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17/09/2020

Luton to borrow then lend £60m to airport

Words: Huw Morris
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Luton Borough Council is to borrow £60 million and then lend the money to its embattled airport to cover huge losses owing to the Covid-19 pandemic.

The money is the first of two loans the council aims to give to London Luton Airport (LLAL), which it wholly owns, in the next year following a major fall in passenger numbers.

The council is facing a £49 million shortfall after a projected drop in revenue of £37 million from the airport, including a £16 million dividend. It had approved a £23 million loan to the airport in 2021-22 with its emergency budget in July.

“As LLAL is so important to our local economy and in providing vital public funds to support the most vulnerable people, the council is working with the company to get the town through this period,” the council said. “The council is to borrow £60 million and lend it to LLAL. This is because the council is able to borrow money at a cheaper rate of interest than LLAL can.”

The airport will repay interest to the council at a higher rate than the council’s borrowing. With interest rates, this would mean paying back £32 million to the council next year for frontline services. Passenger numbers for London Luton Airport dropped by 74 per cent in July compared with the same month in 2019, according to latest figures from LLAL. In the year up to that date, the fall in passengers was 66 per cent.

Image credit | Shutterstock

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