Representation by David Endon Stuart Shipley
- Date submitted
- 21 June 2023
- Submitted by
- Members of the public/businesses
I wish to register my objection to the proposed expansion of London Luton Airport’s annual passenger limit from 18 million to 32 million. My concerns are as follows: Governance and financial background The Applicant, Luton Rising (LR) is a wholly owned subsidiary of Luton Borough Council (LBC), its own local planning authority, and there is a mutual financial and operational dependency between the two entities. All directors of LR are either elected councillors or employees of LBC. Specifically LR has borrowed at least £491 million from LBC, which LBC in turn has borrowed from central government, and both its and LBC’s balance sheets are dependent on the valuation of the Airport as a whole and specifically its reversionary rights once the current Concession expires on 15 August 2032. Both LR’s current auditors, Azets, and their predecessors, PWC, who resigned after the 2020/21 audit, qualified the accounts and stated that in their opinion LR’s directors’ valuation of the airport asset has been very materially overstated. In the 2021/22 audit report Azets assessed the overstatement as between £298 million and £361 million. If Azets are correct, both LR and LBC are far more highly geared in terms of borrowing versus assets than their accounts show. LBC’s auditors, EY, have still not been able to sign off the Council’s 2018/19 accounts, even on a qualified basis, indicating significant outstanding issues. The valuation rests on the fee income payable by the airport operator London Luton Airport Operations Limited to LR, the bulk of which is calculated on a per passenger basis. This means that both in terms of capital asset valuation and operating income both LR and LBC have a direct financial incentive to maximise passenger numbers regardless of other considerations such as road and rail capacity, carbon and other emissions, and noise levels. Credibility of noise controls Over the decade from 2009 to 2019 Luton was the fastest growing airport in the UK, and noise nuisance for residents of nearby communities worsened dramatically. The situation has been exacerbated by the need for Luton flights to be kept at low altitudes to allow Heathrow flights to fly above them; residents were promised relief by way of airspace redesign but this still seems years away and we are not confident that it will deliver great benefits. As part of the existing planning approval granted by LBC in 2012-2017, day and night noise conditions were imposed. These were breached in each of the last three years before the pandemic caused the airport’s closure. No enforcement action was taken by LBC, and no credible action plan was presented to bring the airport into compliance with its legally binding conditions, so it is reasonable to assume in the absence of evidence to the contrary that breaches would have continued were it not for the pandemic, with the planning authority and beneficiary turning a blind eye. In the operating company’s called-in application to increase the annual passenger number limit from 18 million to 19 million and temporarily relax the noise limitation conditions, currently as far as I am aware under consideration by the Secretaries of State, LBC made representations that, although it had not enforced the existing conditions, it did view the proposed relaxed conditions as binding. These representations are at the very least called into question by the current DCO application, in which its own subsidiary, led and staffed by its own councillors and employees, seeks to increase passenger numbers by over 75% and ATMs by at least 50%, with inevitable increases in noise. The operator’s forecast fleet mixes were demonstrated at the Inquiry to be inconsistent with the published plans of the three main airlines operating nearly 90% of the flights at the airport, so any derived noise forecasts cannot be relied upon. If the forecasts are inaccurate, breaches are likely, and given the conflict and past history, they can be expected to go unpunished. Council’s relationship with DLUHC As a condition of emergency funding during COVID, LBC was instructed by Ms Kemi Badenoch, then Minister of State at the Department for Levelling Up, Housing and Communities, in December 2021, to reduce its dependency on the airport. Instead it has increased its financial exposure to the airport by spending many millions on consultants to bring forward this DCO application because it does not have its own in house resources, and by optimistically revaluing the airport asset in order to support increased borrowings, in direct breach of the instruction, showing complete disregard for the Department. Competence to manage infrastructure projects LR has recently completed a substantial infrastructure project, the DART cable railway. Its original budgeted cost was £200 million but the current estimate is £300 million, and has since been subject to a £184.7 million write down in LR’s 2020/21 financial statements. A similar over-run in a project estimated to cost 10 times as much would be catastrophic for investors and for the council. LR still has no directly employed expertise. Access to funds I had intended to offer a critique of the funding statement, but frankly it says so little that detailed analysis is not possible. In very simple terms, the estimated cost is £2.7 billion, and in spite of the clear direction from DLUHC, LR believes it can raise this finance itself. For it to be a viable project, the additional revenues generated by an increase in capacity from 18 million (or 19 million if the called-in application, supported by LBC, succeeds) must provide an acceptable return on an investment of £2.7 billion. In view of the scale of the project, and of DLUHC’s stated position, it would be unrealistic to assume that public funding would be available. For commercial investors, with short term interest rates at 5%, a level only briefly exceeded in the 2007-8 crisis, required returns have also risen sharply whether for debt or equity. LLAOL have been circumspect in their comments in support of the application; it is far from obvious that they will find a proposition that involves a huge uplift in the concession fee they have to pay, together with a £2.7 billion investment, can be justified by an increase of 2.5-3.5 million passengers per annum over the next 10 years, with at most 9 million more by 2036 and 14 million more by 2043. With current combined net earnings for LLAOL and LR of less than £8 per passenger the additional revenues would not appear to come close to offering an attractive return either to LLAOL or to outside investors. Summary As I live directly under the 08 Compton easterly take off flight path, my main issue is noise. However the extraordinary level of conflict of interest and the financial and operational governance issues should concern any interested citizen, and as a businessman I find the funding rationale extremely unconvincing.