CPH interim report: DKK 851 million loss before tax, but the clouds are slowly clearing for the aviation industry

Serving just 1.4 million passengers in the first half of 2021, a mere fraction of the H1 2019 figure of 14.4 million, Copenhagen Airports incurred a loss before tax of DKK 851 million for the period. May and June were the first months of growing passenger numbers, and that trend is expected to continue. However, operating costs remain much higher than income flows. 

After winter and spring seasons with aviation travel heavily restricted and a loss of 90–95% of traffic, prospects began to brighten towards the end of the first half with early signs of passenger growth. In June, the drop in passenger numbers was a little lower at 82.6 relative to 2019, the last year of pre-pandemic normality.

 “The good news is that the situation is finally improving for the aviation industry, as passengers are slowly starting to return. 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 DKK 300 million on our credit facilities to keep the airport open and in operation,” says Thomas Woldbye, CEO of Copenhagen Airports A/S.

Revenue dropped by 78.7%, or by DKK 1,651.8 million, in the first half of 2021 compared with a revenue of DKK 2,099.7 million in the first half of 2019.

“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 DKK 734 million in the first half, despite us doing all we can to reduce costs and non-essential investments to a minimum” explains Woldbye.

CPH is currently exploring whether the Company fulfill 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 DKK 6 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 DKK 2.1 billion on our credit facilities,” says 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 DKK 500 million.

“As passengers are returning and aviation is recovering, CPH is now looking at where it needs to reemploy people. 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,” says Woldbye.

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 stresses.

Investments put on hold
Before the pandemic, CPH invested some DKK 2 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 DKK 800 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 DKK 2 billion. As a result, the money we’re spending now is mainly on security and maintenance and on developing Terminal 3 beyond security control. This is a project that includes significant expansion of the baggage reclaim area and will be needed in the years ahead,” says Woldbye.

Battle for routes in Europe
With Europe’s reopening, large parts of the route networks have been restored, albeit with fewer departures. CPH’s ambition to be northern Europe’s leading international aviation hub is intact, but competition for that position has intensified significantly during the crisis.

“Despite living in a small country on the outskirts of Europe, Danes have for decades been accustomed to having many more travel options than otherwise warranted by the country’s size. As a result, we’ve had opportunities to travel the world whether for leisure or business, and to attract tourism and investments to Denmark. This is by no means a given,” says Woldbye.

“It’s absolutely crucial for the airlines’ motivation to run a business in Denmark where passenger flows now seem to be recovering, but it’s also important that we operate an efficient and attractive airport to encourage the return of old routes but also attract new ones,” he continues.

After the first half of 2021 during which only one in three seats was sold, traffic levels increased in June and the load factor rose to 60%.

“We need air traffic and our earnings to really accelerate, just as it is crucial to have a flexible and efficient management of Corona efforts, if CPH is to stay competitive and attract routes to Denmark and if we’re to retain our ability to invest for the green transition while still being a good investment for our owners,” Woldbye emphasises.

Copenhagen Airport continues to push for green transition in the aviation sector
The entire aviation industry has been caught up in a severe economic crisis that has affected airports, airlines, aircraft manufacturers and the many businesses operating in the field of aviation. However, regardless of the sectors current economic crisis, solving the climate challenge for aviation remains essential to Copenhagen Airport.  

 “We continue to engage with national and international partners and decisionmakers to ensure the necessary regulatory framework and funding for an accelerated green transition in aviation and to facilitate Danish production of sustainable aviation fuel based on renewable energy,” says Woldbye.

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 is not possible to provide a realistic assessment of the financial outlook for CPH at present.

CPH 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.

Read full announcement here