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A British Airways passenger jet sits on the tarmac at London City Airport in east London on March 25, 2020. The airport has been closed since March 25, and it isn’t clear when it will reopen.

BEN STANSALL/AFP/Getty Images

When three of Canada’s largest pension plans acquired control of London City Airport in 2016 for about $3-billion, it looked like a shrewd investment given the airport’s growing popularity as a hub for business travellers.

London City’s proximity to the financial district – and Canary Wharf in particular – made it a favourite of corporate executives heading to European destinations. Passenger traffic soared, reaching a record 5.1 million in 2019. But that strength has suddenly become a liability as the COVID-19 pandemic brings the British economy to a standstill and raises questions about the future of business travel.

The airport has been closed since March 25, and it isn’t clear when it will reopen. When it does, London City will face some big challenges. Last week, British Airways announced deep cuts to its CityFlyer subsidiary, which accounts for half the airport’s traffic, and regional airline Flybe collapsed in March, leaving another hole in London City’s service. The British government is also set to introduce a 14-day quarantine for travellers arriving from abroad, and all airports have yet to figure out how they will abide by new physical-distancing measures.

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“I think that airport is one that will be greatly challenged as we go through this and, indeed, as we come out of it,” Willie Walsh, the chief executive of International Airlines Group, which owns British Airways, told a parliamentary committee last week in London. He added that the airline was assessing its future at London City.

The Canadian pension funds – the Ontario Teachers’ Pension Plan, the Ontario Municipal Employees Retirement System and the Alberta Investment Management Corp. – had high hopes for London City when they acquired it along with Kuwait’s Wren House Infrastructure Management Ltd. In a news release at the time, the group called it a "unique opportunity” and "a highly attractive infrastructure investment.” None of the three has commented on the current situation at London City.

The deal was part of a move by Canadian pension funds into airports around the world. Teachers’ has interests in four other airports in Europe, while the Public Sector Pension Investment Board holds stakes in airports in Europe, India and Latin America. The Caisse de dépôt et placement du Québec owns 13 per cent of London’s Heathrow Airport.

London City had been a stellar performer for its investors until the novel coronavirus outbreak. Profit hit £35.2-million ($60-million) in 2018, up from £28.7-million a year earlier, according to the latest financial statement, and revenue increased 6 per cent to £119.1-million. The airport is also in the midst of a £500-million expansion that will put it on track to increase passenger traffic to 6.5 million by 2023. And there had been talk of direct flights to North America ever since the launch of Bombardier’s C-Series airplane in 2017, now called the Airbus A220, which can fly across the Atlantic but still use London City’s runway.

London City Airport’s £500-million

expansion plan

Beckton

Park

Cyprus

Gallions

Reach

Royal

Albert

Extended parallel

taxi lane

Royal Albert Dock

Fire

station

A1020

Runway

West Pier

Arrivals

King George V Dock

Extended

terminal

building

LCY

station

King

George V

New aircraft stands

and pier extension

LONDON

City of

London

Detail

Canary

Wharf

Isle of

Dogs

River Thames

WOOLWICH

A102

A2

A20

0

2

S. Circular Rd.

KM

Looking to the future

Expansion of air travel will require larger aircraft

to accomodate passenger capacity

Past: Avro RJ85

Length: 28.55m

Passengers: 95

Wingspan: 26.34m

Present: Embraer 190

Length: 36.24m

Passengers: 96

Wingspan: 28.72m

Future: Airbus A220

Length: 35m

Passengers: 110

(up to 125)

Wingspan: 35.1m

john sopinski/THE GLOBE AND MAIL, SOURCE:

city airport development programme

London City Airport’s £500-million

expansion plan

Connaught Bridge

Gallions

Reach

Cyprus

Royal

Albert

Beckton

Park

Extended parallel

taxi lane

Royal Albert Dock

Fire

station

A1020

Runway

West Pier

Arrivals

King George V Dock

Extended terminal

building

LCY

station

King

George V

New aircraft stands

and pier extension

0

500

METRES

LONDON

City of

London

Detail

Canary

Wharf

Isle of

Dogs

River Thames

WOOLWICH

A102

A2

A20

0

2

S. Circular Rd.

KM

Looking to the future

Expansion of air travel will require larger aircraft

to accomodate passenger capacity

Past: Avro RJ85

Length: 28.55m

Passengers: 95

Wingspan: 26.34m

Present: Embraer 190

Length: 36.24m

Passengers: 96

Wingspan: 28.72m

Future: Airbus A220

Length: 35m

Passengers: 110

(up to 125)

Wingspan: 35.1m

john sopinski/THE GLOBE AND MAIL, SOURCE: city airport

development programme

London City Airport’s £500-million expansion plan

Gallions

Reach

Cyprus

Beckton

Park

Royal

Albert

Connaught Bridge

Extended parallel

taxi lane

Royal Albert Dock

Fire

station

A1020

Runway

West Pier

Arrivals

King George V Dock

Extended

terminal

building

LCY

station

SILVERTOWN

Reconfigured

airport entrance/

forecourt

King

George V

New aircraft stands

and pier extension

0

500

METRES

Looking to the future

LONDON

Expansion of air travel will require larger aircraft

to accomodate passenger capacity

City of

London

Detail

Past: Avro RJ85

Length: 28.55m

Passengers: 95

Canary

Wharf

Wingspan: 26.34m

Isle of

Dogs

River Thames

WOOLWICH

Present: Embraer 190

Length: 36.24m

Passengers: 96

A102

A2

Wingspan: 28.72m

Future: Airbus A220

Length: 35m

Passengers: 110

(up to 125)

A20

0

2

S. Circular Rd.

KM

Wingspan: 35.1m

john sopinski/THE GLOBE AND MAIL, SOURCE: city airport development programme

Much of that now looks uncertain as the economy slows to a crawl. Britain has been under a near-total lockdown since March 23, and while the government has been easing some measures, it has yet to spell out how airports will get back in business. Details of the proposed 14-day quarantine have also not been clarified.

London City plans to use contact-free security technology and temperature screening for passengers. Managers are also counting on the airport’s small size and easy access to public transit to keep people moving quickly. “We will be the quickest London airport to get to and through, and we believe this will be welcomed by all passengers as they begin to make their travel choices,” a company spokesman said. The airport is also urging the government to exempt low-risk European countries from any quarantine.

Given that just more than half the airport’s passengers are business travellers, a lot depends on how quickly the economy recovers. “I think the profitability of the business is going to be hit for a number of years going forward,” British aviation analyst Martin Evans said. “The impact on the wider economy is going to be with us for some considerable time until a permanent solution is found for COVID-19.”

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John Strickland, a London-based aviation consultant, agreed and said the airport runs the risk of a short-term financial hit. "The challenge is how much business traffic comes back and in what shape and form,” he said. "Yes, they have a crisis to deal with, in as much as everybody has a crisis to deal with right now in this industry.”

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