Vantage | How Saudi, China, Qatar came to own 40% of London's biggest airport

In a significant move that reflects the evolving landscape of global investments, Saudi Arabia’s Public Investment Fund (PIF) is set to acquire a 10 per cent stake in London’s Heathrow Airport. This ownership shake-up in Europe’s largest air hub comes as part of a broader strategy by PIF to diversify its international portfolio, which already includes major holdings in sectors such as aviation, infrastructure and luxury automotive.

Background on PIF

Established in 1971, the Saudi Arabia Public Investment Fund initially managed local funds. However, a pivotal shift occurred in 2017 when Crown Prince Mohammed bin Salman took charge, transforming PIF into the world’s sixth largest sovereign wealth fund. Under the Crown Prince’s leadership, PIF’s asset portfolio has surpassed $700 billion with ambitious plans to control assets worth $2 trillion by 2030.

PIF’s portfolio spans 92 companies across 13 strategic sectors, with a keen focus on international investments. Notable holdings include being the second-largest shareholder in Aston Martin and an 80 per cent stake in Newcastle United, a prominent English Premier League club.

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Heathrow investment and strategic alignment

PIF’s acquisition of a 10 per cent stake in Heathrow Airport aligns with its long-term strategy to support businesses as a reliable partner. The investment, valued at $3 billion, is a testament to PIF’s confidence in the global significance of Heathrow as a key gateway.

In a statement, PIF expressed its satisfaction with the investment, citing Heathrow as a world-class airport. Crown Prince Mohammed bin Salman’s direct involvement in overseeing PIF’s investments underscores the strategic importance of this acquisition.

Stakeholders in Heathrow

Heathrow Airport boasts a diverse group of stakeholders with the Spanish firm Ferrovial currently holding the largest share at 25 per cent. The ownership structure also includes Qatar Investment Authority holding a 20 per cent stake and China Investment Corporation with 10 per cent. Singapore’s sovereign wealth fund and the Australian Retirement Trust each own nearly 11 per cent.

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Upon completion of the deal, 40 per cent of Heathrow Airport will be foreign owned, with Qatar, China and Saudi Arabia collectively holding a substantial share.

While the final confirmation of Saudi ownership is pending regulatory clearance, the financial challenges faced by Heathrow make the deal appear unlikely to encounter significant hurdles. Heathrow has struggled since the onset of the COVID-19 pandemic, losing over $4.5 billion in revenue. The airport’s plans for a third runway have been delayed due to a lack of funds and it currently sits on a substantial debt of £15 billion (over $18 billion).

Global competition from emerging transit hubs in Asia further intensifies the need for financial infusion into Heathrow. The acquisition by PIF is poised to provide a lifeline to the airport as it navigates through these challenges.

As Saudi Arabia’s PIF becomes a major stakeholder in London’s Heathrow Airport, the deal not only signifies a shift in the airport’s ownership but also reflects the broader trends in sovereign wealth funds diversifying their portfolios internationally. With Heathrow facing financial constraints and increased competition, the infusion of Saudi funds is expected to play a crucial role in supporting the airport’s future growth and resilience in the global aviation landscape.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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