AIG, the stricken US insurer, has sold its 50 per cent stake in London City airport, as it embarks on a disposal of assets in an effort to repay the $85bn US government rescue loan.

It is considering selling more than 15 businesses, including ILFC, its aircraft leasing unit, a stake in a large US reinsurer and billions of dollars in properties. Edward Liddy, AIG chief executive, is expected to announce later this week what other assets could be for sale.

Global Infrastructure Partners (GIP), its partner in the purchase of London City airport two years ago, said it had entered into a definitive agreement to acquire AIG-Financial Products’ stake giving it 100 per cent control. The deal was expected to close next month.

No financial details were disclosed.

London City airport was sold in October, 2006 by Dermot Desmond, the Irish financier, in a deal which placed an enterprise value of around £750m on the company, well in excess of early analyst estimates, and provided sale proceeds of around £650m to Mr Desmond. He bought the airport for £23.5m in 1995 from Mowlem, the UK construction group.

GIP is an independent $5.6bn fund that invests worldwide in infrastructure assets including power and utilities, natural resources infrastructure, air transport infrastructure, ports, rail, water distribution and treatment, and waste management.

It was founded in 2006 by Credit Suisse and General Electric, which both have stakes of close to 10 per cent.

GIP has expressed interest too in bidding for London Gatwick airport which was put up for sale two weeks ago by BAA, the UK airports operator controlled by Spain’s Ferrovial.

BAA may also be forced to sell London Stansted and either Glasgow or Edinburgh airports, as a result of the continuing investigation of the group by the Competition Commission, whose final report is due early next year.

London City airport is the niche business travel airport at the heart of London’s Docklands and is located only six miles to the east of the City of London financial district and two miles east of the Canary Wharf business district.

Commercial passenger numbers have risen quickly in the last couple of years increasing in 2007 by 23 per cent from 2.35m to 2.9m, but traffic growth has slowed in recent months and is forecast to reach around 3.2m this year.

Demand from private business jet users has remained flat this year in contrast to strong growth in previous years, and the number of business jet movements at the airport is forecast to fall slightly this year to around 14,500 from 15,000 in 2007.

The expansion of the airport, which has a short runway and steep approach paths, has been focused on the development of routes to European business centres, but next year British Airways is planning to open the first long-haul route from London City to New York JFK using all-business class A318s, the smallest jets made by Airbus.

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