Podcast transcript - Glasgow Prestwick Airport
I’m here today with audit manager Ursula Lodge to talk about a new report by Audit Scotland on the Scottish Government’s purchase of Glasgow Prestwick Airport. 
Ursula, can you tell me what this report is about?
Well, the Scottish Government bought Glasgow Prestwick Airport from Infratil in November 2013 for £1. It did so to safeguard what it considered to be a strategic infrastructure asset and to protect the significant number of jobs associated with it.
So this audit assessed, firstly, if the Scottish Government’s approach to the buying of the airport was reasonable. This included the quality of the business and financial planning for airport.
Secondly it considered the future plans for the airport’s development and how they have changed since the purchase and, finally, it examined the governance arrangements that have been put in place. 
So what is the importance of Glasgow Prestwick Airport to Ayrshire and to Scotland as a whole?

Economic analysis has shown that the airport makes a significant contribution to the Scottish and the Ayrshire economies through the considerable number of jobs associated with the airport. And as such, it is really important to people that the airport remains open.
It is also important that the public can have confidence in the Scottish Government’s ability to make such significant strategic spending decisions which directly impact on local communities.

And what did you find during the course of your audit? 
We found that the Scottish Government acted reasonably when buying Glasgow Prestwick Airport, especially given the tight deadline and timescale of six weeks it had to conclude the purchase.

The Scottish Government prepared the business case to support its decision. Its business case identified risks associated with the commercial viability of the airport, for example worsening economic outlook and the possibility of Ryanair withdrawing its flights.

But because of the tight timescales the Scottish Government did not model those risks or include their impact in financial forecasts.  

The Scottish Government is providing the airport with loan funding and, as of January 2015, it has given the airport £9 million in loan funding, and it is also committed to a further £16.2 million to the end of March 2016, if required. Latest estimates put the total required funding at £39.6 million up to the financial year 2021/22.

However, the total funding that the airport will need in the future is still uncertain. This is because the Scottish Government is exploring a number of potential development opportunities for the airport.

We also found that the Scottish Government’s purchase business plan showed a positive financial return for its investment, although it used optimistic predictions for future passenger growth. 
We carried out our own financial modelling with less optimistic figures and concluded that the Scottish Government could have reasonably expected a positive return on its loan funding. But since then things have moved one and the eventual return will depend on future developments which could have an effect on a number of factors, for example the airport sale price and passenger numbers. 

So what about the future of the airport?
As I have said, the Scottish Government is still assessing a number of potential future opportunities for the airport. 
These will take time to put into effect and it may be some years before it can sell the airport back to the private sector. 

What do you want to see happen as a result of your report? 
As I have said, there are still a number of uncertainties around the future development of the airport. In the meantime, we are recommending that the Scottish Government and Glasgow Prestwick Airport make sure that a clear strategy is now put in place.
This should take into account future development potential for the airport. It should include robust business and financial plans and full evaluation of potential risk. A well-defined, regularly reviewed exit strategy for the airport should also be part of it and this should be reviewed regularly. 
We will continue to Audit Scotland also plans to carry out further work at a later date on the airport's performance.

Ursula, thank you.