Stansted Owner Aims to Draw Airlines With $122 Million Overhaul

Photographer: Chris Ratcliffe/Bloomberg

A file photo showing a cabin crew employee entering Stansted Airport in Essex, U.K., in Aug., 2008. About an hour north of London, Stansted serves 17.5 million people each year and has specialized in low-cost services. Close

A file photo showing a cabin crew employee entering Stansted Airport in Essex, U.K., in... Read More

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Photographer: Chris Ratcliffe/Bloomberg

A file photo showing a cabin crew employee entering Stansted Airport in Essex, U.K., in Aug., 2008. About an hour north of London, Stansted serves 17.5 million people each year and has specialized in low-cost services.

Manchester Airports Group plans to spend about 40 million pounds ($61.3 million) sprucing up lounges and adding perks like valet parking to draw carriers like Etihad Airways and Emirates to London’s Stansted Airport.

In partnership with retailers, the new owner of the capital’s third-largest airport will commit a total of 80 million pounds on a program of improvements including fast-track security lanes, a new food court and revamped shopping outlets, Chief Financial Officer Neil Thompson said in an interview.

“We’re looking to use the relationships we have with the other full-service carriers such as Etihad, Emirates, etcetera to bring a richer mix of traffic to Stansted,” Thompson said. “That typically incorporates broadening the product offering.”

MAG signed an agreement aimed at growing traffic with EasyJet Plc (EZJ) in June, three months after buying Stansted for 1.5 billion pounds from Heathrow Airport Ltd., and is looking to complete a similar deal with the airport’s largest operator Ryanair Holdings Plc. (RYA) About an hour north of London, Stansted serves 17.5 million people each year and has specialized in low-cost services.

Designed by U.K. architect Norman Foster, the facility ranks behind Heathrow and Gatwick among terminals in southeast England.

The airport will seek to tap the local catchment area of eight million people and draw travellers with new destinations, Thompson said. The landing strip, which now operates at about 50 percent of its capacity, has the potential to play a key role in adressing the U.K.’s airport constraints, he added.

Newfound Focus

“Stansted has had no focus and no incentive as part of the previous ownership to grow, so we’re going to change that,” the executive said. “There is plenty of opportunity for growth before any cost or expansion is required.”

All of London’s major airports submitted proposals this month to a state-appointed Davies Commission on future airport capacity. Boris Johnson, the city’s mayor, has said he favors development of Stansted airport or a completely new base in the Thames estuary costing 65 billion pounds, while Heathrow itself has proposed adding a third runway by 2025-29 for as much as 18 billion pounds. Gatwick Airport said it could add a second runway for as little as 5 billion pounds.

Heathrow, Europe’s biggest hub, served close to 70 million passengers in 2012, while London’s second largest airport Gatwick -- owned by Global Infrastructure Partners Ltd. after an earlier BAA sale -- handled 34.2 million travelers. Both larger facilities are operating close to the limits of their runway capacity.

Long-Haul Operators

Long-haul operators that fly to Manchester Airport, MAG’s largest asset, include Etihad of Abu Dhabi, Qatar Airways, Singapore Airlines Ltd. (SIA) and U.S. carriers American Airlines, Delta Air Lines Inc. (DAL), United Airlines (UAL) and US Airways Group Inc. (LCC), as well as U.K.-based Virgin Atlantic Airways Ltd.

MAG’s sales for the year ended March 31 climbed 5.3 percent to 393.1 million pounds, not including the one-month contribution of Stansted. Operating profit jumped 12 percent to 73.6 million pounds in the period, the Manchester, England-based company said in a statement. The group’s Manchester, East Midlands and Bournemouth terminals served 24.5 million passengers in the fiscal year.

Work to improve Stansted will be phased with the completion of a new duty-free store in the summer of 2014, enhanced shopping areas finished by mid-2015 and final touch-ups to a renovated food court taking place through early 2016, Thompson said. The facility is capable of handling about 35 million passengers without major changes to the existing infrastructure, he said.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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