Manchester Airport set to swoop on Humberside

MANCHESTER AIRPORT, the UK's third-largest, is to become the first council-owned airport in the country to buy up another - Humberside International Airport. The move comes two months after legislation granted Manchester the right to borrow money.

With London's airports at saturation point, the future of air travel for millions lies in the provinces. John Prescott, Deputy Prime Minister, has made clear there will be no planning approval for additional London runways before spare capacity, most of it in the North, has been soaked up.

This has brought suitors flooding to previously unfashionable locations like Humberside, where pounds 1.5m was invested in the airport last year.

Manchester already says its controversial second runway will make it number two to Heathrow for passenger numbers next year. It has the financial clout and expertise to develop Humberside.

Equally attractive, say analysts, is the profit potential which airport business parks and hotels like those at Humberside offer buyers. Despite its unfortunate image of being stuck in the middle of nowhere, there were 30 expressions of interest in the airport when North East Lincolnshire, Hull, East Riding and North Lincolnshire (which is now holding on to its 17.3 per cent stake) said they wanted to sell last year.

From 1 April, legislation freed Manchester Airport from local-authority borrowing constraints under which it could never have afforded the deal.

But Manchester walks straight into a pitched battle for market share in the north of England with Peel Holdings, which has launched a bid to turn a former RAF base near Doncaster into Yorkshire's biggest airport. Peel, owner of the Manchester Ship Canal, is already ploughing pounds 20m into Liverpool Airport at Speke, which had lain under-developed for years and wants to spend pounds 30m developing the base at Finningley near Doncaster. It says it can attract 2.3 million passengers by 2014 - more than Sheffield, Leeds-Bradford and Humberside airports together. "The market is growing and much of that growth is not going to be out of Heathrow or Gatwick," said a Peel spokesman. The triumvirate of Yorkshire airports is resisting but Doncaster Council, which must decide on planning approval, backs the plan.

In Manchester Airport, however, Peel will find a fiercely competitive adversary. It has been rumoured to have its sights on Teesside Airport and other local authority-owned airports in the region which may come up for sale.

Now borrowing restrictions have been lifted, Manchester will also be lobbying hard for removal of controls which hamper its investment in "non-core" activities and mean it cannot share in the profits of any off-site facilities at Manchester, such as a business park or hotels.

"We can generate revenue from ground leases for a low budget hotels," said corporate-affairs director Rowena Burns, "but we cannot profit share in them." At Humberside an under-developed 40-acre business park and designated hotel site offers that very kind of profit potential.

Humberside is making money but, like many regional airports, has needed investment. Passenger numbers are climbing (from 340,000 last year to an estimated 500,000) and it has scope for the development of freight business.

"It is a niche airport with a loyal local market," said Ms Burns. "We can develop new routes by bring our relationship with tour operators to bear in a way the local management can't. We have expertise and a track record in our access to finance."

Sheffield City, Britain's newest airport (the first built in the UK for 50 years), is also jostling for passengers near by.