Latest reports indicate that Saudi Arabia is seeking to acquire effective majority control of London Heathrow, the United Kingdom’s largest and busiest airport. This development arises as other investors are reportedly considering divesting their stakes in the airport.
The Public Investment Fund (PIF) of Saudi Arabia, a significant provider of oil, has forged an alliance with private equity investor Ardian to purchase a 25% stake in Heathrow from Ferrovial, the Spanish infrastructure giant that served as the primary owner of the airport for the past 17 years. Heathrow is currently estimated to be valued at around £9.5 billion, and at least one other shareholder is reportedly in discussions to sell their stake, with the possibility of additional investment funds following suit.
According to the airport’s shareholder agreement, other international pension funds holding a collective ownership of almost 35% are also entitled to divest at the same price. Notably, the Qatar Investment Authority, which holds a 20% stake, is reportedly hesitant to sell to the Saudis, as are other shareholders, including sovereign wealth funds from China and Singapore.
Despite declining to provide comments on the matter, it is essential to recognize that the potential acquisition of majority control of Heathrow by Saudi Arabia could lead to contentious developments. The UK has been relatively permissive towards Middle Eastern control over ports, with Dubai-based DP World currently possessing UK maritime ports.
The Saudi PIF is widely acknowledged as one of the most active sovereign wealth funds in the world, with assets surpassing $700 billion. While the fund has made notable investments in sports, including the acquisition of Newcastle United football club and professional golf ventures, its connections to the Saudi government, particularly Crown Prince Mohammed bin Salman, have been the subject of criticism over alleged human rights violations.
London Heathrow Airport, which experienced a significant increase in passenger numbers in 2022 following the resurgence of international travel from the Covid-19 pandemic, reported an adjusted loss of £684 million last year, marking a notable improvement from the approximately £1.3 billion loss in 2021. However, the airport continues to encounter challenges in its expansion plans, including legal disputes concerning the construction of a third runway. Additionally, concerns have been raised regarding the decline in landing charges and its potential impact on future investments, despite airlines arguing that the charges are excessive.
As the situation continues to unfold, the potential change in the ownership of London Heathrow raises significant questions about the future of one of the world’s leading airports and its potential influence on international travel and commerce.
