Heathrow makes a loss in first half of 2022; debt increases; RAB increases
Heathrow airport has reported a £321m adjusted pretax loss for the first half of the year after weeks of lengthy queues and flight cancellations, with passenger numbers back at near pre-pandemic levels. It recently had to announce a daily cap of 100,000 passengers until early September. It estimated that airlines were lacking about 30% of ground handling staff compared with before Covid. The airport said it did not expect to pay any dividends to its shareholders for the rest of the year. Heathrow’s revenue in the 6 months to 30th June was £1,280 million, compared to £348 million in 2021, and £712m in 2020, and £1,461m in 2019. The £231 million loss in 2022 compares with a loss of £787m in 2021, a loss of £471m in 2020, and a £153m profit in 2019. Heathrow’s Regulated Asset Base (RAB), on the size of which it can levy passenger charges, was £18,425m in 2022, compared to £17,474m in 2021, £16,516m in 2020 and £16,598m in 2019. Heathrow Finance plc consolidated nominal net debt was £15,561 million in 2022, compared to £15,440m in 2021, £14,932m in 2020 and £14,361m in 2019. ie. it has risen a lot.
Heathrow press release
There is lots of it, but copied below is one section:
Heathrow remains loss making and we do not forecast any dividends in 2022 – Our adjusted loss before tax reduced by £466m to £321m as a result of higher passenger numbers, higher aeronautical charges offset by increased costs as we invested ahead of demand. Passenger numbers, operating costs and revenues are in line with the H7 business plan submitted to the CAA. Our balance sheet remains strong with gearing ratios now below pre-pandemic levels and strong liquidity.
Heathrow reports £321m loss after queues and flight cancellations
By Joanna Partridge (Guardian)
Passenger numbers return to near pre-Covid levels but airport is hit by staff shortages and increased costs
Heathrow airport has reported a £321m adjusted pretax loss for the first half of the year after weeks of lengthy queues and flight cancellations, with passenger numbers back at near pre-pandemic levels.
Britain’s busiest airport said the summer getaway had “started well”, despite recently announcing a daily cap of 100,000 passengers until early September after it struggled to cope with rebounding demand for travel.
The London hub blamed a lack of ground handling staff for recent weeks of travel chaos and lengthy delays for passengers, describing this as the “constraint on Heathrow’s capacity”.
The airport estimated that airlines were lacking about 30% of ground handling staff compared with before Covid, adding there had not been an increase in these workers since January.
“We have been raising our concerns over lack of handler resource for nine months,” Heathrow reported in its results. It added that from late June, as passenger numbers began to soar, it had experienced a “a worrying increase in unacceptable service levels for some passengers”.
These problems included “an increase in delays to get planes on to stand, bags not travelling with passengers or being delivered very late to the baggage hall, low departure punctuality and some flights being cancelled after passengers had boarded”.
Heathrow said the airport was busy during peak travel times, but any queues were “well managed and kept moving”.
Weeks of problems for air passengers have resulted in a blame game between airlines and airports. On Monday, the Ryanair chief financial officer, Neil Sorahan, criticised airports, saying they “had one job to do” to ensure they had sufficient handlers and security staff.
Ryanair does not operate from Heathrow, but the airport’s chief executive, John Holland-Kaye, said the accusation was “bizarre”.
“Airports don’t provide ground handling, that’s provided by the airlines themselves, so this is like accusing us of not having enough pilots,” Holland-Kaye told BBC Radio 4’s Today programme.
“Passengers don’t care about who is to blame, what they want is the good service and that’s why we have taken the decision on behalf of the whole community to make sure that we keep supply and demand in balance.”
Heathrow said it had hired 1,300 people in the past six months, adding that it would return to pre-pandemic levels of security staff by the end of July.
The airport said it remained loss-making and did not expect to pay any dividends to its shareholders for the rest of the year, but it was offsetting increased costs through higher charges.
See, for comparison with 2019, the Heathrow press release in July 2020
Travel chaos won’t bother Heathrow, “the ATM with runways attached”
Heathrow has been highly profitable for its owners, which include Ferrovial, the Qatari sovereign wealth fund, and USS, the British academics’ pension scheme. Since 2012, the owners have taken £4 billion in dividends (but nothing in 2021 and only £100m in 2020)— and Heathrow is still valued at more than £17 billion. But it has £16 billion of debt to boost the returns. These amazing economics are due to the antiquated way Heathrow is regulated. Because it’s a monopoly, for long haul flights, the CAA sets its returns, using the “regulated asset base” (RAB), and decides what it can charge airlines on the back of that. But this encourages the owners to throw as many costs as they can on to the RAB. Inflating Heathrow’s value means they get paid more. So wherever it can, Heathrow gold-plates spending – with everything costing as much as possible. Much of Heathrow’s income comes from passenger charges, which were £19 pre-Covid; the CAA allowed a temporary increase to £30; and they now have to fall back to £26 by 2026. Heathrow has been described as “a cash machine with a couple of runways attached.” At least it now seems the 3rd runway is unlikely to be built.
Heathrow’s financial problems deepen, especially if it has 15% less passengers in 2022 than forecast
Heathrow has been allowed, by its regulator the CAA, to increase its passenger charge from £19.36 to £30.19 this year until the summer. After that the CAA will probably rule on charges for the next 5 years. Heathrow wanted a larger increase, to £43 per passenger, and based some of its profit forecasts on that – and is peeved with the CAA for limiting its charges. Heathrow has net debts of £15.4 billion of net debt. It says that if its number of passengers in 2022 is more than 15% below its forecast of 45.5 million, it will have financial problems – though “no covenant breaches are forecast in 2022” but that is possible. Its forecast aeronautical revenue for 2022 has been revised down to £2.19 billion, and its underlying earnings down to £1.04 billion. If Heathrow has to breach its covenant terms with its lenders, it becomes a less attractive (aka lucrative) investment, and its credit rating eg. by Standard & Poor’s and Fitch. The airlines using Heathrow are, predictably, deeply opposed to yet higher Heathrow charges.