Prestwick Airport sale 'could take years', says Audit Scotland

Scottish government plans to sell Prestwick Airport back to the private sector are viable but it could take "some years" for them to be achieved, a public spending watchdog has said.

Ministers bought the struggling airport for just £1 from owners Infratil in late 2013 amid fears it could close.

They have so far committed to provide £25.2m in loan funding to the airport.

Audit Scotland said it could take almost a decade before Prestwick would be able to start repaying the money.

In its report, the watchdog said that while the business case for the deal was based on "optimistic" passenger numbers, the government could still "reasonably expect a positive return" on the cash being loaned.

Ministers are seeking to return the airport - which had been running at a loss - to profitability before selling it back to the private sector.

The government has so far provided the airport with £9m of loan funding and has committed to a further £16.2m to the end of March next year, if required.

Audit Scotland said latest estimates had put the required total funding up to 2021-22 at £39.6m.

The report said: "The Scottish government's long-term aim is to sell Glasgow Prestwick Airport back to the private sector once the airport is viable.

"Owing to the uncertainties around the future development opportunities, the Scottish government has not yet set a timetable for this.

"It is important that its plans for the airport include regular consideration of its ongoing financial viability and a well-defined exit strategy covering a variety of possible scenarios.

"The Scottish government recognises that the long-term opportunities could take some years to take effect if they are realised."

Airport losses

The airport, which was established in 1934, had been on the market for 18 months when ministers stepped in and bought it over.

Falling passenger numbers and a decline in freight business meant it had been operating at a loss for a number of years.

Audit Scotland found ministers "acted reasonably" when buying the airport, given the tight timescale of six weeks in which to conclude the purchase.

It also found that they established "appropriate governance arrangements" and identified the risks associated with the site's ongoing commercial viability.

The watchdog also concluded that the government's business case for the purchase "generally" followed Treasury guidance, but said it should have been clearer in some areas, including fully quantifying the economic benefits of the purchase.

'Action vindicated'

Responding to the report, Infrastructure Secretary Keith Brown said: "Closure of Prestwick Airport would have been devastating for Ayrshire and the action taken by the Scottish government has safeguarded 3,200 jobs and secured a vital infrastructure asset that contributes more than £61m annually to the Scottish economy.

"Audit Scotland's report vindicates the action taken by the Scottish government - it shows we made the right decision to step in and confirms that we followed the correct purchase process in a tight timescale, identifying and considering the risks before moving forward with the acquisition."

He added: "The report confirms that the Scottish government is highly likely to generate a return on this investment that is higher than the interest rate that we are currently charging the airport."

Ryanair is Prestwick's sole remaining scheduled passenger carrier

Both Scottish Labour and the Scottish Liberal Democrats accused the Scottish government of a lack of transparency over the costs involved in running the airport.

Scottish Labour's infrastructure spokeswoman Mary Fee said: "As the minister in charge, Nicola Sturgeon was repeatedly unable to answer the most basic financial questions about the airport and its future.

"Now we learn that the projected investment needed is nearly £40m, but the SNP have never bothered to tell the Scottish Parliament or the Scottish people.

"The SNP government in Edinburgh must explain when they knew this."

'Transparency crucial'

Scottish Liberal Democrat South of Scotland MSP Jim Hume said: "The cost of investing in Prestwick Airport to the taxpayer more than doubled but the SNP government kept that a secret. Meanwhile the forecast annual passenger growth rate has been nearly halved.

"Transparency from ministers over the business case is crucial to provide assurances about the airport's long-term future."

The Scottish Conservatives called on the SNP to return the airport to private ownership as soon as possible.

Transport spokesman Alex Johnstone said: "It's obvious to all that there is no long-term future in public ownership for Prestwick Airport.

"That's why we need to see a detailed plan from the Scottish government on exactly how and when it plans to return it to private ownership.

"It's essential this is done at the earliest possible opportunity."

A Transport Scotland spokesman said: "The loan funding to Glasgow Prestwick Airport has not doubled, as the Liberal Democrats are suggesting.

"The figures published by the Scottish government represent confirmed loan facilities made available to Glasgow Prestwick Airport during the previous financial year and the budgetary provision for the current year and the year ahead. No budget has been set by the Scottish government beyond 2015/16.

"In contrast, the Audit Scotland figures do not reflect the actual and budgetary provision for loan funding, but are a projection of potential loan facilities that may be required in the period to 2021/22 and is, of course, subject to revision as and when commercial activities become realised.

"It would therefore have been inappropriate for ministers to speculate on how much Glasgow Prestwick Airport may or may not need to borrow in future years, given any confirmed facility would need to be based on a robust business case and subject to the availability of the necessary budgetary provision."