Heathrow Airport upgrades passenger traffic forecasts but losses top £4 billion

Heathrow has maintained a robust programme of dining and retail openings since traffic recovery began; Big Smoke Taphouse & Kitchen in T2 pictured

UK. London Heathrow Airport has upgraded its forecasts for passenger traffic for 2022 to 65% of pre-pandemic levels, as eased UK travel rules deliver a surge in outbound leisure traffic.

The UK airport should serve 52.8 million passengers in the year, up from the previously projected 45.5 million, but management remains cautious about the months ahead.

Heathrow revenue breakdown by channel in Q1 2022; click to enlarge

The airport company said in a statement: “Demand remains very volatile and we expect these passenger numbers to drop off significantly after the Summer. We are already seeing airlines 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. We are still in a pandemic with many markets still closed, nearly 80% with testing and vaccination requirements and another variant of concern could see the return of UK travel restrictions.”

Heathrow retail revenue by category; click to enlarge

Despite increased outbound demand, Heathrow said it is not forecasting a return to profit and dividends in 2022. Although Q1 2022 revenue climbed to £516 million (+212% year-on-year) and adjusted EBITDA turned positive to reach £273 million, total pandemic losses have now topped £4 billion. In Q1, pre-tax losses were £191 million compared to £307 million a year earlier.

Heathrow welcomed 9.7 million passengers in Q1 2022 in line with forecasts. The figure was almost five times the 1.7 million number from a year ago. The company said: “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 18 March.”

First-quarter retail revenue reached £101 million, up by +274.1% year-on-year. This was driven by higher passenger numbers and the mix of retail services available in the period compared to last year when government restrictions on non-essential shops were in place. Retail revenue per passenger slipped by -35% to £10.46. The figure was distorted due to the significant change in passenger numbers, stated the airport company.

Key financials for Q1 2022; click to enlarge

Heathrow Airport management was critical of Civil Aviation Authority proposals for the next regulatory period which it said would hold back its competitiveness.

CEO John Holland-Kaye said: “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.”

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