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UK Aviation in Danger

August 18, 2021

Kevan James

UK aviation travel in danger of continuing to substantially lag behind Europe and US if UK Government does not build on its world class vaccination programme, says London Gatwick Airport.

  • Government must act to simplify travel requirements to improve passenger confidence in international travel and not squander the benefits of its world leading vaccination programme

  • Passenger numbers for Gatwick in first six months hit very low levels due to global impact of COVID-19 and associated international travel bans.

  • The business has a strong liquidity position and is well placed for recovery due to successful refinancing alongside reduced capital expenditure and operating costs.

  • Focus remains on safety and wellbeing of passengers travelling and staff as well as operational readiness.

With over 75% of UK adults double vaccinated the UK Government needs to take advantage of its world leading vaccination programme to improve passenger confidence in international travel by substantially simplifying its current travel requirement rules. The UK is in danger of continuing to lag behind Europe and the US whose much simpler travel rules are enabling passengers to travel more freely and enjoy much needed breaks and reunions with family and friends. The UK aviation recovery is far behind countries in Europe such as France and Germany whose travel bookings are on average over 50 per cent of pre-pandemic levels whereas in the UK it is sitting at approximately 16 per cent.

To simplify current travel rules and remove the prohibitive cost of COVID-19 testing for many passengers Gatwick is calling on Government to:

  • Have no test requirements for travellers from “green” countries,

  • Have no test requirements for double vaccinated travellers from “amber” and a single lateral flow testing for those non-vaccinated from an “amber” country.

Gatwick passenger numbers were very low at just 569k in the first six months ended 30 June 2021 due to the impact of COVID-19 and the associated international travel bans. While the airport remained open throughout this period all revenue streams were impacted and the collapse in passenger demand along with Government restrictions led to a £244.6m loss for the six-month period and negative EBITDA at -£50.2m.

A strategic and sustained reduction in capital expenditure resulted in the deferral or cancellation of over £570m from investment originally planned in 2020, 2021 and 2022. Swift and decisive actions taken in 2020 reduced operating costs by 34.4% in the first half of the year through renegotiated contracts, temporary infrastructure shutdowns, halting discretionary expenditure and the continued consolidation of operations into one passenger terminal. Staff costs are £31.3m lower (46.4%) in the first half of the year due to the restructuring that was completed in Q4 2020.

As of 30 June 2021 the business has a strong liquidity position with £779m of liquidity including £624m of cash which is sufficient liquidity to meet operating cashflows, planned investment levels and interest payments for at least the next 12 months. This ensures Gatwick is well placed for the recovery. Gatwick has commenced a consent solicitation process to address forecast breaches in Financial Covenants, following successful discussions with its banks and with bondholders forming a special committee of the Investment Association.

A priority continues to be protecting the health and wellbeing of employees and passengers with enhanced cleaning and mandatory face masks guidance for all Gatwick staff in passenger facing areas. The airport continues to host an NHS testing site alongside walk-in and drive-through private testing facilities also being made available.

Gatwick Airport, Chief Executive Officer, Stewart Wingate said: “First I would like to thank all our staff for their hard work and fortitude throughout what has no doubt been the most challenging six months the airport has witnessed with its low passenger and air traffic volumes. I remain certain that Gatwick will recover and as a business we are financially and operationally well placed for that.

“In the UK we are all emerging to enjoy more freedoms due to our world class vaccination programme, however we are in danger of squandering the advantage that vaccination programme has afforded us for international travel. Our Government needs to act now and remove unnecessary and costly PCR testing requirements for passengers, particularly for those double vaccinated.

“UK travel recovery should not be allowed to lag behind the US and Europe. Passengers need the travel rules simplified so they can choose to travel more freely and enjoy much needed breaks and reunions with family and friends which are currently much more attainable for those in Europe and the US.”

Commenting on news that the UK will no longer require double vaccinated EU and US visitors to self-isolate on arrival, Wingate added: “This is welcome news for those wishing to travel to the UK although the changes may have come too late for many to make bookings this Summer.

“The cost of PCR tests remains prohibitive for many and should be replaced by cheaper, quicker lateral flow tests for those who have been double vaccinated, as many other countries already rely on. Double vaccinated travellers to designated green countries should also not have to take any tests at all.

“The EU and US aviation sectors opened up earlier and are recovering significantly faster, which is why European travel was already at 50% of pre-pandemic levels in June compared to just 16% in the UK, despite our more advanced double vaccination rates. We will continue to lose out on trade, tourism and other economic benefits unless the Government removes the remaining unnecessary barriers to travel.

“Travellers also need a stable traffic light list that provides more certainty and plenty of notice of any changes to help restore their confidence to book.”

All images - Gatwick Airport

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