Heathrow makes £2bn loss in 2020 due to the pandemic – warning on continuing to be a “going concern”

Heathrow lost £2 billion in 2020 because of the fall in passenger numbers because of the Covid pandemic. The numbers are lower than for perhaps 50 years, and the airport is issuing a warning about its future.  Its pre-tax loss was £2.01bn for its full-year compared to a £546m profit in 2019.  Revenues fell 62% £1.18bn, with passenger were at 22.1 million, 73% less than in 2019.  This led the airport to issue a warning, that the “existence of a material uncertainty… could cast significant doubt upon the group and the company’s ability to continue as a going concern”. Nobody knows how much air travel will happen this year.  Heathrow desperately wants relief on all its business rates, an extended furlough scheme for its staff, and a revival of VAT-free airport shopping for tourists to the UK. John Holland-Kaye makes his usual statements about how vital Heathrow is to Britain … Since the start of the pandemic, the airport has cut operating costs by nearly £400m, reduced capital expenditure by £700m and raised £2.5bn in funding. And it says it ended 2020 with £3.9bn of liquidity, which it says is enough to last until April 2033 even if there is no recovery in passenger numbers. Which begs the question of why it needs more government support now.
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Heathrow’s results for the year to 31st December 2020 are at

https://www.heathrow.com/content/dam/heathrow/web/common/documents/company/investor/reports-and-presentations/financial-results/2020/Heathrow-SP-Limited-Q4-2020-final.pdf 

All its financial results in previous years can be seen at

https://www.heathrow.com/company/investor-centre/reports/financial-results


HEATHROW SUFFERS £2BN LOSS AFTER TRAFFIC COLLAPSES IN 2020

UK’s busiest airport handled more passengers in January and February than in the whole of the rest of the year

By Simon Calder, Travel Correspondent  (The Independent)
@SimonCalder

24.2.2021

Britain’s busiest airport handled more passengers in January and February 2020 than in the remaining 10 months of the year.

London Heathrow airport saw passenger numbers fell by almost three-quarters to 22.1 million, triggering a loss of £2bn for the full year.

The chief executive, John Holland-Kaye, said the business had shrunk “to passenger levels we haven’t seen since the 70s”.

Heathrow, which has been by far the biggest airport in Europe for decades, slumped to sixth place in December – behind two airports in each of Istanbul and Moscow, as well as Amsterdam.

Mr Holland-Kaye said: “It became clear in mid-August that the recovery had stalled so we started making plans for further cost reduction and begun implementing in October.

“These included cutting all our costs to the lowest level we safely could, including further management reductions, closing our main office and suspending our free travel zone.

“After 12 months with very few passengers, we are only just starting to see daylight at the end of a very long tunnel.”

The airport has criticised increasing travel restrictions that have “effectively closed borders,” including the new hotel quarantine rules.

But airport’s CEO held out hope that Britain is “on the cusp of becoming the first country in the world to safely resume international travel and trade at scale”.

Mr Holland-Kaye said: “Getting aviation moving again will save thousands of jobs and reinvigorate the economy.

“In the meantime, we need next week’s Budget to support aviation’s recovery by extending furlough and providing 100 per cent business rates relief.”

Heathrow cut gross operating costs by nearly £400m and reduced capital expenditure by £700m.

It has almost £4bn of liquidity, which the airport says is “enough to see us through until 2023”.

https://www.independent.co.uk/travel/news-and-advice/covid-heathrow-airport-passenger-loss-b1806534.html

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And see BBC article

Heathrow passenger numbers fall to 1970s’ levels

This says:

Heathrow doesn’t have many passengers at the moment, but one thing it does have a lot of is borrowing.

The London airport has built a £15bn debt pile in the past decade while paying its shareholders several billion pounds in dividends.

The collapse in traffic caused by the coronavirus pandemic has understandably put a strain on its finances, to the extent that the company has asked the Civil Aviation Authority (CAA), its economic regulator, for an increase in prices to compensate.

The request has outraged its airline customers, who say they and their passengers should not have to pick up the airport’s pandemic tab.

There is no danger of Heathrow running out of money in the short term – it has about £3.9bn in cash, enough to keep it ticking over for two years – but the accounts do include a warning about the future.

The directors say that the uncertainty about the timescale and nature of the recovery from the pandemic “indicates the existence of a material uncertainty which could cast significant doubt upon the group and the company’s ability to continue as a going concern”.

It would take a serious prolongation of traffic restrictions for Heathrow’s current financial structure to crack – but the warning underlines why the company is pressing the CAA so hard for a price increase.

https://www.bbc.co.uk/news/business-56176403

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Heathrow’s own press release:  

Heathrow 2020 Financial Results

24 February 2021

2020 has been one of Heathrow’s most challenging years with £2bn losses and passengers levels not seen since the 1970’s.Keeping passengers and colleagues safe

We have only been able to remain open throughout the pandemic by maintaining high safety levels. We helped to develop international standards for safe travel through airports and invested in cutting-edge COVID-secure technologies and testing facilities for up to 25,000 passengers a day to help restore international travel safely

Annual loss of £2bn underlines the devastating impact of COVID-19 on aviation

Passenger numbers collapsed to 22.1m, more than half of whom travelled in January and February. Overall revenue fell 62% to £1.2bn and adjusted EBITDA fell to £270m. Government policies over recent months have effectively closed borders. We have had no government support, other than furlough, and have not been given relief from business rates, unlike other airports, retail and hospitality Businesses. The March Budget is the key opportunity for the Chancellor to support the sector by providing 100% business rates relief, extending the furlough scheme and reversing the tourist tax

Decisive action to weather the storm

Airports have very high fixed costs. We acted quickly to cut gross operating costs by nearly £400m, reduced capital expenditure by £700m and raised £2.5bn in funding including a £600m capital injection. We ended the year with £3.9bn of liquidity, enough to see us through until 2023

CAA must act now to unlock lower charges and more investment for consumers

If the CAA acts to approve a RAB adjustment, to recover regulatory depreciation and provide a fair balance of risk and reward, they can unlock lower airport charges and higher investment in passenger service and resilience 28% decline in cargo volumes shows the cost to the economy of shutting down aviation. Passenger planes from Heathrow are the UK’s global trading network, carrying British exports and inbound supply chain. Economic recovery will be held back until long haul passenger flights are restarted, especially to key markets such as the US

28% decline in cargo volumes shows the cost to the economy of shutting down aviation

Passenger planes from Heathrow are the UK’s global trading network, carrying British exports and inbound supply chain. Economic recovery will be held back until long haul passenger flights are restarted, especially to key markets such as the US

“We can be hopeful for 2021, with Britain on the cusp of becoming the first country in the world to safely resume international travel and trade at scale. Getting aviation moving again will save thousands of jobs and reinvigorate the economy.”
John Holland-Kaye , Chief Executive Officer , Heathrow

We support the Prime Minister’s plan to restart travel and the economy

We will work with the Global Travel Taskforce, so that Britain can become the first country in the world to safely restart international travel and trade at scale, saving thousands of jobs and reinvigorating the UK economy. The Prime Minister has a unique opportunity to agree a common international standard for safe travel with other world leaders when he hosts the G7 in June

Building Back Better

We remain focused on decarbonising aviation. We became carbon neutral in 2020 and have been working to make decarbonizing aviation a flagship goal for COP26 ahead of a global agreement for net zero emissions by 2050 at the ICAO general Assembly in September 2022

Heathrow expansion is mission critical to delivering “Global Britain”

With the Supreme Court reinstating the Airports National Policy Statement, we will consult with investors, Government, airline customers and regulators on our next steps

Heathrow CEO John Holland-Kaye said:

“2020 has been one of our most challenging years – but despite £2bn of losses and shrinking to passenger levels we haven’t seen since the 70s, I am hugely proud of the way that our colleagues have kept our passengers safe and the UK’s hub airport open for vital supplies throughout. We can be hopeful for 2021, with Britain on the cusp of becoming the first country in the world to safely resume international travel and trade at scale. Getting aviation moving again will save thousands of jobs and reinvigorate the economy, and Heathrow will be working with the Global Travel Taskforce to develop a robust plan underpinned by science and backed by industry. The Prime Minister will then have the unique opportunity to secure global agreement on a common international standard for travel when he hosts the G7 in June. In the meantime, we need next week’s Budget to support aviation’s recovery by extending furlough and providing 100% business rates relief.”

https://www.heathrow.com/latest-news/heathrow-2020-financial-results

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