Campaigners tell Heathrow to accept reality, and give up on plans for a 3rd runway
No 3rd Runway Coalition campaigners say Heathrow should accept what is now financial reality and give up on its plans for a 3rd runway. Heathrow made a £2bn loss in 2020, and is asking for more government finance in the form of extending the furlough scheme – and also full relief from business rates. Heathrow’s financial frailty is obvious; it has net debt of £15.2bn as of September 2020. It is now so highly geared with debt, that it has reached a leverage ratio of 97% — higher than any comparable UK infrastructure or utility operation. In June last year the ratings agency, Standards & Poor’s, put Heathrow on “credit watch with negative implications” — a 2nd credit downgrade in just 2 months. Then Heathrow sought waivers on covenants from holders of £1.1 billion of bonds. Any further downgrade would render these bonds junk, making the airport an extremely unattractive asset for investment. Its shareholders have not contributed more cash. John Holland-Kaye has told staff that the publicised “£3.2bn war chest” is merely the liquidity that can be mustered when “we have drawn down all the cash and credit facilities at our disposal”. ie. more future borrowing. With its precarious finances, it is no longer appropriate for Heathrow to be pursuing a 3rd runway.
ACCEPT REALITY AND GIVE UP ON 3RD RUNWAY
By No 3rd Runway Coalition
24 February 2021
Heathrow Airport should accept what is now reality and give up on its plans to expand the
airport by building a third runway, according to campaigners.
The Airport reported £2bn losses in 2020 on Wednesday (1), with a renewed request for
financial support from Government in the form of extending the furlough scheme and full
relief from business rates (2).
Heathrow’s financial frailty is clear for all to see; the airport already carries net debt
of £15.2bn as of September 2020. It is now so highly geared with debt, that it has reached a
leverage ratio of 97% — higher than any comparable UK infrastructure or utility operation.
In June last year the ratings agency, Standards & Poor’s, put Heathrow on “credit watch with
negative implications” — a second credit downgrade in just two months. (3)
Later that month it was announced that Heathrow sought waivers on covenants from holders of £1.1 billion of bonds. Any further downgrade would render these bonds junk, making the airport an extremely unattractive asset for investment.
So far during the crisis, Heathrow’s shareholders have declined to contribute more cash to
the airport despite relying on the Government furlough scheme and receiving £8m relief on
They have received over £4bn in dividends since 2012, including £100m in
February 2020 when the impact the pandemic would have was just becoming clear.
Yet despite these figures, Heathrow’s CEO claims that the airport “remains committed” to a
3rd runway and fancifully predicts that “expansion will proceed successfully”.
Heathrow’s CEO, John Holland-Kaye continues to speak of the business’s “current financial
strength”, despite their losses. Yet, he has admitted to staff that the publicised “£3.2bn war
chest” is merely the liquidity that can be mustered when “we have drawn down all the cash
and credit facilities at our disposal”. (4)
So, yet more borrowing to be repaid in the future – presumably by passengers.
The Government recently stated that Heathrow expansion will be a private sector project and
will receive no taxpayer funds (5).
Campaigners believe that it is no longer appropriate for Heathrow to be pursuing a third
runway given its precarious financial position.
Paul McGuinness, Chair of the No 3rd Runway Coalition, said: “Leaving aside the moral dimension – that any expansion of Heathrow Airport would require a reduction in regional aviation if the country is to meet its new carbon obligations – Heathrow’s absurd debt position, even before the pandemic, was always likely to put their third runway out of reach.
“And in acknowledging such a large loss over the last year, Heathrow should now concentrate on building back better, refocusing on their customers and away from their foreign shareholders’ pipe dream.”
1. Heathrow Results for 2020, 24 February 2021 https://www.heathrow.com/content/dam/heathrow/web/common/documents/company/investor/reports-and-presentations/financial-results/2020/HeathrowSP-Limited-Q4-2020-results-release-final.pdf
3. Internal staff email, John Holland Kaye, Heathrow Airport, 6 April 2020.
4. Standard and Poor’s latest downgrade of Heathrow’s crest rating, 2 June 2020. https://www.heathrow.com/content/dam/heathrow/web/common/documents/company/investor/creditratings/sp/RU_Heathrow_Funding_Ltd%20_On_CreditWatch_Negative_May_2020.pdf
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.