Saudi Arabia is poised to become the majority owner of London Heathrow, the UK’s largest airport, as other investors mull over selling their shares. The Saudi Public Investment Fund (PIF) and private equity investor Ardian recently acquired a 25% stake in the airport from Ferrovial, the previous primary owner. According to reports, at least one other shareholder is considering selling their stake, with other investment funds potentially following suit.
Under the airport’s shareholder agreement, other investors, including international pension funds, have the right to sell at the same price. This would value Heathrow at around £9.5 billion. A representative from one investor stated, “At that price, we are a seller.”
The Saudi PIF and Ardian will hold their stakes separately, but the Saudis are limited partners in Ardian’s infrastructure funds. The Qatar Investment Authority, which owns a 20% stake, is unlikely to sell to the Saudis. Other shareholders, including China and Singapore’s sovereign wealth funds, are also considered unlikely sellers. The remaining investors are pension funds from Canada, Australia, and the UK.
While the move towards Saudi control of Heathrow may spark controversy, the UK has been more relaxed about Middle Eastern influence over ports compared to the US. The PIF, controlled by Saudi Arabia’s crown prince, Mohammed bin Salman, is one of the world’s most active sovereign wealth funds, with over $700 billion in assets. Its notable investments include Newcastle United football club and professional golf.
Heathrow saw a significant increase in passenger numbers in 2022 as international travel rebounded from the pandemic. However, the airport has faced challenges in expanding its operations, with ongoing legal battles over its proposed third runway. Additionally, landing charges set by the UK’s aviation regulator, the Civil Aviation Authority, have caused concerns about investment disincentives, although airlines argue that the charges are still too high.
Heathrow, as the main hub and a monopoly, sets charges based on its regulatory asset base. This funding model allows for infrastructure investment to be repaid through charges, making it an attractive long-term investment for wealth funds. Although the airport did not pay a dividend in 2023, the CAA forecasts that it will pay out up to £1.5 billion by 2027 as business returns to pre-pandemic levels.
Thomas Woldbye, the CEO of Heathrow, plans to oversee upgrades to facilities in the coming years, including enhancements to the airport’s security program and a new baggage system for Terminal 2.