Airports have been in the news in the UK recently. All are agreed that there is a shortage of capacity in the South East but the breadth of solutions only emphasises the large degree of self-interest.
But airports vary not only in location and size but also in their passenger profile. And no airport, in the UK at least, has as high a proportion of business travellers than London City, located close to the city's financial centre. It claims that almost two-thirds of its passengers are travelling on business, a staggering figure when compared with what London's Heathrow (30%) or Gatwick (20%) claim.
London City is in the news because its current majority owners GIF (Global Infrastructure Partners) want to sell — and there seems to be a number of suitors who are not baulking at its £2bn price tag.
However its airlines are. It started with IAG CEO Willie Walsh saying that the price tag — at 44 times EBITDA (earnings before interest, tax, depreciation and amortization) — was too high for any buyer to have a return on investment without raising the airlines' fees and that if those fees were raised IAG member British Airways, which currently operates about 40% of the airport's flights, would depart.
This week CityJet and Flybe joined BA in the threat to jump ship should the fees rise. In this era of fare wars and increased pressure for profitability, carriers are no longer willing to be the airports' cash cows.
Of course, airport owners also want to make money but they often want the airlines only for their passengers who have the dual benefit of also being footfall necessary to attract the airport's retailers and food & beverage outlets. This is why secondary airports have always either offered low-costs either low fees or, indeed, paid them to use them and why the German airports are currently offering sweeteners to any carrier that wants to set up operations.
In contrast it is not only the length of London City's runway that is limited: its main terminal building is very small and so is its retail space. It is an airport that has primarily business passengers and yet it has no lounge. The rationale has always been that a check-in time of 20 minutes before departure obviates the need but there is also the challenge of increasing pressure on the space. In 20 years the passenger numbers have zoomed from half a million to 4.3 million passengers per year. And that has made the retail space, such that it is, much more valuable per square foot.
The airport's location next to the financial giants headquartered in Canary Wharf may mean "masters of the universe" passengers but big earning business travellers who arrive exactly 20 minutes before departure to board BA001 to JFK are not necessarily big spenders at airport retailers.
But London City may soon not have its special value to business travellers for an even bigger reason.
Crossrail, the new, high-speed east-to-west cross-London rail service, is scheduled to start operations in 2018. The time then between Heathrow and Liverpool Street in the heart of the City will be 34 minutes and Canary Wharf 40 minutes.
The lure of London City Airport for airlines wanting high margin business travellers just might be diminishing.