CPH interim report: Pre-tax loss of DKK 773.6 million for the first three quarters
Growth in passenger numbers during the summer brought CPH closer to being able to finance operations at the airport in the third quarter. In addition, CPH received DKK 120 million in government support packages for this year and the year before, which meant that CPH closed out the third quarter at a DKK 77.2 million profit before tax. September’s passenger numbers came out at 46.2% of the 2019 figure. The accumulated loss before tax for the first three quarters amounts to DKK 773.6 million, but prospects are brightening
A total of 3.8 million passengers passed through Copenhagen Airport’s terminals during the third quarter, and the traffic volume in September amounted to 46.2% of the volume in the same month of 2019, the last year of pre-pandemic normality.
“We saw air travel beginning to make a comeback in Europe during the summer, supported by Covid passports, vaccines, eased restrictions and the underlaying demand for travel,” says Copenhagen Airport CEO Thomas Woldbye.
While European traffic is making a comeback, things look very different for the long-haul intercontinental routes to the US or Asia, for example. Passenger numbers here were at a mere 13% of the 2019 levels, down from 2.9 million to 0.4 million during the first nine months of the year.
“Travel restrictions are largely lifted in Denmark, and the US and Thailand are reopening for tourism and travel in November. That’s good news for us. The US is one of the world’s most important markets. Before the coronavirus crisis, as many as one million people travelled on routes from the US to Denmark every year. It’s also essential for our status as a hub that transfer traffic starts up again, so passengers from the Nordics, the Baltics and Northern Europe can fly via Copenhagen to destinations in North America and Asia,” says Thomas Woldbye.
Borrowings due to the pandemic now at DKK 2.2 billion
Despite the increase in passenger numbers during the summer, the early months of the year – when activity at the airport resembled business in 1962 with only 5,000 passengers daily – continue to weigh on the performance for 2021 year to date.
Revenue was down by 67.5% relative to the first nine months of pre-pandemic 2019, ending at DKK 1,073.7 million (relative to the same period of 2020, revenue was down 19.0%).
For the third quarter, revenue totalled DKK 625.7 million, a 47.8% decline relative to the third quarter of 2019.
Having cut both our costs and investments around DKK 2 billion over the past year, we are now getting closer to a level of activity that will enable us to finance airport operations as well as maintenance costs and necessary investments. We have had to draw total of DKK 129.8 million on our credit facilities in the third quarter.
In May, CPH negotiated an extension to its DKK 6 billion credit facility until August 2023. At the same time, the current temporary waiver on certain loan terms was extended till the end of 2022.
“Cash is critical in a severe crisis, such as the one we have been struggling with since March of last year. Currently we have had to draw DKK 2.2 billion on our credit facilities to keep the airport running. This is money we will have to repay once we get to the other side of the crisis,” explains Thomas Woldbye.
Operations supported by government support packages
Due to the catastrophic impact on the aviation industry, many wholly or partly government-owned airports and carriers in Europe have received extensive government support.
The EU Commission have accepted that the Danish government can provide some extraordinary support for our operations due to the COVID-19 restrictions. This means that CPH in the third quarter received DKK 120 million as part of the government’s support packages relating to fixed costs which have been made available both this year and last year. The amount is recognised as other operating income and taking this into account, CPH recorded a profit before tax for the third quarter.
“The government’s efforts have eased the massive pressure on our cash flows with the extra support for our operations. Our costs of keeping the runways and the airport manned and open are almost the same whether we have 70 or 700 operations daily. So, keeping the airport open for cargo and what limited air traffic we had during the early months of the year was a costly affair,” says Thomas Woldbye.
More jobs in and around Copenhagen Airport
The thousand or so companies operating at and around Copenhagen Airport have also felt the effects of the growing business activity during the summer months.
While total headcount fell from upwards of 22,000 to around 13,000, many of the companies are currently rehiring. That applies not only to the shops in the terminals but also to subcontractors, airlines and the ground handlers checking in passengers and handling baggage as well as aircrafts etc. on behalf of the airlines.
Copenhagen Airports A/S is also rehiring for some of the more than 800 jobs that were lost last year.
“There’s a lot of uncertainty surrounding the pace of recovery, and that affects the speed and extent to which we are able to rehire people, so it is a process that requires very careful consideration and is hampered by the general lack of manpower in Denmark,” explains Thomas Woldbye.
Amid the crisis, passengers selected Copenhagen Airport as the winner in the category ‘Best Airport Staff in Europe 2021’ in this year’s international Skytrax survey.
“This is a great achievement and well deserved accolade of our staff. They have truly gone the extra mile to provide excellent service to our passengers at a time of constant change and challenges,” says Thomas Woldbye.
Green transition under pressure
Our ambitions remain intact for the green transition of aviation. In 2019, Copenhagen Airport was certified as carbon neutral under the Airport Carbon Accreditation programme. The target is for the airport to be emissions-free already by 2030.
“The green transition is a particular challenge just now because airlines and airports are under extreme financial pressure. That’s why it’s crucial that any future levies imposed on air travel are spent specifically to support a sustainable transition of aviation and not on anything else,” Thomas Woldbye stresses.
In this context, the Aviation Climate Partnership has already proposed to charge about DKK 30 per airline ticket and to channel the money raised to a climate fund to promote competitive green fuels produced in Denmark.
“We have an opportunity to create a new industry adventure for Denmark involving green fuels. We must strive to develop aviation, rather than pushing it out. It certainly wouldn’t benefit the global climate if airlines moved part of their business out of Denmark to operate elsewhere,” he emphasises.
The future development of the COVID‐19 pandemic continues to be uncertain. Regulation or other limitations restricting international travel may still have a significant adverse effect on the aviation industry as well as passenger levels.
Revenue is mainly passenger‐driven and hence remains equally uncertain, while CPH’s cost base for the rest of the year largely fixed. This uncertainty is reflected in the range for the profit before tax outlook. Based on current conditions, management expects a loss before tax for the full year within the range of DKK ‐800m to DKK ‐700m.
CAPEX spend for the year is expected to be DKK 550‐600 million.
Dividends to shareholders have been suspended for now due to the financial situation and conditions for receiving compensation from the Danish government’s support packages. Furthermore, the DKK 6 billion credit facilities agreement and the loan covenant waiver agreements with existing lenders, which were entered into in May 2020 have been extended, and in this connection CPH has agreed not to pay out dividends in the period until 22 August 2023.