As the coronavirus spread from China and national borders across the world were closed in February and March, air traffic ground to a virtual halt during the last few weeks of the first quarter.
“Normally, we have 83,000 travellers on a daily basis. In the last week of March, we had an average of 1,600. In April, that number dropped to fewer than 900 per day. More than 90 aircraft are parked long term at the airport. We have decided they can park free of charge to reduce the airlines costs. A total of 143 of the 146 shops and outlets serving food and drinks are closed. In other words, virtually all of our income and our business platform has been wiped out in only a matter of a few weeks,” says Copenhagen Airport CEO Thomas Woldbye.
The standstill in March was so abrupt that CPH is reporting historically poor quarterly results despite near normal operations in January and February. Profit before tax landed at DKK 79.4 million (excluding for one-off items). That is a reduction of 69.3% compared to last year. Revenue amounted to DKK 764.3 million, 21.4% lower year-on-year.
“With virtually no air traffic during the months of April and May and the extensive uncertainty as to when the world will reopen, we are unable to provide guidance for the near future. However, 2020 will be a challenging and difficult year for the aviation industry. With that said, however, CPH will be ready to help restart the economy and the airport when the world reopens,” Thomas Woldbye emphasises.
Cutting costs and investments by one billion Danish kroner during the rest of the year
CPH is currently rolling out a comprehensive plan intended to preserve cash by reducing operating costs and postpone investments planned for the rest of the year for up to one billion Danish kroner.
“Being categorised as critical infrastructure, our job is to remain in operation even if that currently implies large daily losses. To address that situation, we have established substantial credit facilities to ensure CPH remains in operation during the upcoming period,” says Thomas Woldbye.
In addition, CPH is making use of the Danish government’s financial support packages. Effective from the second quarter, CPH will receive compensation for about one third of its current wage and salaries costs through the wage and salary compensation scheme. As a result, CPH has so far avoided redundancies. Instead, 2,200 of its 2,600 employees have been temporarily furloughed in a rotation scheme.
“We’re doing everything we can to avoid redundancies, but of course it will depend on the depth and duration of the crisis as well as on the support measures provided by the government,” says Thomas Woldbye.
“We’re seeing the effects in our local community, Tårnby, which as a municipality has suffered a greater spike in unemployment than almost anywhere in the country. However, there are never any guarantees, and if this crisis leads to permanent changes to the aviation industry, we will be forced as a business to consider the new situation. Until that happens, we will do everything in our power to make it through the crisis and salvage all we can, including our position as a European hub,” he says.
In terms of liquidity, CPH is well prepared for the coming period. In May 2020, CPH entered a 2-year facilities agreement totalling DKK 6.0 billion with a club of banks. The new facility is a combination of a 2-year term loan of DKK 2.0 billion and a 2-year credit facility of DKK 4.0 billion. Simultaneously, CPH entered into waiver agreements with existing lenders, providing CPH relief form certain loan covenants until and including Q1 2021. The new facility and the waiver agreements ensures that CPH will continue to be able to meet its financial and investment commitments.
CPH creates jobs and welfare
The airport is home to some 1,000 companies and airlines that combined employ about 22,000 people. Their services span everything from handling aircraft, baggage and passengers to catering as well as construction, maintenance and retail and restaurant services. Many of these businesses have had to dismiss staff. Most recently, SAS has announced redundancies of up to 1,700 employees in Denmark and on 20 April, the airline Norwegian announced that it is making redundant more than 600 Danish pilots and cabin crew.
“These are incredibly sad messages, and it only shows how serious this crisis is for the entire aviation industry. Over the years, we have worked closely with both SAS and Norwegian on route development. Before the crisis hit, the two companies accounted for 51% of traffic at Copenhagen Airport,” notes Thomas Woldbye.
According to data from Copenhagen Economics, the aviation industry contributes jobs and wealth creation in Denmark worth as much as DKK 100 billion, including DKK 30 billion through Copenhagen Airport alone.
“Keeping Denmark connected with the rest of the world is our primary objective. It is essential for our welfare that Denmark is able to trade and stay connected with the rest of the world. There’s a risk that we might lose all that,” says Thomas Woldbye.
Green transition not forgotten
Despite the crisis, Copenhagen Airport intends to continue seeking to work with its partners, the airlines, the public sector, NGOs and other parties to ensure that aviation of the future will be sustainable, and the entire Danish aviation industry will achieve climate neutrality by 2050.
“We also intend, until further notice, to continue the airport’s climate strategy and aim for the targets we’ve set for making CPH’s operations carbon-neutral and completely emissions-free by 2030. However, the pace in the crucial green transition will depend on how we get through the crisis. The more economic muscles we have, the greater strength we can put into the sustainable transition of aviation once the world reopens for trade, travel and air traffic,” says Thomas Woldbye.