Budget Secrets Become Clearer?

On the 20th January, the Executive Committee of Luton Borough Council (LBC) met to discuss – amongst other items – the following:-

Private – Budget 2021-22 LLAL Framework for Funding and Financing of Stabilisation and Recovery Plan, report EX/01a/21.

As with all LBC Committees, any talk of LLAL is done in secret, so the public have no access to those reports.  The following are extracts form the agenda pack which is open to the public. The link to the full agenda can be found at the end of this article.

“The airport risk is a unique one for the council and deserves specific appraisal. The Council wholly owns London Luton Airport Limited, LLAL, the freehold owner of the airport, who leases the airport to London Luton Airport Operations Limited, LLAOL (owned by Aena and AMP Capital), under a Concession Agreement whereby LLAL receives income (a concession fee) based on the numbers going through the airport, with a minimum fee level.  The Concession Agreement (a document to which the Council is not a party) includes clauses relating to ‘force majeure events’, that is, events outside the control of the parties. Where those force majeure events are ongoing, the risks fall principally on LLAL and the minimum fee level does not apply”

As long as the aviation industry is affected by Covid-19, and its aftermath, and the airport operator LLAOL has financial shortfalls, those and any other costs, must be met by LLAL; a company that doesn’t have the money to stay solvent, without £60million of extra loans from LBC in 2020, and another £40 million planned for 2021.   

So where will LLAL get the money to pay those costs? Yes that would be more loans from LBC, and from service budget cuts.

LBC are party to the Concession Agreement, as it was they who gave permission to LLAOL for a three year extension of their original lease to cover for the investment in Project Curium, the last airport expansion.  Let us not forget all Board Members of LLAL are Councillors, and staff all LBC employees, so they know, or should know, exactly what is happening within LLAL.

“LLAL’s income in normal times is based on the airport’s passenger throughput. Passenger numbers have reduced substantially due to the Covid-19 epidemic, and there are longer term risks if reactions to the epidemic reduce people’s appetite for flying.  The other key long-term risk relating to passenger numbers would be one of the major airline users of the airport (currently easyJet and Wizz) moving away from Luton. It is worth noting that a reserve has been created re Funding Equalisation Account to partly cover this specific risk. However any use of reserve is a short term measure until on-going sources of income or savings can be found to make up for any shortfall in income and/or grant”

As we have mentioned previously, Wizz Air are actively compiling a large slot allocation at London Gatwick.  At its peak in 2019 Luton Airport only had around eight regular airlines.  About 80% of the total passenger throughput was with the two airlines mentioned.  Yet person or persons unknown within LBC/LLAL, thought it a prudent idea to borrow millions of pounds to build the DART which has no benefit on increasing passenger throughput whatsoever, and certainly no positive financial benefit to the town of Luton, as the loan payments are more than the interest return.  

This is the first time we have seen in public documents, admissions as to the true depth and severity that the freely taken decision to switch LLAL from rent collector to an airport developer, has caused.

We would hope that the error of that decision has now been fully realised, but as ever with LBC, we would not advise holding your breath on that one.

Stop Luton Airport Expansion


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