United Kingdom: Second runway ahead as City Airport s owner buys Gatwick for [pounds sterling]1.5bn.

Byline: shiv03

Gatwick will be sold today for [pounds sterling]1.5 billion, in a move expected to prompt a series of developments at the airport. As part of BAA s plan to reduce its [pounds sterling]10 billion debt burden, the airport will be sold to Global Infrastructure Partners, an investment fund that also owns London City Airport. The fund is a joint venture between Credit Suisse, the investment bank, and GE, the world s largest company.

Most of the price will be raised from major banks including HSBC, RBS, Credit Suisse and JP Morgan. Ferrovial, the Spanish infrastructure company, acquired BAA in 2006 for [pounds sterling]10.2 billion. The group borrowed nearly the full amount and had difficultly refinancing the debt when the credit crunch hit.

Yesterday Ferrovial s chairman said that the group was in advanced talks over the sale of Gatwick but insisted that there was more than one interested party.

There could now be a new era for Gatwick as it repositions itself as the airport of choice for holidaymakers in the South East. It has been seen as the poor relation to Heathrow, but Global Infrastructure Partners is understood to want to attract holidaymakers rather than businessmen as part of its strategy for the airport south of London.

The hope is that Gatwick can garner business from international airlines offering package holidays and destinations in far-flung locations while keeping low-cost carriers such as easyJet that fly to European destinations.

Global Infrastructure Partners is not expected to try to challenge Heathrow s dominance as the UK s principal gateway. However, analysts believe that the investment fund may seek to expand the number of flights able to use Gatwick by pushing for a second runway. Gatwick is already the busiest single-runway airport in the world.

Although an injunction prevents Gatwick from adding a second runway until 2019 a new owner might seek to accelerate a planning application to take advantage of growth opportunities the moment that ban ends.

In December The Times revealed that BAA had sent potential bidders a confidential memorandum with a section entitled Gatwick Builds a Second Runway . It gave details of how the expansion could increase capacity at Gatwick from 45 million passengers a year to 80 million; 67 million people used Heathrow last year.

BAA put Gatwick up for sale last year when it became clear that it needed to reduce its vast debt burden. This decision was aided by a ruling from the Competition Commission that BAA s ownership of Heathrow, Gatwick and Stansted in the region was bad for airlines and passengers.

Critics have argued that BAA diverted resources to Heathrow, turning Gatwick into a poor relation. The commission ruled last year that BAA should dispose of Gatwick, Stansted and one of either Edinburgh or Glasgow airports. BAA is this week appealing over that ruling but has favoured selling Gatwick to ease its financial situation.

Global Infrastructure Partners has had talks with Gatwick s major users, including

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