick around and making it a viable enterprise”.

One has to ask why, more than eight years on, that has not happened. What is it that the Scottish Government is looking for from a buyer? What are the various concerns, which the cabinet secretary referred to, about the latest bid? I am not asking for figures or for her to betray confidences.

The latest accounts show an operating profit of £0.5 million, which is way down on the figure for the previous year. Freight held up, but passenger numbers plummeted and it may be a while before they recover. Can the cabinet secretary tell us what the operating profit needs to get to in order for the airport to be put back on sale?

The latest doomed bid—which was from Train Alliance UK, although the cabinet secretary does not want to say that—was scuppered when it emerged that major repairs to the runway are required. Can the cabinet secretary confirm that the figure for those repairs was around £20 million, and can she say why the preferred bidders were not told about that but kept in the dark? If I am right about that figure—or whatever the figure is—is the Scottish Government going to pay for those repairs before the airport is put back on sale?

There were quite a lot of questions in there, Presiding Officer, so I hope that you will allow me to go into some of the detail.

The member set out the starting position that he wants Prestwick to be a success, as I do. He asked about the viability of the enterprise and where the profit needs to get to. I would suggest that that is not one of our criteria when looking for bids. As I said, we are a willing seller, as it were, so we will work with any expressions of interest, whether they emerge today, tomorrow or next year.

The finances are strong. The member will have looked at the annual report and accounts, which were published on 21 December. He cited the operating profit for exceptional items as being £500,000. The total profit after tax for the year was £12.8 million, which includes technical accounting for non-cash revaluation of assets. Overall, that was in a year in which every part of the aviation industry really struggled and was facing huge challenges.

The member talked about passenger numbers. That issue was not unique to Prestwick, but, under expert management and the help of the chair and the board, Prestwick has been able to develop a niche market. I would caution that the issue is not about the accounts, which are showing that Prestwick is a successful business that has great opportunities.

On the bids, I would caution the member that he is citing media speculation, much of which, as I have said, has been wholly inaccurate. We will obviously continue to respect commercial confidentiality in terms of the specific bidders.

The member also talked about the condition of the runway. The reason for any bidder ending their involvement in the process is a matter for them. However, I would say again that a lot of the reporting has been inaccurate. The runway and all other infrastructure at Prestwick is maintained and it is operating in accordance with regulatory requirements. An area next to the runway was the subject of discussion last year because of some damage caused by the jet blast of a departing aircraft, but the damage has been repaired and the runway was not damaged in the process.

I hope that I have given a comprehensive answer to the member’s comprehensive questions.

I thank the cabinet secretary for advance sight of her statement.

It is 10 years since Prestwick was bought by the Government, which claimed that its plan was to return the airport to the private sector. A decade on, we still do not have any clear explanation from the cabinet secretary of why every appointment by the Government of its preferred bidder ends in the same outcome, which is no sale.

We still do not know how close we were this time to an actual sale. The cabinet secretary has explained the latest bids that have been rejected and the timescale in which they were rejected. Can she tell us how many other bids have been received by the Government since it took ownership of the airport 10 years ago and when those bids were rejected?

The cabinet secretary says that Prestwick’s finances are strong, but there is still no repayment plan for the millions of pounds of Government loans. We know that there is a need for significant investment in Prestwick airport. Given that we are no further forward when it comes to a new owner, will the cabinet secretary tell us where the investment will come from? Where is the Government’s plan for the running of Prestwick airport, for delivering the sustainable future that she talked about and for securing the jobs that the Ayrshire economy desperately needs?

The latest accounts should not be dismissed, because this is a credible business with a credible plan that is proving its success, and it will continue to do so.

We will continue to work with the board to develop its strategy for the future of the airport. Just last week—if I remember my diary correctly—I met the new chair of the board, who has considerable expertise and vision for Prestwick airport. It has a refreshed operating board and we will work with that board.

The member asked specifically about investment opportunities. The board will focus on the development of new revenue opportunities, building on the airport’s strengths. We will continue to engage with the board on how we support that work.

I emphasise that the three bids that we received were credible bids and that there are reasons why each bid did not come to fruition. Again, those are complex reasons, many of which have not been covered in any of the media speculation.

I have been through the timeline for the most recent bids, which I hope answers that question.

I thank the cabinet secretary for the statement. Can she expand on the ways in which the eligibility criteria for bidders will ensure that the local community in Ayrshire benefits from the sale of Prestwick airport?

Yes. The criteria made it clear that the long-term continuation of Prestwick as an airport and a key Scottish infrastructure asset was essential. We also required a commitment to operate businesses directly relevant to Prestwick, including aviation, logistics, infrastructure and real estate and other services. Bidders were asked to demonstrate that they were capable of developing and maximising the economic benefits and—this is key for the local area—the employment potential associated with the business. That is why we originally bought Prestwick, and it is why we want to ensure that it goes to the right bidder.

The preferred bidder withdrew their initial bid because of the omission from the Prestwick airport sales prospectus of the state of the runway. On resubmission of their bid, taking that initial omitted information into account, they were so frustrated at the lack of any response from the Scottish Government that they had no option available to them but to approach me and ask me to personally give a hard copy of their bid to the Scottish Government. I gave it to the Cabinet Secretary for Net Zero, Energy and Transport, Michael Matheson, who said that he would pass it on to Kate Forbes. Does the cabinet secretary think that that is the way to work with a business and a preferred bidder? Does she think that that kind of amateurish approach will encourage any potential future bidders?

We have engaged with all three bidders. I am happy to pick up with the member on his direct experience after this conversation. I am not sure that the dates that the member refers to, relating to when I assumed responsibility for Prestwick and the times at which certain bidders pulled out, are strictly accurate.

The leader of North Ayrshire Council’s Tory group, Councillor Tom Marshall, has called for Prestwick airport to be closed. Can the cabinet secretary say what the impact on the aerospace industry, the Ayrshire economy, local employment and local community would be if that profitable airport were closed down?

The clear understanding of the economic impact of closure is what caused us to intervene in 2013. We were clear that closure would have a significant impact on the local economy, not just because of jobs lost at the airport but because various other businesses rely on the airport being operational, including maintenance, repair and overhaul facilities, which provide highly skilled engineering jobs.

Prestwick has always enjoyed cross-party support locally. We have heard that again today. I hope that we can get behind ensuring that it is not only returned to the private sector but handed to the right bidder and continues to grow in success.

The SNP Government’s commitment to fair work is questionable at best, but the fact that a job advert released last year at Scottish Government-owned Prestwick airport advertised a job as paying less than the real living wage is simply shocking. Can the cabinet secretary tell us why, after almost a decade of the Government owning Prestwick airport, it still does not pay the real living wage and give its employees—many of whom live in my region—the proper wage that they deserve?

We expect all employers to pay at least the real living wage and to adopt fair work principles. That expectation has not changed. We are actively engaged in working with all public and private sector employers to ensure that they meet the standards in our fair work first policy.

Does the cabinet secretary agree that the Scottish Government’s recent support of a £4.8 million research and development infrastructure grant towards the development of the new aerospace innovation centre at Spirit AeroSystems in my constituency is to be welcomed, along with the Scottish Government’s investment in the Ayrshire growth deal, both of which recognise the strategic importance of the aerospace design, innovation, manufacture and repair businesses, and the potential for the spaceport ambitions? Does the cabinet secretary agree that all of that is contingent on the continued operation of Prestwick airport?

I absolutely agree with Elena Whitham on all those points. As she will know, last September, the First Minister was delighted to open the new aerospace innovation centre, which will enhance the excellent capabilities in Spirit AeroSystems and support greater innovation across the aerospace cluster at Prestwick. It is one of the obvious immense opportunities. That is why we are working with the board to ensure that Prestwick gets such opportunities locally.

I thank the cabinet secretary for the advance sight of her statement and for outlining what has happened in relation to the various potential buyers over the past couple of years.

We all know that air travel is a small but significant contributor to climate emissions, with emissions rising steadily prior to the pandemic. Will the cabinet secretary include in discussions with future potential buyers of Prestwick airport additional eligibility criteria that speak to being a climate-resilient airport, supporting and developing innovative low-carbon air travel technologies and the associated jobs, and reducing—not just offsetting—emissions that result from flights coming through the airport?

The member will know of the Scottish Government’s commitments, backed by Parliament, to be net zero by 2045, in which every sector in Scotland has a role to play. Given that Prestwick is a publicly owned airport, it would be included in that. I am sure that that will feature in future discussions as part of our strategic approach to returning Prestwick to the private sector.

The SNP-Green Government supports the expansion of Heathrow with a third runway, with 75,000 extra flights for Scotland. Part of the contract between the Scottish Government and Heathrow airport included the examination of the possibility that Prestwick could be included in the supply chain. How much of the future of Prestwick airport is dependent on the expansion of Heathrow airport?

The opportunities for Prestwick airport are far greater than the relationship with Heathrow. In my opening statement, I cited some of the opportunities for Prestwick airport. It has diversified its operations considerably, it has a stronger business model and it is continuing to adapt to changing circumstances. We are supportive of the business, and we hope that, under the new refreshed leadership, the chair, the board and the chief executive will continue to develop the strategy for growth.

I call Rona Mackay, to be followed by Edward Mountain.

I believe that you may be on mute, Ms Mackay. Would you like to check, please, and begin again?

We are having difficulty hearing you in the chamber at the moment, Ms Mackay. We will work behind the scenes and, we hope, return to you. In the meantime, I call Edward Mountain.

Mr Mountain, it seems that we are having difficulty in the chamber hearing members who are joining us remotely. We will try to come back to you. Bear with us just now. We will move on to John Mason.

The cabinet secretary said a bit about the previous bidding process. Will she say something about the future? As I understood it, she said that there was an expression of interest followed by an opening out to bids. Is that broadly how she sees the process working in future? Would we wait for an expression of interest and then look for more bids?

We will carefully consider any proposal from credible investors with a positive vision and plan for Prestwick airport. Until then, the airport will obviously continue in Government ownership. We have not set any timeframe for disposal of the business, and we are not actively marketing it at this stage, immediately after the previous expressions of interest. As I said in my opening remarks, we are a willing seller, but we will do so only when the circumstances are right. We are open to credible expressions of interest.

I give my sincere apologies to members who joined us remotely and with whom we have been unable to connect. We will continue to look into that matter.