Growth kickstarted in 2022
The Heathrow Observer
April 27, 2022.
Q1 passengers on forecast – Heathrow welcomed 9.7 million passengers in Q1 2022 in line with the airport's forecasts. January and February were much weaker than expected due to Omicron-related travel restrictions, while March demand increased after the unexpectedly quick removal of all UK travel restrictions on 18th March.
Heathrow will remain lossmaking in 2022 as COVID losses top £4 billion – Despite increased outbound demand, the airport is not forecasting a return to profit and dividends in 2022. Although Q1 2022 revenue climbed to £516m and adjusted EBITDA turned positive to reach £273 million, total pandemic losses have now topped £4.0 billion. Heathrow liquidity remains strong with gearing decreasing to pre-pandemic levels
Easter was fuelled by last-minute bookings as planned for a safe and smooth summer getaway – Once it became clear UK travel restrictions would be fully lifted, the airport's colleagues worked extremely hard putting in place a plan to welcome back a surge of last-minute bookings for the Easter getaway – with over 95% of passengers through security within 5 minutes. Heathrow is planning to continue delivering a good service over a busy summer, opening up Terminal 4 by July and recruiting over 1,000 new security officers. The airport is also assisting airlines, ground handlers and retailers to fill over 12,000 vacancies across the airport. A smooth arrival journey is more important than ever as many people begin travelling again for the first time, and Heathrow relies on Border Force having the right plans and resources in place for the summer peak
Summer travel bubble, but winter freeze on horizon – Heathrow is seeing a temporary increase in demand driven by UK outbound leisure passengers taking advantage of removed UK travel restrictions and redeeming travel vouchers accrued during the pandemic. As a result, the 2022 passenger forecast is being updated from 45.5 million to 52.8 million, which represents a return to 65% of pre-pandemic traffic this year. However, demand remains very volatile and these passenger numbers are expected to drop off significantly after the summer. Airlines are already cancelling services into the autumn and the realities of higher fuel costs, lower GDP growth, the war in Ukraine and the ongoing pandemic will drag on demand. The country is still in a pandemic with many markets remaining closed, nearly 80% with testing and vaccination requirements and another variant of concern could see the return of UK travel restrictions.
Passengers want a good experience, but in the airport's view, the Civil Aviation Authority ( the CAA) have proposals tabled that will make it worse – The operational challenges seen across the UK’s aviation industry in April show how much passengers want easy, quick and reliable journeys every time they travel. Heathrow's H7 plan prioritises investments in keeping passenger journeys flowing safely, smoothly and for less than a 2% increase in ticket prices – far less than the extra hundreds of pounds airlines have implemented during the initial weeks of the recovery. The airport does not accept the CAA’s current proposals which will see passengers faced with longer queues and more frequent delays, as well as threatening Heathrow’s ability to fund itself affordably. This view is echoed by ratings agencies which have raised concerns that the regulator’s plans put the airport’s financeability under strain and risk its credit rating being downgraded for a second time.
Sustainable Aviation Fuels Incentive starts delivering lower-carbon flights from Heathrow – Heathrow introduced a SAF incentive in 2022 to encourage airlines to shift to lower-carbon fuels. Already this year, the airport has transitioned 0.5% of the airport’s fuel to SAF, making Heathrow the largest user of SAF out of any major airport globally. This is only the start, and the airport recognises there is much further to go – so will be scaling-up the incentive programme over the coming years and will continue to seek a UK mandate for 10% SAF use by 2030.
Heathrow CEO John Holland-Kaye said; “I want to thank colleagues who worked very hard to ensure the start of 2022 has gone to plan, and I want to reassure passengers that we’re redoubling our efforts to ensure this summer’s journeys go safely and smoothly. These past few weeks have only reinforced our view that passengers want easy, quick and reliable journeys every time they travel and we can continue to deliver that for less than a 2% increase in ticket prices. The CAA should be aiming to secure this win for passengers instead of pushing plans which will cut investment in service, increase queues and make delays a permanent feature post-COVID. We have a lot of work to do to reclaim Heathrow’s crown as Europe’s largest airport which will deliver more competition and choice for passengers and more growth for Britain, and we need the regulator to help us do it.”
All images courtesy of Heathrow Airport Ltd