SCOTS ministers have been condemned by a cross-party group of MPs for ploughing £50m into 'failing' Prestwick Airport while failing to back other airports during the pandemic.
The Herald on Sunday revealed ministers decided not to recoup loans and interest from the state-controlled Prestwick Airport to allow it to remain in existence - leading to concern it has sanctioned unlawful state aid.
Transport Scotland has provided written confirmation that it will not seek repayment of all or part of the loan facility or the interest until at least March 31, 2023 - which directors say will enable the Ayrshire airport to "continue in operation existence for at least the next 12 months".
Public spending watchdog Audit Scotland said the £6.3m of interest accrued on the loans was "impaired to nil" meaning it is probable that ministers will be unable to collect amounts due.
The Scottish Affairs Committee has told ministers that the funding of Prestwick Airport represented "significant issues for the taxpayer" and said the money should have been spent across all airports in Scotland.
Edinburgh, Aberdeen and Glasgow airports have not received direct financial provision for the Scottish Government for day-to-day operations.
Gordon Dewar, the chief executive of Edinburgh Airport has told MPs that the state intervention puts their business at a disadvantage and that the financial support given to Prestwick Airport “fundamentally skews what should be a competitive and fair playing field”.
And Gordon Dewar, chief executive of Edinburgh Airport has raised concerns to MPs that the subsidy Brian McClean, director of communications and sustainability, AGS Airports Limited, which owns Glasgow and Aberdeen airports said that Prestwick "distorts the market completely".
He went on to say: “It would be good to see an endgame that stops seeing that amount of money spent on an airport that doesn’t sustain jobs in any meaningful way”.
The committee said: "The purchase and funding provided to Glasgow Prestwick Airport represents significant issues for the taxpayer. Additionally, the funding received by Glasgow Prestwick Airport from the Scottish Government has ensured there is not a level playing field across airports in Scotland, leading to a distortion in the market.
"It would have been more appropriate had the money from the Scottish Government been spent across airports in Scotland, rather than being poured into an airport which did not reflect a commercial success."
The airport was taken into public ownership in November 2013 after being purchased by the Scottish Government for £1.
The facility, which was put up for sale the previous year by New Zealand firm Infratil, had incurred annual losses of £2m.
Then deputy first minister Nicola Sturgeon said the deal would help protect the airport and the 1,400 jobs it supported and that work would begin for "turning Prestwick around and making it a viable enterprise".
The Scottish Government has been trying to sell the airport but a preferred bidder pulled out of negotiations in May 2021.
The Scottish Government then re-engaged with the second-placed bidder, but “various concerns” were identified and it was not pursued further.
It is believed the latest doomed bid came from Train Alliance UK and was scuppered when it emerged that major repairs are required to the runway.
The finance secretary Kate Forbes said in January that ministers had decided not to go ahead with selling the airport late last year and that it was in a financially strong position.
However she said it is still the Government’s intention to return it to the private sector in the future.
The airport made an operating profit in 2020/21 of of £500,000 down from £5.5m in 2019/20 in what the board has described as a year of "unprecedented challenges" headed by the travel restrictions brought about by the Covid pandemic that saw passenger numbers plummet from 621,000 to 47,000.
The Scottish Government has already been found to have given £50m in "illegal state aid" to Sumburgh Airport on Shetland and Inverness Airport after both received taxpayer support that had not been approved by the European Commission.
If a state aid investigation was launched and found proven, the commission can ultimately demand the recovery of money pumped in.
According to financial papers of the Scottish Government-controlled TS Prestwick Holdco Ltd, which runs the airport, the board say they have an assurance that no repayment of the loan or the interest will be made till March of next year "although support is expected to be continue beyond this date for the foreseeable future".
The concerns over Prestwick come as the committee said that the recovery for Scotland's airports is not expected to happen until at least 2025 and a plan of future action is “urgently needed”.
The pandemic has severely impacted Scottish airports, with passenger numbers dropping by more than 75 per cent in Scotland in 2020.
The Scottish Affairs Committee has warned that a significant airspace modernisation programme, which boasts a potential to make journey times quicker, quieter and cleaner, is at risk of collapse – unless it receives proper funding.
It has also issued a stark warning that varying travel restrictions between the four nations and a slow recovery plan for the airports sector are likely to impact further progress and modernisation.
And it has said that a strategic framework, being worked on by the Department for Transport, should be published “as soon as possible”.
The plan should include information on how Scottish airports can increase passenger numbers while meeting environmental targets, along with how airports can recover the routes lost to the pandemic and under what circumstances the UK Government would fund airport modernisation.
Edinburgh airport cut a third of its direct jobs, from 750 down to 500, while more than 2,000 jobs were lost across the airport campus. Glasgow lost 2,000 direct and indirect jobs and Aberdeen lost 400 direct jobs.
Highlands and Islands Airports Limited has already outlined how travel restrictions and lockdowns contributed to an overall reduction of almost 77 per cent passenger flow across all of its airports for 2020/21.
Hial figures showed just under 393,000 passengers used its 11 airports, compared to 1.68 million during 2019/20.
“We are convinced that a UK Government-led recovery plan for airports is urgently needed,” the committee report read.
“The paused strategic framework that is being developed by the Department for Transport for the aviation industry to help them recover from the impact of the Covid pandemic needs to be published as soon as possible.
“As Scottish airports have been more adversely affected by the pandemic than other airports in the UK, the strategic framework should specifically consider policy interventions to help Scottish airports recover.”
Airports and other aviation bodies in the UK are currently attempting to modernise the sector, reducing delays, noise and emissions.
But the Scottish aviation leaders told the committee that, without a quick recovery from the pandemic, they would not be able to fund the move to the third stage of modernisation.
“The airspace modernisation programme has the potential to benefit the whole of the UK by making journey times quicker, quieter, and helping to reduce carbon emissions from aviation,” the report said.
“We are concerned that this programme, that can offer significant environmental benefits, is at risk of collapse if it is not properly funded.
“Without a swift financial recovery, Scottish airports reported that they will not have the funds to invest in moving to stage three of the airspace change process.
“The airspace modernisation programme must continue at pace if the benefits are to be fully realised for Scotland and the UK.”
During the pandemic, the committee said, the Scottish Government’s policies on travel caused “severe difficulties” for airports north of the border.
The Scottish and UK Governments regularly differed on their views toward international travel, meaning those leaving Scotland could travel to England to fly abroad and inbound passengers could skirt regulations by flying to England and then travelling north.
Scottish Affairs Committee chairman, Pete Wishart, added: “The covid-19 pandemic was a turbulent time for the airports sector across Scotland.
“Lockdowns and travel restrictions hit the sector incredibly hard, and the pausing of a recovery plan by the UK Government is prolonging the pain and uncertainty.
“Airports across Scotland offer a lifeline to many rural communities across the country.
“During the pandemic, airports had to stay open so essential workers can carry on with their important work, and that medicines and goods could get to those who needed them.
“However, we heard in evidence that it would have been cheaper to completely close airports than survive with the trickle of passengers they saw come and go.
“Now the UK Government must publish its recovery plans for the sector. The uncertainty is continuing to be deeply damaging and delays any progress to make the sector fit for the 21st Century.”
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