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Welsh Government hits back at airport loans claim

Cardiff Airport is owned by the Welsh Government Photo:

The Welsh Government says it's answered every concern raised by the UK Government about loans to Cardiff Airport.

A leaded letter suggested that officials at the Department for Transport were worried about the status of the loans and the likelihood that they'd be repaid.

It was also claimed that £12m to be spent marketing new Flybe routes could fall foul of EU rules.

A Welsh Government source said the leak was 'politically-motivated mischief making' and said all the questions were dealt with in a letter responding to the DfT.

Cardiff Airport was bought by the Welsh Government for £52m in 2013.

I've been shown that response which I understand was sent last week. The key points are:

  • Many of the DfT's 'assumptions and concerns' in its original letter were 'based on an incorrect and out of date version' of a report into likely passenger numbers and future business at the airport
  • Welsh Government rejects suggestions that it 'exercised undue influence over the Cardiff Airport company' which it says operates on a commercial and arms length basis
  • Terms and conditions of the loan haven't yet been finalised and no money has changed hands
  • Commerical repayable loans are 'a standard economic development tool' of the Welsh Government and Cardiff Airport is treated no differently

A Welsh Government source says

This is politically motivated mischief-making. As our letter makes clear, there’s absolutely no case to answer here. It is disappointing to see that once again the Tory Government in Westminster is more interested in trying to block things, rather support our strategy for economic growth in Wales.”

– Welsh Government source

The main extracts of the Welsh Government's letter are below. It was sent by a senior official in Cardiff to the DfT's Deputy Director of Aviation Policy.

Firstly, I think many of your underlying assumptions and therefore many of your concerns, particularly around levels of risk, are based upon an incorrect and out of date version of the York Aviation report. Naturally, I am therefore concerned that the DfT is appearing to base its position upon out of date information that has since been superseded (a copy of the final version of the report is enclosed). Your analysis appears to focus on the risks, without recognising the benefits acknowledged in the York Aviation report or the steps that have been put in place to mitigate risks.

Secondly, I would wish to challenge the inference that Welsh Government exercises undue influence over the Cardiff Airport company, its borrowing and business plans. The Airport company (CIAL) operates on a commercial basis and at arms length from Government – commercial and operating decisions, including levels of borrowing and its business plans are a matter for its Board. Thirdly, it is important to recognise that the terms and conditions of the loan announced in November 2014 have not been finalised, and no monies relating to that loan have been drawn-down. We are in the process of considering appropriate terms and conditions as would be expected for any MEOP compliant loan to a commercial organisation.

It is also worth emphasising that agreement of Welsh Government commercial loans with businesses is by no means novel or outside of the usual range of Welsh Government practice. Commercial loans and repayable finance is a standard economic development tool that Welsh Government uses routinely in its support for business, growth and jobs. Any such loans are carefully considered to ensure that they comply with MEOP. In that regard Cardiff Airport is being treated no differently to any other commercial organisation...

– Welsh Government letter