Critics of the public funded grants included the Scottish Greens who said that as the airport is set to return to private ownership taxpayer subsidies given to large multi-national firms based in Prestwick are “wasteful and unsustainable”.
Prestwick Airport moved into public ownership after it was bought by the Scottish Government for £1 in 2013. The previous owner had incurred annual losses of £2 million and failed to find a buyer.
Nicola Sturgeon, then Deputy First Minister, said the purchase would safeguard the airport and prevent job losses. She said the Scottish Government would work to make Prestwick Airport financially viable and return it to profit.
But after millions in losses, the struggling airport appears to be surviving on taxpayer loans.
The largest of the SE grants went to companies based at Prestwick Aerospace park.
£1,674,095 was given to GE Aviation’s aero engine overhaul facility, GE Caledonian while Spirit Aerosystems Europe Limited, which designs and builds aeroplane parts for the commercial and defence sectors, received £1,149,071.
Other larger subsidies include £200,000 given to air and spacecraft manufacturer Rohr Aero Services Limited, and £159,674 to Etek Europe Limited, a supplier of equipment to aerospace and other industries.
Prestwick recorded a pre-tax loss of £9.21 million in the 2015-16 financial year, which outgoing CEO Ron Smith said was “less than predicted”. This was despite an increase on the £8.71 million loss in the previous year.
Accounts released by Transport Scotland – the Scottish Government’s transport agency – showed that the airport had received £21.3m from Holyrood at the end of the 2015-16 financial year.
The airport then received £9.6 million in loans from the Scottish Government in 2016-16, which “must be repaid in full with interest”, according to a Freedom of Information response.
Ryanair also received £653,523 from SE for its Prestwick activities, The Ferret revealed last month.
In April, Prestwick announced plans to return to private ownership within the next five years.
However, the airport’s finance and commercial director Derek Banks told Holyrood’s rural affairs and connectivity committee in May that repayments of the £39.6 million borrowed, plus interest and running costs, are not expected to begin until 2032.
“A lot of people in Scotland will be baffled as to why the government believes it’s appropriate that BAE Systems, a weapons manufacturer with profits of more than £1.7bn, should be entitled to or deserving of government subsidy for its operations at Prestwick Airport”, said Finnie.
“Clearly throwing large sums of money at the airport, to then eventually hand it over to a private operator, appears wasteful and unsustainable.
“I’d therefore urge ministers to consider the viability of long-term public ownership of Prestwick Airport to ensure that any future profits are more likely to be reinvested in the area.”
Defending the grants, an SE spokesperson said: “We support businesses across Scotland, including those operating in the aerospace, defence & marine industries (ADM) in areas such as innovation support, workplace efficiencies and training”.
“ADM projects deliver significant economic impact in return for funding, particularly in the safeguarding and creation of new jobs.
“In relation to our support for BAE Systems Regional Aircraft, the company currently employs 250 people at Prestwick and our support, which dates back to 2012, helped the company with training and youth employment at the Ayrshire site.”
Commenting on airport’s finances, a spokesperson said: “Glasgow Prestwick Airport is an important strategic infrastructure asset for Scotland.
“In a continuing competitive trading environment for all airports, we are moving in a positive direction to deliver on our five year strategic plan which we published in April.”
The Scottish Government said that all recipients of the SE grants, excluding the airport itself, have no financial link to Prestwick Airport, although many of the firms rely on the airport facilities to operate.
The airport also stressed that it does not financially benefit from the existence of the firms and there is no direct financial link between the firms and the airport.
A Scottish Government spokesman said: “The funding given to Glasgow Prestwick Airport is supporting vital employment in and around the business. If we had not stepped in, the closure of the airport would’ve dealt a heavy blow to the local and national economies.
“It remains the intention of the Scottish Government to return Glasgow Prestwick Airport to the private sector at the appropriate time.
“As we made very clear at the start of the acquisition process, our investment in the airport is on a commercial basis in the form of loan funding. This attracts a market rate of interest in line with state aid rules.”
|Company||Value of support||Purpose|
|Bae Systems (Regional Aircraft)||31346||To support innovation and organisational development projects|
|Etek Europe Limited||153000||Regional Selective Assistance grant|
|Etek Europe Limited||6674||To support business improvement project|
|GE Caledonian Limited||1674095||Regional Selective Assistance grant|
|IMT Aviation Scotland Ltd (Formerly Airframe Components Europe Ltd)||50000||This entry does not appear on the SE grants FOI response we provided so we cannot substantiate this information|
|Inter-tec Services Ltd||40770||To support business improvement and international business development projects|
|Morgan Ward (Ndt) Ltd||38075||To support business improvement and organisational development projects|
|Rohr Aero Services Limited||200000||Regional Selective Assistance grant|
|Spirit Aerosystems (Europe)||90000||Regional Selective Assistance grant|
|Spirit AeroSystems (Europe)||1059071||To support business improvement project and Training Plus grant|
|Tannlin Uk Ltd||36078||To support business improvement, innovation and international business development projects|
|Veracity UK Ltd||900||To support international market development project|
|Woodward Aircraft Controls||10610||To support organisational development project|
|Woodward International Inc||60000||Regional Selective Assistance grant|
|Airframe Components Ltd||11424||To support business improvement, domestic market development and international market development projects|
In addition, SE also confirmed that it gave £244,000 to Chevron Aircraft Maintenance to establish a Prestwick base.
Performance and Economic Impact
The South Ayrshire airport has operated for almost a century. According to its website, it directly employs more than 320 people and supports a further 4,500 jobs through the airport and the surrounding Prestwick aerospace cluster..
Passenger numbers have declined dramatically since operating at 2.5 million passengers a year in the 2000’s.
827,000 passengers were handled in 2014-15, but dropped to 624,000 in 2015-16. There was a modest increase, reaching 678,000 this year, and numbers are projected to hit 710,000 next year.
Prestwick Airport claims to contribute £61.6 million to the Scottish economy and aims to become one of Europe’s first spaceports.
“If successful this could lead to the creation of 2,000 additional jobs and generate a further £320 million for the UK economy,” its website says.
South Ayrshire Council last year approved £120,000 from an existing budget to support Prestwick’s spaceport bid. SE also agreed to match this amount, bringing the total to almost a quarter of a million.
Scottish Conservative shadow finance secretary Murdo Fraser said: “It’s very clear that the SNP over-reached when taking on Prestwick Airport, and it has been sluggish in getting it back into private ownership.
“However, these firms can be deserving of taxpayer-funded support.
“It’s important, given the Scottish Government’s involvement in the airport, that these grants are justified and not out-of-proportion.”
Cover image: Planes at Prestwick Airport | CC | Mark Harkin | https://flic.kr/p/LQQEdo