CPH financial statements: pre-tax loss of DKK 667 million, but CPH continues to invest in the future
Despite a pre-tax loss of DKK 667 million in 2021, confidence in a sustainable future remains strong. CPH will invest more than DKK 4 billion in developing the terminals in the coming years. The busy summer saw optimism return following a winter in which the level of activity was thrown back 60 years. 9.2 million passengers passed through CPH in 2021. Far more are expected this year, when climate will be high on the agenda.
For two years in a row now, the worst crisis in aviation since the Second World War has turned profit into triple-digit million-kroner losses – specifically, from a profit of DKK 1.3 billion in 2019 to pre-tax losses in 2020 and 2021 of DKK 838 million and DKK 667 million respectively.
In 2021, 9,179,654 passengers passed through Copenhagen Airport. This equates to barely a third of the passengers before COVID-19, though 22% more than in 2020.
Due to COVID-19 and travel restrictions, activity in the first half of the year was at an early-1960s level. But during the summer and autumn, air travel made a comeback, with the number of passengers in the second half of the year reaching around 50% compared to the pre-COVID period.
“In just a few months, the number of passengers increased more than five-fold, from 184,000 in April to 1.2 million in July,” says Thomas Woldbye, CEO, Copenhagen Airport. “This shows that the desire for travel is intact. It now looks as if the COVID-19 pandemic is on the wane, so we can all once again travel for business and leisure. This is good news.”
Quiet winter severely impacts financial statements
Although the desire for travel in the summer and autumn started turning things around, the financial statements for 2021 are severely impacted by the very low passenger numbers in the first months of the year.
“The bad news is that we’re emerging from 2021 with a total pre-tax loss of DKK 666.5 million. This is the second year in a row in which we’ve suffered a loss. But the good news is that we came out of the third and fourth quarters with small operating profits of DKK 77 million and DKK 107 million respectively.”
However, CPH still had negative cash flow in the second half of the year and therefore had to continue drawing on credit facilities.
Revenue for 2021 was DKK 1.8 billion – a fall of 60% compared to 2019, but a small increase of 12% compared to 2020.
Revenue of DKK 865.5 million from the aeronautical business area (the charges the airlines pay to use the airport) was 24.5% higher than in 2020 – but relative to 2019 this represents a fall of 64.2%.
Revenue of DKK 895.4 million from the non-aeronautical business area, comprising the shopping centre, parking, hotels and leasing of premises, was 1.7% higher than in 2020 – but 53.6% lower than in 2019.
The financial statements include DKK 260 million that the EU Commission allowed the Danish government to pay in compensation for fixed costs in light of the coronavirus restrictions in 2021.
Debt is a challenge
To date, CPH has drawn down DKK 2.1 billion from its credit facilities to keep the airport running and carry out essential investments. The growing debt is a challenge for CPH’s ability to invest in developing the sustainable airport of the future.
The current charges agreement between CPH and the airlines could not have envisaged that the aviation industry would be hit by the worst crisis in living memory, nor that the assumptions on which the agreement is based regarding, among other things, growth and new routes would essentially be rendered invalid. The agreement was therefore adjusted in March 2021.
“In the period after 2023, CPH wants the regulatory model to be adjusted to address the enormous debt we’ve accumulated in keeping the airport running. We need to be able to pay off the debt while retaining the financial strenght to invest in capacity, safety and the green transition,” says Thomas Woldbye.
Ready to develop CPH
During the crisis, CPH has simplified and rethought a number of processes while reducing costs relative to the 2019 level and deferring planned investments worth around DKK 2 billion. All the same, in 2021 CPH was able to introduce a new baggage system and open the new Comfort hotel and conference centre.
The ambition to be one of the world’s most efficient and sustainable airports remains intact. This is vital if CPH is to fulfil its most important social responsibilities: to secure Denmark the best possible air connectivity for travelling out into the world for work and leisure, and to help ensure the green transition of the aviation industry.
“We're confident about the future. So, despite the crisis and the growing debt, in the autumn we resolved to continue with our biggest investment of recent times: the development of Terminal 3 airside with a much larger baggage reclaim area, more room for passport control and passengers, and improved facilities for airlines and customers,” says Thomas Woldbye.
After three years of preparatory work, a DKK 2.1 billion turnkey contract was signed, which will run for the next seven years. The total investment will be more than DKK 4 billion.
The green transition is under way
Denmark is a small country on the fringes of Europe. Air transport is essential to our prosperity and development. We do not need to fly less. But we do need to fly in a greener, more sustainable way.
The sustainable transition of aviation was addressed by both Her Majesty Queen Margrethe II and Prime Minister Mette Frederiksen in their New Year’s speeches.
“We’re ready to support the Prime Minister’s ambition for domestic flying to be green by 2030 – and for one in six domestic routes to be flown solely on sustainable fuel by 2025. This will be challenging, but not impossible,” says Thomas Woldbye.
Copenhagen Airport is a co-founder, together with Ørsted, Maersk and others, of the Green Fuels for Denmark initiative. The ambition is to establish Danish production of sustainable Power-to-X fuel. The technology exists – but the challenge is that it is currently very expensive.
“Danes are overwhelmingly positive about paying a little extra for their flight if the money goes to the green transition and sustainable fuel,” Thomas Woldbye continues. “We hope soon to establish the Aviation Climate Fund, where money from a climate levy on flights will be returned to the industry for specific initiatives to support the green transition of aviation – for example, the production and sale of competitively priced green fuel.”
More jobs in aviation
CPH represents one of Denmark’s largest economic ecosystems. Around 1,000 companies operate in and around the airport. By the time the crisis had reached rock bottom at the start of 2021, the number of employees had fallen from 22,000 to 13,000.
Now many companies at the airport are recruiting again, including the shops in the terminals, suppliers, airlines and ground handlers, who work on behalf of the airlines to check in passengers, handle baggage and aircraft etc.
At CPH 800 positions were disbanded in 2020. The airport is now rehiring, however uncertainty remains about the pace of the restart and how many people CPH will re-employ and how quickly.
“We’re confident about the future and believe in our employees, who since March 2020 have gone the extra mile to deliver the best possible service to passengers in a time of almost endless changes and obstacles,” says Thomas Woldbye. “The board and management have recognised this by awarding all employees an extraordinary bonus of DKK 10,000, to be paid on 31 March. It is very well deserved.”
Passengers also appreciate the efforts made. According to surveys, which resumed in the second half of the year, 84% of passengers were satisfied with their experience at CPH. This is on a par with the satisfaction ratings in 2019 before the COVID-19 pandemic started.
Furthermore, in Skytrax’s international survey in 2021, passengers rated CPH as number 1 in the category “Best Airport Staff in Europe”.
Financial Outlook for 2022
Whilst 2022 has started better than 2021 in terms of passenger levels, the global aviation industry continues to face uncertainty from the ongoing COVID-19 pandemic. This makes it difficult to provide detailed guidance on the financial performance for the coming fiscal year.
European air traffic is anticipated to improve in 2022 versus 2021. However, the long-haul international routes continue to be severely affected by restrictions and passenger hesitation even though countries are slowly reopening. Despite the current restrictions, an improvement in year-on-year results is expected for CPH, as passengers are the prime conduit for our revenue.
CPH expects that the pandemic will continue to affect the number of flights and passengers, both leisure and business, throughout 2022, and that volatility and continued waves of infection may result in renewed disruption of travel patterns.
Additionally, the crisis in Ukraine combined with increasing fuel and energy prices has increased uncertainty. Due to the continued uncertainty, CPH will monitor the situation closely and continue to assess and adjust the level of operating costs and investments on an ongoing basis.
CPH will advise the financial market as and when a meaningful financial outlook can be provided.