Gatwick Airport has announced a £353m cut to its planned capital expenditure over the coming two years, after passenger numbers fell by 66% and led to a £321m loss in the first half of 2020. Building works are being reduced by £157m for 2020, and a further £196m in 2021.
The news, revealed in the UK’s second largest airport’s half yearly financial results, came hot on the heels of up to 600 job cuts announced as part of a company-wide restructure announced by the airport last week.
The airport revealed that despite an encouraging start to the year passenger numbers at Gatwick fell by 66% in the first six month ended 30 June, 2020 due to the impact of Covid-19. The airport remained open throughout the pandemic, however all revenue streams were impacted and the collapse in passenger demand led to a 61.3% fall in revenue and a £321m loss. EBITDA fell 98.3%.
Decisive and swift action was taken to protect the financial strength of the business, following the spread of Covid-19 in March. Planned capital expenditure has been reduced by £157m for 2020 and £196m for 2021. Operational costs have been also reduced by over £100m through a variety of actions including consolidating air traffic to one terminal allowing for infrastructure shutdowns, severance programmes and termination of fixed term contracts, and improving efficiencies of its services in line with reduced airline and passenger demand.
To improve its liquidity, in April 2020 Gatwick secured a £300m loan with a consortium of banks. As at 30 June 2020, Gatwick held a cash balance of c.£326m. In light of the forecast impact on its financial covenants, Gatwick has commenced a three-week consent solicitation process following successful discussions with its lending banks and with bondholders forming a special committee of the Investment Association, in aggregate representing c.46.9% of total secured debt.
Stewart Wingate, Gatwick Airport chief executive officer, said: “Like any other international airport, the negative impact of Covid-19 on our passenger numbers and air traffic at the start of the year was dramatic and, although there are small signs of recovery, it is a trend we expect to continue to see. However, we are focussed on ensuring the business remains robust and is best placed to take advantage of future growth.
“As with any responsible company we have protected our financial resilience by significantly reducing our operational costs and capital expenditure. We are going through a proposed company-wide restructuring programme and I want to thank all my staff for their hard work to date whilst we go through this difficult time. We will emerge a fitter and stronger organisation, best placed to remain flexible and agile in responding to growth opportunities. This includes continuing to do all we can to protect the safety and wellbeing of our staff and passengers.
“In this post Covid-19 travelling world, we are working hard with our airlines to ensure we continue to offer our customers a wide choice of destinations and carriers. We also expect, next year, to progress our plans to bring the existing Northern (stand-by) Runway into routine use which, as we rebuild our passenger numbers over the next four to five years, will enable us to offer even more travel choice. We will ensure we continue to deliver our operation mindful of our environmental, social and governance responsibilities. We want to rebuild better.
“Despite the immediate challenges I remain resolutely optimistic that Gatwick will recover and retain its position as one of the UK’s leading travel hubs and economic driver for the region.”
Gatwick currently has 18 airlines flying to 115 airports in 42 countries.