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Cardiff Airport lacking long term business plan, says National Assembly committee

24/03/2016

Cardiff Airport is missing its own passenger and profit targets and lacks a long term plan for growth, according to a new report from a National Assembly for Wales committee.

The Public Accounts Committee found that, while the Welsh Government had a clear rationale for buying the airport given its decline under previous owners Abertis, there were weaknesses in the preparation of the Welsh Government's business case for purchasing the airport. 

 

Passenger numbers have risen under Welsh Government ownership, but the Committee notes that the rise isn't as high as first predicted, and that by airport management's own admission, numbers are currently a year behind target.

Cardiff Airport's business plans are currently approved on two-year basis. But the Committee notes that Glasgow Prestwick, which is also in public hands, operates with much longer term plans.

Questions were raised about the relative lack of aviation and airline experience on the board of directors for Cardiff Airport International Airport Limited (CIAL). The Committee is recommending that the board be expanded to gain a broader view of the industry and opportunities available.

Potential for conflicts of interest were considered as a member of the board for the airport's arms-length holding company (Holdco) is also a senior Welsh Government civil servant in a department which has cut advertising spending with the airport.

Conflicts of interest have been a recurring theme in the Committee's work, including its inquiries into the Regeneration Investment Fund for Wales and the Welsh Life Sciences Investment Fund.

"It is clear from our report that the Welsh Government's assumptions on future commercial performance of Cardiff Airport have not been realised, at least in the short-term," said Darren Millar AM, Chair of the Public Accounts Committee.

"The Committee found that the Welsh Government had a clear rationale for buying the airport given it was in decline and that prospects for turning it around under its previous ownership were bleak. 

"We also recognise the importance to Wales of having its own international airport and the wider benefits for Wales arising from this.

"However, although the airport has the potential to grow significantly, we note its progress against the acquisition business plan in terms of passenger growth are behind target.

"We also highlighted the potential for conflicts to arise between Holdco and the Welsh Government. Unfortunately, these issues have been a recurring theme within our work, for example within our inquiries on the Regeneration Investment Fund for Wales and Wales Life Sciences Investment Fund."

The Committee makes 10 recommendations in its report, including:

  • We recognise the uncertainty of longer term business planning and that Cardiff Airport Holdco may wish to formally approve actions on a two year outlook.  However, we recommend that Holdco should also require medium and longer term financial projections as part of its review of the airport's business plans;
  • We recommend that the Welsh Government consider engaging with Transport Scotland to understand the different approach they have taken to membership of their holding company, how conflicts of interest are managed within the Scottish model and to consider the merits of such an approach alongside the work currently being undertaken to consider the composition of the CIAL and Holdco boards; and
  • We recommend that Holdco encourage the CIAL Board to consider expanding its Membership to include wider aviation and/or airline experience.

 The Welsh Government’s acquisition and ownership of Cardiff Airport (PDF, 458KB)

Image: Ben Salter (Flickr), Under Creative Commons

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