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Heathrow reports £2bn loss amid ‘devastating’ impact of pandemic

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Saleha Riaz
·4-min read
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Heathrow saw passenger numbers collapse to 22 million while cargo volume was down 28%. Photo: Getty Images
Heathrow saw passenger numbers collapse to 22 million while cargo volume was down 28%. Photo: Getty Images

Once Europe’s biggest airport, Heathrow suffered an annual loss of £2bn ($2.8bn) in 2020, as passenger numbers were hit and the pandemic took a major toll on the travel industry.

Heathrow Airport Holdings, which runs the airport, said this highlighted “the devastating impact of COVID-19 on aviation” as passenger numbers collapsed to 22.1 million, levels not seen since the 1970s.

Overall revenue fell 62% to £1.2bn and adjusted EBITDA fell to £270m.

“Government policies over recent months have effectively closed borders. We have had no government support, other than furlough, and have not been given relief from business rates, unlike other airports, retail and hospitality businesses,” Heathrow said in a statement.

It added that the UK budget, to be announced in March, will be a “key opportunity” for chancellor Rishi Sunak to support the travel sector by providing 100% business rates relief and extending the furlough scheme.

“We can be hopeful for 2021, with Britain on the cusp of becoming the first country in the world to safely resume international travel and trade at scale,” said Heathrow CEO John Holland-Kaye.

He added that prime minister Boris Johnson will have “the unique opportunity” to secure global agreement on a common international standard for travel when he hosts the G7 in June.

The company also said it saw a 28% decline in cargo volumes, which "shows the cost to the economy of shutting down aviation."

It explained that passenger planes from Heathrow are the UK’s global trading network, carrying British exports and inbound supply chain and that the UK's economic recovery will be held back until long haul passenger flights are restarted, especially to key markets such as the US.

READ MORE: Heathrow no longer Europe's biggest airport as it slams lack of passenger testing

In October Heathrow had significantly revised down its 2021 forecasts as the pandemic and restrictions continue to hit air travel, predicting 37.1 million passengers this year. It had forecast 62.8 million in June.

‘’Heathrow has been plunged into the toughest crisis in its history and is fighting for survival as demand for international travel has plummeted," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

She said "there had been high hopes fortunes would change rapidly following vaccine breakthroughs but the mutation of the virus causing fresh spikes of infection across the world has seriously delayed its recovery."

She noted that Heathrow has a £3.9bn support cushion of liquidity to see if through, "but there could be yet more turbulence ahead if restrictions severely curtail the summer season."

Joe Morris, partner at law firm, Gowling WLG, said that the knock on effect of the pandemic on airport traffic and footfall "has undoubtedly been damaging. However, the accumulative result of passenger numbers swelling as planned lockdown lifting measures take effect should help boost investment in Heathrow as its retail network, as well as flight numbers, look towards recovery."

There is some optimism around travel later in the year. UK prime minister Boris Johnson set out his roadmap out of lockdown in parliament on Monday.

The rules are not clear on when exactly both domestic and international travel will be allowed, but it does appear current strict restrictions will be eased.

Included in Johnson's four-step plan was to allow international travel potentially by 17 May, although not any earlier, and subject to review.

Johnson said current restrictions on international leisure travel will only be eased after a review in April, led by transport secretary Grant Shapps. The market appears to be positive about the outcome of this review.

Earlier this month, Shapps had said foreign holidays will remain banned until “everybody” has had a coronavirus vaccine. His comments sparked an angry response from the travel industry.

Meanwhile domestic holidays will also be prohibited until 12 April at the earliest, which is when the second stage of the roadmap will kick in.

Airlines and travel firms have seen a bump in demand since prime minister Boris Johnson's proposed roadmap out of lockdown was laid out.

In the hours after the announcement, budget airline EasyJet (EZJ.L) said bookings by UK customers for the summer season were more than four times higher compared with the same period during the previous week.

According to the data, the most popular destinations for this summer are beach resorts including Malaga, Alicante and Palma in Spain, Faro in Portugal and the Greek island of Crete. August is the most booked month, followed by July and September.

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