House of Commons - 9th Report - Smaller airports

9th Report - Smaller airports - Transport Contents

3 Case study: Manston

37. Manston airport is located in the district of Thanet in Kent some 13 miles north-east of Canterbury and about one mile from the coast near the town of Ramsgate. It occupies a 700-acre site. Manston closed as an airport shortly before the start of this inquiry in May 2014. We scrutinised this individual case of a smaller airport closing to inform our inquiry and wider recommendations.

38. Manston has a relatively lengthy runway which extends to some 9,000 feet. The largest long-haul aircraft—for example, Airbus A310, A330, A340, A350 and A380; Boeing 747, 767, 777, 787; and McDonnell Douglas DC-10 and MD-11—require a runway of at least 8,000 feet. Apart from Heathrow, Gatwick and Stansted, Manston is the only runway in the south-east capable of handling the largest long-haul aircraft. Several witnesses to our inquiry pointed out Manston's suitability as a diversionary airport due to its lengthy runway.[44] Stansted airport is currently used to handle most diverted aircraft in the south-east. Diversions disrupt commercial operations at Stansted, which is bad news for passengers and airlines. That problem is only likely to worsen as Stansted becomes busier over the next decade.[45] The Minister pointed out that "suitably trained traffic controllers, emergency services and expert technical support" would need to be located at Manston for it to receive diverted aircraft.[46]

History

39. Manston is a former RAF base. In 1989, a civilian airport, Kent International airport, was set up within the RAF facility. This airport was run from the current terminal building. In 1998, the Ministry of Defence put RAF Manston up for sale. All RAF operations ceased at the site in 1999. In 1999, Manston was purchased by the Wiggins Group, which oversaw the airfield's transition from a military base to CAA-licensed civilian airport. From 1999 to 2003, the Wiggins Group operated Manston as a cargo airport. In 2004, the Wiggins Group, which at this point changed its name to PlaneStation, purchased a new airline called EUjet. EUjet based five aircraft at Manston, which attempted to compete as a passenger airport. In 2005, all EUjet operations were suspended and the airport went into liquidation.[47]

40. Manston was purchased by a New Zealand company, Infratil, in August 2005 for £17 million. From 2005 to 2012, airlines such as Flybe and Monarch ran scheduled passenger services from Manston. In November 2012, Infratil secured a new commercial passenger service at Manston, when KLM announced twice-daily flights to Amsterdam. The first KLM flight took place in April 2013.

Manston Skyport

41. On 15 October 2013, Infratil announced they would sell Manston Airport to a company called Manston Skyport. Manston Skyport was wholly owned by Ann Gloag, co-founder of Stagecoach Group. It began running the airport on 29 November 2013. Ann Gloag purchased Manston from Infratil for £1.[48] At the time of the purchase, she stated:

The local Member of Parliament, Sir Roger Gale MP, told us that "In a personal telephone conversation with me at that time Ms. Gloag indicated that she intended to invest heavily in the airport and would give it two years to turn around the business."[50] We invited Ann Gloag to provide us with oral evidence at our session on 2 February 2015. She was unavailable, although the company that ran Manston on her behalf, Manston Skyport, provided written and oral evidence.

42. Manston Skyport announced its plan to close Manston airport on 19 March 2014, less than four months after its purchase. The airport closed on 15 May 2014 and its commercial aerodrome licence was returned to the CAA, which meant that it was no longer licensed to operate as an airport. Manston Skyport told us that it decided to close Manston because Ryanair withdrew from discussions to operate from Manston, because British Airways decided not to relocate its cargo operation to Manston and because the Airports Commission concluded that hub capacity should be expanded in the south-east.[51]

RiverOak

43. RiverOak Investment Corp is a private equity group based in Stamford, Connecticut, USA. RiverOak was keen to purchase Manston as a base for cargo operations.[52] It told us:

Manston Skyport contested RiverOak's claim that it had offered £7 million to purchase Manston airport.[54] RiverOak later provided documentary evidence to back up this claim.[55] If Ann Gloag's motivation was to run Manston as an airport, accepting RiverOak's £7 million offer would have allowed her to correct her initial error in purchasing the airport and left her with a generous profit. RiverOak has maintained its interest in purchasing Manston and operating it as an airport.

Sale to Trevor Cartner and Chris Musgrave

44. In its written evidence, Manston Skyport stated that "In September 2014 Manston Skyport sold the site to regeneration specialists who have plans to redevelop the site over the coming years."[56] The regeneration specialists, Trevor Cartner and Chris Musgrave, were invited to provide us with oral evidence on 2 February 2015. They were unavailable, although they later submitted written evidence. In September 2014, Chris Musgrave told Kent Online:

45. At our oral evidence session on 2 February 2015, we examined Manston Skyport's statement that it "sold the site to regeneration specialists".[58] Pauline Bradley, Director, Manston Skyport Limited, told us that "80% of the share capital of that business is owned by Mr Musgrave and Mr Cartner. We have a minority interest in the business going forward."[59] We noted:

· Manston Airport is currently owned by a joint venture company called Lothian Shelf 718. There are two classes of share in Lothian Shelf 718—A shares and B shares. Mr Cartner and Mr Musgrave hold 80 A shares; Ann Gloag holds 20 B shares.[60]

· The articles of Lothian Shelf 718 state that a decision at a directors meeting requires a unanimous vote involving at least one A director and one B director.[61] There are two A directors, Mr Cartner and Mr Musgrave, and one B director, Pauline Bradley, who was appointed by Ann Gloag. Regardless of her minority shareholding, Ann Gloag, as holder of the 20 B shares and having appointed the B director, holds equal decision making power to and a de facto veto over Mr Cartner and Mr Musgrave.

· Ann Gloag holds a legal charge over the Manston airport site. This charge relates to a loan to Lothian Shelf 718.[62]

· Because the joint venture agreement between Mr Cartner, Mr Musgrave and Ann Gloag to redevelop Manston is not in the public domain, it is unknown how any profits derived from the redevelopment of Manston might be shared. The allocation of profits might not be in line with the 80:20 share allocation.

46. On Ann Gloag's motivation in purchasing Manston airport, Sir Roger Gale MP commented:

The Minister expressed an alternative view, stating that he did "not believe that Mrs Gloag bought the airport with a view to closing down operations and turning it into a development site."[64] We recommend that Ann Gloag places the joint venture agreement between herself, Chris Musgrave and Trevor Cartner to redevelop Manston in the public domain to make it clear who would benefit from the proposed redevelopment of Manston and to repudiate allegations of asset-stripping. We would be happy to publish this document on our website.

Thanet District Council

47. Thanet District Council (TDC) is the local planning authority with responsibility for Manston. TDC told us that it received a petition on 10 July 2014 asking it to compulsorily purchase Manston.[65] It subsequently agreed a motion to conduct "a detailed examination of the legal and financial implications of a Compulsory Purchase Order before a final decision is reached."[66] Councillor Iris Johnston, Leader, TDC, explained:

A CPO involving RiverOak as the indemnity partner was considered at a TDC cabinet meeting on 11 December 2014. The TDC cabinet decided not to proceed with the proposed CPO at that meeting.

48. We welcome Councillor Johnston's commitment to due diligence. We agree that risks should, so far as is possible, be transferred to the private sector to protect the interests of council taxpayers. However, we question whether a small district council has sufficient funds or legal and financial expertise to handle a case of this magnitude. For example, TDC told us that it spent £26,000 on legal advice in relation to the proposed CPO.[68] That sum was unlikely to provide TDC with adequate advice in relation to indemnification by a US company or to allow it to understand RiverOak's business plan and operating model. We expect higher-tier local government bodies to fulfil their strategic oversight functions by supporting local planning authorities in resolving one-off, complex cases involving nationally significant transport assets.

Kent County Council

49. Kent County Council (KCC) is the local transport authority for Kent, which means it has strategic oversight of aviation in the county. On 17 July 2014, KCC considered the case of Manston airport. County councillors agreed the following motion by 82 votes to nil:

Paul Carter, Leader, KCC, attended and voted at that meeting.

50. In September 2014, Paul Carter commented on the sale of Manston to Chris Musgrave and Trevor Cartner:

Paul Carter's remarks in September 2014 were inconsistent with the motion agreed by KCC on 17 July 2014.

51. We asked Paul Carter to explain his position. He told us that "the motion that was supported unanimously by the county council said we would be prepared to support Thanet district council in a CPO process at Manston, provided a viable and thriving airport could be delivered at Manston."[71] He subsequently admitted that there was no such caveat to the KCC motion.[72] He also reiterated his enthusiasm for the redevelopment of the Manston site rather than its operating as an airport.[73] We asked him whether Trevor Cartner or Chris Musgrave had shown him detailed plans for the redevelopment. He replied, "They showed me nothing."[74]

52. Kent County Council has the legal and financial resources to assess complex CPO cases. Despite having agreed a motion to support Thanet District Council, it failed to deploy those assets. In failing to support Thanet District Council's scrutiny of the proposed CPO at Manston, Kent County Council also failed to fulfil its strategic oversight function as the local transport authority.

Role of the DfT

53. The DfT interceded in the Manston case following TDC's decision not to proceed with a compulsory purchase order. In December 2014, the Minister of State, DfT, John Hayes MP, chaired a meeting with interested parties and agreed to co-ordinate work across Government to explore all options to secure the airport's future. That the DfT judged it necessary to intervene in the Manston case shows the extent to which Kent County Council failed to fulfil its strategic oversight role.

54. In February 2015, more than two months after the DfT intervened, we asked the Under-Secretary of State, DfT, Robert Goodwill MP, what progress had been made. He told us that the DfT was doing "everything we can to facilitate a rescue deal so that aviation can continue at Manston, if that be possible".[75]

55. We asked the Minister to explain the nature of the DfT's intervention over the past two months. He explained that

On 5 March 2015, the DfT announced that it will "appoint a consultant to review the process so far on decisions about the future of Manston airport."[77] We welcome the DfT's decision to appoint a consultant to examine the Manston case. The uncertainty faced by the public and other interested parties could have been reduced if it had not taken three months before the DfT acted. The DfT should set out clear terms of reference for the consultant who is contracted to examine the Manston decision-making process and place them in the public domain. Those terms of reference should include (a) an explicit requirement to assess whether RiverOak is an appropriate indemnity partner for Thanet District Council; (b) a deadline for the consultant to report back to the DfT; and (c) an expeditious timescale for subsequent DfT decision making. To ensure that similar cases are handled promptly and effectively in future, the Government should clarify precisely how (a) central Government and (b) higher-tier local authorities are responsible for supporting lower-tier planning authorities in cases where a strategic transport asset is subject to a proposed compulsory purchase order.

56. We asked the Minister which powers the DfT had used to intervene in the Manston case. He said that he did "not think that the United Kingdom Government, unlike maybe the Scottish or the Welsh Government, are in the position of wanting to intervene directly to take over operations of an airport."[78] We agree that there is no general case for the Government to purchase airports, including Manston. We questioned whether the DfT has any other powers short of nationalisation in cases where a strategic transport asset might be at risk. The Minister told us that "we have the powers that we need, for example, to work with the CAA … It is very important indeed that we explore all the avenues we can and ensure that whatever powers we have in terms of the Government can be used to their fullest effect."[79] The DfT should review what powers it has to intervene in cases where strategic transport assets are at risk and whether those powers are fit for purpose.

44 Q174; Q184; Q194 Back

45 Daily Telegraph, Plane diverted under RAF escort after disturbance on board, 24 January 2011 Back

46 Q217 Back

47 RiverOak (SMA 042) para 18 Back

48 Q49 Back

49 Kent Online, 14 October 2013 Back

50 Sir Roger Gale MP (SMA064) Back

51 Q69; Q61 Back

52 Q117 Back

53 RiverOak (SMA 042) para 18 Back

54 Qq 75-84 Back

55 RiverOak (SMA090) Back