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19.05.2022

CPH interim report: DKK 171 million loss before tax, but optimism prevails despite situation of war and pandemic

Prospects are brightening for Copenhagen Airports as the company reports a Q1 loss before tax of DKK 171 million, a substantial improvement on the DKK 436 million loss incurred in the first quarter of 2021. At the end of March, six out of ten travellers were back, and the growth trend looks set to continue despite war and pandemic. 

Almost 3.3 million passengers passed through the terminals at Copenhagen Airports during the first three months of 2022. This was a significant improvement on the Q1 2021 period when CPH recorded only 430,000 travellers.

“For this year’s first quarter, we’re reporting a loss before tax of DKK 171 million. This also shows that the COVID-19 crisis is still far from being over for the aviation industry,” says Thomas Woldbye, CEO of Copenhagen Airport.

Revenue for the first quarter ended at DKK 577 million. While this is a 205.1% year-on-year increase from only DKK 189 million in Q1 2021, it is still 40.6% less than the Q1 revenue in 2019, the last year before the volatile COVID-19 pandemic struck.

“Just as we thought we were seeing light at the end of the tunnel, the Omicron variant struck towards the end of November last year. The widespread infections halted our recovery for a couple of months, but already in February things began to improve and the momentum continued in March. By the end of the quarter, six out of ten passengers were back compared to the figure for 2019, and growth has continued since despite war and pandemic,” says Thomas Woldbye.

 

Growing air travel in Europe

The airlines have flights to 135 destinations this summer, mainly in Europe – and all indications are that the number of travellers will continue to grow.

“European air travel looks set to approach normal levels over the summer, while the recovery is slower on long-haul intercontinental routes – particularly to China and the rest of Asia. The long-haul routes play an important role in our position as a hub, because many passengers make their way to their final destinations via Copenhagen. That makes it important for us to win back that traffic,” says Thomas Woldbye.

A breakdown of the current passenger volume shows that long-haul passengers account for 43% of the traffic shortfall compared with 2019. In addition, traditional popular travel destinations like London, Stockholm, Berlin and Helsinki are still a far from prior years. In fact, they account for 18% of the drop in passenger numbers. However, there is every indication that these travellers are returning as well. London is once again the biggest destination out of CPH.

 

More hands needed

More travellers mean more hands are needed at the airport. Copenhagen Airport is still the setting of one of Denmark’s largest financial ecosystems, with about 1,000 companies operating in and around the airport. When the crisis peaked in early 2021, staff numbers had decreased to 13,000 from 22,000 pre-COVID.

Now, once again, the companies need to take on more employees. This also applies to CPH after the company had to eliminate 800 jobs. Initially, CPH will hire about 400 people, including 300 for the security checkpoint.

“It’s really great news that companies are all hiring again. That’s no easy task in a job market under pressure, but there’s a lot of interest in helping to rebuild the aviation industry,” says Thomas Woldbye.

CPH organised a job fair on 31 March in collaboration with a large number of companies, the Municipality of Tårnby and the City of Copenhagen.

“We had an unusually strong turnout with some 2,200 people attending the job fair in Hangar 145, which goes to show that people take great interest in being a part of the airport’s journey,” says Thomas Woldbye.

 

Growing debt

What has proved to be the worst crisis for CPH in living memory is now coming to an end, but the past two years have indeed been costly. When the crisis hit in March 2020, the first and most important thing to do was to ensure CPH had sufficient liquidity to keep the airport running, even though virtually all traffic and income streams had been eliminated. At the time, CPH secured extra liquidity of DKK 6 billion.

Including the loss incurred in the first quarter, CPH has now borrowed a total of DKK 2.2 billion to keep the airport running and to make the necessary investments.

“The growing burden of debt poses a challenge to our ability to invest in the development of the sustainable airport of the future and to maintain our position as an important northern European air traffic hub,” explains Thomas Woldbye.

For the post-2023 period, CPH aims to amend the regulatory model underlying the charges agreement between Copenhagen Airport and the airlines, so it will also address the significant accumulated debt.

“It’s still too early to say what effect an amended charges model will have on the actual price level, but we need to be able to repay our debt and still have the financial strength to invest for the future,” says Thomas Woldbye.

 

Outlook for 2022

Whilst the passenger volumes for 2022 have had a better start than last year, the global aviation industry continues to face uncertainty from the ongoing COVID-19 pandemic. CPH expects that the pandemic will continue to affect the number of flights and passengers, both in terms of leisure and business travelers, throughout 2022. Uncertainty for travelers and continued waves of infection may result in renewed disruption of travel patterns. Currently, we are unable to predict if and how the pandemic will affect aviation during the fall/winter 2022.

The war in Ukraine, combined with raising inflation, increased fuel, and energy prices have brought added uncertainty to the future travel patterns.

Regardless of the above-mentioned uncertainties, European air traffic is anticipated to improve in 2022 compared with 2021. The long-haul international routes, however, continue to be severely affected by restrictions and passenger hesitation although countries are slowly reopening. Despite the current uncertainties, an improvement in year-over-year results is expected for CPH, but we are not in a position to provide detailed guidance on CPH’s financial performance for 2022.

CPH will monitor the situation closely and will continuously assess and adjust the level of operating costs and investments. CPH will update the financial market as and when a more precise financial outlook can be provided.

You can download the announcement here.