Saudi Arabia’s Public Investment Fund (PIF) has entered into an agreement to purchase a 10% stake in London’s Heathrow airport, marking a significant shift in the airport’s ownership structure.

The stake is being acquired from Spanish infrastructure giant Ferrovial, which has been a stakeholder since 2006. 

Concurrently, France-based private equity fund Ardian will acquire an additional 15% in Heathrow’s parent company, FGP Topco, as part of the reshuffle.

The £2.37 billion (€2.73 billion) deal is contingent on regulatory approval, according to Ferrovial. If approved, it would mark the end of Ferrovial’s investment in the UK airports operator, which began at 56% and was gradually reduced to 25% by 2013. 

Heathrow’s debt puts doubt on future

Other stakeholders in FGP Topco include Qatar Investment Authority, Caisse de dépôt et placement du Québec, Singapore’s GIC, Australian Retirement Trust, China Investment Corporation, and Universities Superannuation Scheme.

Heathrow Airport has faced financial challenges, attributed in part to significant debt and recent reductions in passenger charges by the Civil Aviation Authority. 

The average charge per passenger is expected to decrease from £31.47 (€36.47) in 2023 to £25.43 (€29.38) in 2024, remaining stable until the end of 2026. Heathrow’s management had sought an increase in charges, while airlines proposed a cap at around £18.5 (€21.37).

PIF, one of the world’s most active sovereign wealth funds with over £700 billion (€808 billion) in assets, has been diversifying its portfolio with investments in sports such as football and golf. 

However, its control by Saudi Arabia’s Prince Mohammed bin Salman Al Saud, whose government faces accusations of human rights violations, adds a layer of complexity to the fund’s activities.

Stakeholders sell

In a broader context, PIF’s acquisition of a 10% stake aligns with its global investment strategy under the leadership of Crown Prince Mohammed bin Salman. 

The fund, aiming to reach $2 trillion (€1.8 trillion) in assets by 2030, has become a major force in international investments, participating in consortium deals such as the acquisition of Vodafone Group Plc’s towers unit in 2022.

Ferrovial’s decision to sell its stake in Heathrow follows its consideration of a divestment earlier this month. The deal represents a $3 billion (€2.7 billion) windfall for Ferrovial, which had previously valued its holding at zero. 

The Spanish company’s exit concludes nearly two decades of ownership in the UK airport, having bought a majority stake in the airport operator, then known as BAA Plc, for $18.8 billion (€17.1 billion) in 2006.

Third runway causes difficulty

While Heathrow remains a major global gateway, its growth prospects have been hampered by the lack of progress on a third runway. 

This limitation on capacity has allowed airports in destinations like Turkey, Qatar, and Dubai to aggressively expand operations, often operating around the clock.

The UK competition watchdog’s recent ruling on landing fees further added to challenges faced by Heathrow, with dissatisfaction expressed by both airlines and the airport. 

Heathrow had sought higher fees, while carriers advocated for lower charges. The airport is a crucial destination for flights from the Gulf region, served by airlines such as Emirates, Qatar Airways, and Etihad Airways PJSC.

The Heathrow deal is subject to approvals and the rights of existing shareholders to participate as sellers or buyers under a prior shareholder agreement. 

Ferrovial, despite its divestment from Heathrow, remains committed to advancing its airport business, holding stakes in other airports such as Aberdeen, Glasgow, Southampton, Dalaman in Turkey, and a share in JFK’s New Terminal One.