City runway to success: The Docklands airport is on the approach to breaking even

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LONDON City Airport is on the verge of moving into profit for the first time, according to its managing director, William Charnock.

Even though the Docklands airport has just lost its link with Berlin, Mr Charnock expects between 440,000 and 460,000 passengers to pass through this year, compared with 245,000 last year.

'Break-even is between 450,000 and 460,000,' he said. 'It is difficult to say we will make a profit this year, but I am confident we will next year.'

Last month Conti-Flug, a German carrier, went out of business, but Mr Charnock says other airlines are planning to increase frequencies and fly to new destinations. 'I think by 1998, maybe before, we will be at a million passengers.'

Last month the construction firm Mowlem, London City's owner, announced that the airport made a loss of pounds 1.6m in the first half of the year, 33 per cent lower than the comparable 1993 loss. It is still determined to sell or reduce its 90 per cent shareholding in the airport as part of its policy of concentrating on core construction activities. Mowlem has spent about pounds 30m on the airport, while accumulated losses have drained a further pounds 15m.

London City, which opened in 1987 amid high hopes that it would be a godsend to City folk wanting to nip across the Channel, soon turned into the cathedral of the Docklands - a place to go for peace and quiet, but not to catch a flight. Built on the Albert Dock, it was surrounded by houses: noise restrictions and runway length meant that only a handful of aircraft, notably the De Havilland Dash Seven, could use it. Although the airport offered a 10 minute check-in and an uncommonly civilised atmosphere, aircraft range meant it could service only Amsterdam, Paris and Brussels.

Two airlines, Brymon and London City (linked to British Midland) used the airport, and passenger numbers grew to 233,000 in 1990. But it became clear that the 250-mile range of the Dash, in any case now out of production, was limiting the airport's usefulness. Its popularity was also dampened by appalling transport links. 'It could take one-and-a-half hours by taxi from the Bank of England six miles away,' Mr Charnock said.

The recession depressed business further: in 1991 only 171,000 people used the airport. British Midland pulled out that year, and Brymon wound down its operations, stopping completely in 1993. A spokesman for British Midland said this was because it did not make sense duplicating infrastructure for a handful of flights.

Sir Michael Bishop, British Midland's chairman, said in the Independent on Sunday that his decision to be first into London City was his 'biggest mistake'. 'The whole episode cost us the thick end of pounds 10m: I should have let somebody else do the the pioneering and have moved in later,' he wrote.

But in the past two years both the airport's big disadvantages have been eased. In 1992, after a lengthy public inquiry, the runway was extended so that the BAe 146 jet could use it. That extended the range to 1,000 miles, bringing Rome, Lisbon and Warsaw into range. And last year the Limehouse Link tunnel was built, cutting the journey time to the City to 20 minutes.

New airlines started to trickle in: there are now six, flying to Antwerp, Brussels, Dublin, Frankfurt, Liverpool, Lugano, Paris and Zurich.

'The whole thing is gathering momentum,' Mr Charnock said. 'Once people have tried us as an alternative way of getting out of London, few feel the other airports are better.'

Conti-Flug was running at a 70 per cent load factor when it collapsed, but insiders say its bankruptcy highlights one of the inherent weaknesses of the airport. Most of the airlines that use it are small, and therefore vulnerable in a downturn: the German carrier is the third user to go bust.

An executive with a national airline says London City will always have fundamental problems. 'We looked very hard and walked away because our research showed that the potential market was limited,' he said. 'Airlines have experienced enormous fluctuations in load factors because they have not succeeded in broadening the base beyond the financial market.' This, he says, is because the small size of the aircraft means operators cannot afford to offer too many cut- price tickets to attract tourist traffic.

Sir Michael said last year that his mistake was one of timing, and that he believed the airport would eventually be a success. But his spokesman says that it is unlikely that British Midland will now be tempted back. 'We are very much centred on Heathrow now,' he commented.

(Photograph omitted)