Heathrow’s traffic growth kickstarted in 2022, but volatility remains

Credit: London Heathrow Airport (LHR)

London Heathrow Airport (LHR) welcomed 9.7 million passengers in Q1 2022 in line with its forecasts. January and February (2022) were much weaker than expected due to Omicron-related travel restrictions, while March demand increased after the unexpectedly quick removal of all UK travel restrictions on 18 March 2022.

Heathrow will remain lossmaking in 2022 as COVID-19 losses top £4 billion

Despite increased outbound demand, Heathrow is not forecasting a return to profit and dividends in 2022. Although Q1 2022 revenue climbed to £516 million and adjusted EBITDA turned positive to reach £273 million, total pandemic losses have now topped £4.0 billion. Heathrow liquidity remains strong with gearing decreasing to pre-pandemic levels

Plan for a safe and smooth summer getaway

Once it became clear UK travel restrictions would be fully lifted, Heathrow’s colleagues worked extremely hard putting in place a plan to welcome back a surge of last-minute bookings for the Easter getaway, with over 95 per cent of passengers through security within five minutes. Heathrow is planning to continue delivering a good service over a busy summer, opening up Terminal 4 by July 2022 and recruiting over 1,000 new security officers. The airport also assisting airlines, ground handlers and retailers to fill over 12,000 vacancies across the airport. A smooth arrival journey is more important than ever as many people begin travelling again for the first time, and Heathrow relies on Border Force having the right plans and resources in place for the summer peak

Summer travel bubble, but winter freeze on horizon

Heathrow are seeing a temporary increase in demand driven by UK outbound leisure passengers taking advantage of removed UK travel restrictions and redeeming travel vouchers accrued during the pandemic. As a result, the airport is updating its 2022 passenger forecast from 45.5 million to 52.8 million, which represents a return to 65 per cent of pre-pandemic traffic this year (2022). However, demand remains very volatile and Heathrow expect these passenger numbers to drop off significantly after the summer. Heathrow are already seeing airlines cancelling services into the autumn and the realities of higher fuel costs, lower GDP growth, the war in Ukraine and the ongoing pandemic will drag on demand. The UK is still in a pandemic with many markets still closed, nearly 80 per cent with testing and vaccination requirements and another variant of concern could see the return of UK travel restrictions

Passengers want a good experience, the CAA’s proposal will make it worse

The operational challenges seen across the UK’s aviation industry in April (2022) show how much passengers want easy, quick and reliable journeys every time they travel. The airport’s H7 plan prioritises investments in keeping passenger journeys flowing safely, smoothly and for less than a two per cent increase in ticket prices, far less than the extra hundreds of pounds airlines have implemented during the initial weeks of the recovery. Heathrow do not accept the CAA’s current proposals which will see passengers faced with longer queues and more frequent delays, as well as threatening Heathrow’s ability to fund itself affordably. This view is echoed by ratings agencies which have raised concerns that the regulator’s plans put the airport’s financeability under strain and risk its credit rating being downgraded for a second time

SAF incentive starts delivering lower-carbon flights from Heathrow

Heathrow introduced a Sustainable Aviation Fuels (SAF) incentive in 2022 to encourage airlines to shift to lower-carbon fuels. Already this year (2022), Heathrow has transitioned 0.5 per cent of the airport’s fuel to SAF, making Heathrow the largest user of SAF out of any major airport globally. This is only the start, and the airport recognises there is much further to go, so Heathrow will be scaling-up its incentive programme over the coming years and will continue to seek a UK mandate for 10 per cent SAF use by 2030.

Heathrow CEO, John Holland-Kaye commented: “I want to thank colleagues who worked very hard to ensure the start of 2022 has gone to plan, and I want to reassure passengers that we’re redoubling our efforts to ensure this summer’s journeys go safely and smoothly. These past few weeks have only reinforced our view that passengers want easy, quick and reliable journeys every time they travel and we can continue to deliver that for less than a two per cent increase in ticket prices. The CAA should be aiming to secure this win for passengers instead of pushing plans which will cut investment in service, increase queues and make delays a permanent feature post-COVID-19. We have a lot of work to do to reclaim Heathrow’s crown as Europe’s largest airport which will deliver more competition and choice for passengers and more growth for Britain, and we need the regulator to help us do it.”

Credit: London Heathrow Airport (LHR)