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Strong demand as travel restrictions ease

The Heathrow Observer

October 26, 2021

Strong pent-up demand as travel restrictions ease In Q3, Heathrow experienced its first full quarter of passenger growth since 2019, underscoring strong pent-up demand as travel restrictions eased and testing requirements were simplified. Passenger numbers in Q3 recovered to 28%, and cargo to 90% of pre-pandemic levels. Traffic is not expected to fully recover until at least 2026.

Image - Heathrow Airport Ltd

£3.4bn in total losses since the start of pandemic underscore long road ahead – Airports have very high fixed costs and despite over 30% reduction in operating costs, Heathrow has lost £3.4bn cumulatively since the start of the pandemic and remains loss making today. Even so the airport reports that it has the financial strength, with £4.1bn of cash, to be able to come through until the market recovers.

Sustainable Aviation Fuel mandate will accelerate decarbonisation - The UK Government’s ambition to implement a mandate for at least 10% SAF use by 2030 and £300m kickstart funding for production in the UK, provides leadership by example to other world leaders ahead of the COP26 summit in Glasgow. The airport needs government to set higher mandate levels for 2050 and provide a price stability mechanism, such as contracts for difference, to scale up supply as fast as possible. Passengers can purchase SAF for their flights through a number of airlines, including British Airways, or from independent platforms such as CHOOOSE, who have partnered with Heathrow.

CAA H7 initial proposals do not go far enough to ensure financial ability – Heathrow Airport has been transformed through private investment so that it is now rated by passengers as one of the top 10 airports worldwide, and airlines are able to achieve premium margins at Heathrow. However, the airport's shareholders have achieved negative returns in real terms over the last 15 years. The CAA’s Initial Proposals do not go far enough to ensure that investors can achieve a fair return in H7 which is key to securing future private investment in passenger service and resilience for Britain’s hub airport.

Heathrow CEO John Holland-Kaye said:

“We are on the cusp of a recovery which will unleash pent-up demand, create new quality jobs and see Britain’s trade roar back to life – but it risks a hard landing unless secured for the long-haul. To do that, we need continued focus on the global vaccination programme so that borders can reopen without testing; we need a fair financial settlement from the CAA to sustain service and resilience after 15 years of negative real returns for investors; and we need a progressively increasing global mandate for Sustainable Aviation Fuels so that we can protect the benefits of aviation in a world without carbon.”

All Images - Kevan James unless stated otherwise

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