UK falling behind Europe as travel restrictions continue to bite
The UK is falling further behind as European competitors seize the economic advantages of reopening their economies – Cargo volume at Heathrow, Britain’s biggest port, remains 18% down on pre-pandemic levels, while Frankfurt and Schiphol are up by 9%. Britain is losing out on tourism income and trade with key economic partners like the EU and US because Ministers continue to restrict travel for passengers fully vaccinated outside the UK. Trade routes between the EU and the US have recovered to nearly 50% of pre-pandemic levels while the UK remains 92% down.
Despite this, Heathrow's financing remains resilient, even with growing losses – Cumulative losses from COVID-19 have grown to £2.9bn. The airport has taken decisive management action to protect jobs and the financial resilience of the business reducing cash burn by over 50% versus the first half of 2019, with a 35% reduction in operating costs and a 77% cut in capex. Prudent financing action has increased liquidity by 49% to £4.8 billion since the start of the pandemic, providing sufficient cover to meet all commitments until October 2022 in the extreme no revenue scenario.
Image - Kevan James
With continued travel restrictions causing some uncertainty over passenger numbers, the airport has also taken the prudent step to seek creditor approval to waive the Heathrow Finance ICR covenant for FY 2021.
Heathrow continues to rebuild passenger confidence through safe journeys, investing in the latest COVID-19 secure technologies and process to achieve the Skytrax 4 rating, the highest achieved by a UK airport. Face coverings continue in use throughout the airport and social distancing remains in place to protect passengers and colleagues and rebuild confidence in travel.
Passenger demand is increasing from historic lows, but travel restrictions remain a barrier. Fewer than 4 million people travelled through Heathrow in the first six months of 2021, a level that would have taken just 18 days to reach in 2019. Recent changes to the Government’s traffic light system are encouraging, but expensive testing requirements and travel restrictions are holding back the UK’s economic recovery and could see Heathrow welcome fewer passengers in 2021 than in 2020.
Financial support should be in place as long as restrictions remain on travel – Travel is now the only sector still facing restrictions, and for as long as it does, Ministers should provide financial support including an extension to the furlough scheme and business rates relief. Heathrow pays nearly £120 million a year in rates, in spite of being loss making; the government is changing policy to prevent the airport from reclaiming overpayments and this is being challenged in the High Court.
On the other hand, the UK Government is showing global leadership with its transport decarbonisation plan and this is welcomed. The government’s jet zero aviation strategy shows that growth in aviation is compatible with achieving net zero emissions by 2050. The airport also welcomes the proposed mandate for progressively increasing use of Sustainable Aviation Fuel (SAF); together with a SAF price stability mechanism this can stimulate a massive increase in production of SAF, creating jobs across the UK.
Heathrow airlines are taking a lead on decarbonising aviation – Heathrow’s airlines have already committed to using a higher level of SAF by 2030 than in the Committee on Climate Change’s most optimistic case. The first shipment of SAF was recently received, an important proof of concept for blending SAF with kerosene at a major global hub airport.
Heathrow CEO John Holland-Kaye said:
"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 travellers at the end of July will start to get Britain’s economic recovery off the ground."
Images - Heathrow Airport Ltd unless stated
Books From KJM Today:
Want to know more about airport histories; the how, when and why?
The web's premier resource, with informative text and revealing photographs: