Doncaster Sheffield Airport: Council’s £363m lease payment agreement - and 2031 break clause - revealed

Recently-published council finance papers have now revealed that the minimum cost of lease payments is £363m.

But at a separate council meeting last month, the existence of a break clause for the lease on March 20, 2031 was revealed.

The finance paper states a minimum lease payment of £2.9m is due in the next 12 months, followed by £11.6m over the following four years with the remaining £348.48m due after that.

The council’s original plan had been to sign up a private operator to take over the airport and cover its full lease costs through a 50-year underlease.

But after being unable to secure one through a procurement process, the council now intends to sublease the site to FlyDoncaster. The council will require no rental payments from FlyDoncaster for 10 years though would seek the repayment of £44.6m over 25 years from its company.

The issue was raised last week at a full council meeting by Conservative councillor Jane Cox who asked what measures were in place to ensure “affordability and sustainability for residents” given the long-term financial commitment of £363m.

Councillor Phil Cole, cabinet member for finance, said he could not provide an immediate answer as he had not been expecting the question but a written response would subsequently be provided.

The council argues the reopening of the airport will be the catalyst for wider regeneration work around the airport and lead to the creation of 5,000 direct jobs.

While there is no current private operator in place, the council has hired Munich Airport International to provide operational and management services to FlyDoncaster “over a multi-year period” as it looks to reopen the site.

Council auditor Grant Thornton has highlighted the lease issue as one of the financial risks of the project.

It said that the existence of the break clause helps to limit the council’s financial exposure as it could exit the arrangement “if the reopening of the airport proves unviable”.

But the report also warned: “We note, however, the possibility that break points in the lease which can be exercised by the leaseholder and by the freeholder are potentially disadvantageous from the perspective of an airport operator.

“Over the longer term, we note that the airport previously closed on the basis of commercial failure and therefore will need to perform better than historically to be viable in the longer term.”

A further report to South Yorkshire Mayor Oliver Coppard last month said the lease arrangements were among the reasons why the council had been unable to secure a private operator.

It said: “Market feedback has highlighted that the inherent commercial and industry specific risks and complex lease structure between the freeholder and CDC has restricted private investor appetite.”

That led to the council’s alternative plan to use its full share of devolution funding overseen by Mr Coppard on reopening the airport. He is due to make a decision this summer on the plan.

Council ‘focused on reopening efforts’

Doncaster Council says it is focusing on its efforts to reopen its city airport from next spring following questions about the £363m lease it has signed up to.

Deborah Hogg, executive director of corporate resources for Doncaster Council and a director of FlyDoncaster, told a recent scrutiny committee meeting that the existence of a break clause for the lease in March 2031 has led to a need to work “at pace” on the project - contributing to the decision to pursue a publicly-funded operating model.

“The break clauses were mutually agreed but set a time period of seven years to give us sufficient time to get the airport reopened and operational and start the development,” she said.

“That takes us up to March 20, 2031. Time has been on our mind all this time. Whatever we have been doing, we have worked as quickly as we possibly can because the time it takes to do the preparation takes time away from reopening and mobilising the airport. We need as much time to do that in order to achieve passengers, freight activity and development activity.

“We can’t dawdle and have had to keep going at pace. We went down different finance opportunities but then had to make a clinical decision. We had to balance time versus benefit.”

A report last month to Doncaster Council’s cabinet estimated the public reopening costs at £145m, which it said would fund initial costs up to 2034 with the assumption that after that point all FlyDoncaster costs would have to be funded through income generated or private finance.

The same cabinet report also revealed that the council intends to enter into a sublease with FlyDoncaster, while a strategic review of the financial performance of the airport will take place prior to the break clause deadline.

The council intends to loan £105m to FlyDoncaster towards its start-up costs.

When asked by The Yorkshire Post about the council’s strategy in regard to the difference between the break clause coming in 2031 and funding for initial costs being expected to last to 2034, a spokesperson did not provide a direct reply but said in a statement: “Presently, the City of Doncaster Council and Munich Airport International are focusing on the necessary mobilisation activities to reopen the Airport for Spring 2026.”

Conservative councillor Jane Cox said was disappointed that her recent question about the lease arrangements was not answered in a council meeting and that she is still yet to receive a written reply more than a week later.

She said: “This once again brings into question the transparency of this process, why Doncaster is liable and why Mayor Ros Jones has not asked the other authorities in South Yorkshire for financial support.”

City of Doncaster Council said a response would be provided to Councillor Cox “within the usual timeframe”, which council rules state is within a fortnight.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​