Half year losses spell out harsh realities of life for Copenhagen Airports
In announcing a DKK851 million loss before tax for the first half of 2021, Copenhagen Airports today spelt out the harsh realities of the impact of the COVID pandemic on aviation.
The loss came as just 1.4 million passengers passed through Copenhagen Airport (CPH) in the first half of the year compared to the 14.4 million that used the gateway in the first six months of 2019.
There are some grounds for optimism, as May and June marked the first time passenger numbers have improved on the same month a year ago.
However, it warns that “operating costs remain much higher than income flows”.
“The good news is that the situation is finally improving for the aviation industry, as passengers are slowly starting to return,” stated Thomas Woldbye, CEO of Copenhagen Airports A/S.
“The bad news is we’re still a long way off from normal conditions, and in the second quarter, we had to draw a further DKK300 million on our credit facilities to keep the airport open and in operation.”
Revenue dropped by 78.7%, or by DKK1,651.8 million, in the first half of 2021 compared with a revenue of DKK2,099.7 million in the first half of 2019.
Woldbye said: “Despite the steep plunge in revenue and the growing loss we’re incurring, it is our obligation to keep the port to Denmark open for freight and passengers. However, it’s expensive when the basis for our business has eroded.
“Our costs to keep the runways open are the same whether we have 70 or 700 take-offs and landings daily. As such, our debts increased by DKK734 million in the first half, despite us doing all we can to reduce costs and non-essential investments to a minimum.”
CPH is currently exploring whether the Company fulfil the criteria set up by the Danish Authorities and as approved by the EU Commission to receive further compensation for part of the airports fixed costs during the period November 2020 to April 20, 2021.
Cash position good and jobs on the horizon
In times of crisis, liquidity is critical. To follow that mantra, CPH negotiated an extension to its DKK6 billion credit facility until August 2023. At the same time, an extension of the current temporary waiver on certain debt conditions was agreed with the existing lenders until end of 2022.
“In a serious crisis, such as the one we’ve been struggling with since March of last year, cash is critical. We have a good relationship with our lenders, who continue to be supportive. They’ve been helping us through the crisis, where we’ve had to draw DKK2.1 billion on our credit facilities,” noted Woldbye.
CPH implemented a comprehensive cost-saving programme, among other things through a work-sharing scheme and by eliminating more than 800 jobs. That produced annual savings of up to DKK500 million.
“As passengers are returning and aviation is recovering, CPH is now looking at where it needs to re-employ people,” revealed Woldbye.
“The first step was to recall everyone currently on the work-sharing scheme. Our organisation is now leaner and more agile and therefore whilst we are rehiring, we are doing it recognising there continues to be uncertainty as to the future recovery.”
If the current growth trend continues, it will also create jobs in the almost 1,000 businesses operating in and around the airport. Prior to the crisis, more than 22,000 people were employed. Today, that number is about 13,000.
“The crisis has had an exceptionally big impact on the aviation industry. It’s not over yet by any means, but things are starting to improve,” Woldbye stressed.
Investments put on hold
Before the pandemic, CPH invested some DKK2 billion annually in developing the airport. As part of the extensive measures to cut costs in 2020, the entire investment programme was reassessed and reduced by DKK800 million. That focus has continued into 2021.
“We’ve put many projects on hold, reducing planned investments for the 2020–2022 period by more than DKK2 billion. As a result, the money we’re spending now is mainly on security and maintenance and on developing Terminal 3 beyond security control,” said Woldbye.
“This is a project that includes significant expansion of the baggage reclaim area and will be needed in the years ahead.”
Copenhagen Airports states that the global aviation industry remains in a very uncertain situation due to the COVID-19 pandemic and the resulting changes in travel guidelines and quarantine requirements for individual destinations as well as other factors, such as economic uncertainty and climate change.
Given the structural uncertainty that the COVID-19 crisis has caused regarding air travel in Denmark and the rest of the world and the continuing uncertainty as to the duration of this crisis, it believes that it is impossible to provide a realistic assessment of the financial outlook for CPH at present.
It nonetheless assures its stakeholders that it will “continuously assess and adjust the level of operating costs and investments and inform the market about the outlook for 2021 when there is a more secure basis than at present”.