MIAMI – London Heathrow Airport (LHR) is reeling from the negative impact of the current travel restrictions, falling behind European airports with slow aircraft and traveler traffic.
According to the report covering the period from January to June 2021, published in July, the Airport Management indicated that LHR is losing traffic to the advantage of its European competitors where traffic is increasing; specifically, Frankfurt (FRA) and Amsterdam-Schipol (AMS), which show an uptrend of 9%.
Cargo movements at LHR, the biggest airport in the UK, remain down by 18% when compared to pre-pandemic levels.
Loosing traffic to Frankfurth and Amsterdam
The same fate applies to tourism, both in terms of trade and income, as the UK government continues to impose restrictions, even on vaccinated travelers, coming from important partners such as the EU and the US. Conversely, the report cites a nearly 50% traffic recovery between the EU and the US. UK destinations, however, remain at minus 92% trafficwise.
The report continues by pointing out that the situation remains negative notwithstanding that LHR Airport has “invested in the latest Covid-19 secure technologies”. LHR has obtained a Skytrax Four Stars rating, the highest in the UK, and is keeping in force measures to protect passengers and workers in order to rebuild confidence in safe travel.
Travel restrictions are the main barrier hampering an increasing passenger demand, now showing continuous growth, with LHR registering less than 4m travelers using the airport during the six months covered by the report, a number easily reached in an approximately half month during 2019.
LHR estimates that the recent amendments to the “traffic light travel system”, imposed by the UK Government on countries in accordance with the local Covid evoçlution, has brought in some positive effects unfortunately mitigated by expensive testing and quarantine. If the holding back of the UK’s economic recovery continues, LHR might see 2021 traffic numbers go under those registered for 2020 with the crisis in full swing.
However, LHR Airport’s financial situation remains in good shape notwithstanding losses continued to grow to reach US$1.79bn (UK£2.9bn), countered by a reduction in cash burn by 50% when compared to the same period of 2019, a 35% reduction in operating costs accompanied by a 77% cut in capital expenditure.
Liquidity increased by 49% to US$6.67bn (£4.8bn), via a “prudent financing action”, covering all commitments until October 2022 under an extreme scenario of zero revenue. As an additional measure and in view of the stagnating traffic figures, LHR Airport has asked its creditors to approve the waiver of Heathrow’s Finance Interest Cover Ratio (ICR) covenant for 2021.
Moreover, LHR Airport estimates that government-issued financial support should remain in place since travel is the only economic sector still under restrictions, while the furlough scheme and business rates relief should be extended. Notwithstanding being affected by losses, LHR Airport has to face the payment of approximately US$166.8m (£120m) in rates and, on this subject, has entered into a High Court legal dispute against the government that is changing its policy to prevent the request of refunds for overpayments.
London Heathrow CEO, John Holland-Kaye, commented on the financial situation by stating: “The UK is emerging from the worst effects of the health pandemic, but is falling behind its EU rivals in international trade by being slow to remove restrictions. Replacing PCR tests with lateral flow tests and opening up to EU and US vaccinated travelers at the end of July will start to get Britain’s economic recovery off the ground.”
Featured image: London Heathrow Airport, Terminal 5C (satellite 2) viewed from the airfield, May 2011. David Dyson. Photo: London Heathrow Airport Media