Smaller airports have mostly quietly wound down, but distress calls have been loud and clear from the major hubs, with Heathrow, Gatwick and Manchester Airports Group (MAG) collectively losing £50 million a day and facing fixed costs of £335 million while operating at 20% capacity.

How some regional airports would love a slice of that 20%.

Newquay, for example, is closed until late March, Southampton shut at weekends during February, while others are relying mainly on freight and flights bringing in medical supplies.

“Cargo has provided some help, but we need passengers back,” says an East Midlands airport (EMA) spokesperson.

“They are our main source of revenue. It’s not a viable business without them. We desperately need some sort of summer season.”

 
East Midlands, an established freight hub, is more fortunate than some. Despite passenger numbers 94% down year-on-year, cargo volumes are up 13%, with December 2020 a record month, up 43%, and with DHL launching four new US routes.

East Midlands is part of MAG, which describes the volume of goods handled this summer as “more akin to what we would expect to see in the run-up to Christmas”.

However, cargo can only go so far to help with fixed running costs. “We currently have no passenger flights scheduled to and from EMA until mid-March, at the earliest, but this date may be pushed back even further depending on demand,” the spokesperson adds.

MAG, Heathrow and Gatwick claim the Job Retention Scheme has covered less than a sixth of total bills, while the government’s Airport Support Scheme has provided only £46.5 million of £186 million running costs.

The Airport Operators Association (AOA) quotes one unnamed airport finance director who says their business is “existing at the mercy of our lenders – and their goodwill will increasingly evaporate if there is no plan to recovery”.

Karen Dee, AOA chief executive, says regional airports are most affected despite more high-profile cases.

“They felt it quickly, and proportionately they are probably hit harder because airlines tend to consolidate to where they can get the best revenue," she explains.

“I very much hope we won’t lose any airports. The vast majority were viable and profitable pre-Covid, but there’s not an unending money tree.”

‘Proactive stance’

The government’s reluctance to give sector-specific support could perhaps be swayed by many airports having big backers in the shape of property and infrastructure conglomerates or local authorities.

Bournemouth, Exeter and Norwich airports are owned by Regional & City Airports (RCA). All have a few domestic services running, but await the return of the likes of Tui.

RCA recorded a pre-tax profit of £287,263 for the year ended March 2019, compared with £129,597 in 2018. This may seem precarious, but RCA is part of Rigby Group, which has interests including technology, the Eden Hotel Collection brand and British International Helicopters. In the year to March 2020, Rigby Group achieved record pre-tax profits of £75.7 million. 

Rival group AGS owns Southampton, Glasgow and Aberdeen airports. AGS made £30 million before tax in 2018, but only broke even in 2019 when Flybe provided 18% of its traffic. However, AGS is 50% owned by conglomerates Ferrovial and Macquarie and has access to “inter-group funding”.

AGS’s biggest challenge is Southampton, which lost 90% of traffic even before the pandemic due to Flybe’s collapse. Loganair and Eastern Airways have begun filling the gaps, and British Airways is due to return in May, when it will offer 11 summer-only leisure destinations at weekends.

Dee says that regardless of ownership, airports “have made no revenue for their owners for nearly 12 months”. 

“Owners are standing by them, which is good for the airport, but it damages shareholders’ ability to invest in future because of debt.” 

The AOA points out aviation-specific government support amounts to £23 billion in the US, £7.5 billion in Germany and only £2.5 billion in the UK, with financial support per passenger under £10, compared with £25 in the US and £40 in the Netherlands.

In mid-February, the German government announced an additional €600 million support package for 15 airports, with €200 million in running costs to be reimbursed. 

“Other countries have taken a much more proactive stance,” says Dee. “We don’t want to lose customers or have shareholders asking if it’s better to invest in European airports.”

Scotland and Northern Ireland provided airport business rate relief early on in the pandemic, with England announcing partial relief only in November. The AOA believes airports must be seen as vital pieces of infrastructure. 

Dee adds: “As a hard-faced businessperson you would say, ‘why are we open, we’re not making any money?’, but we are national infrastructure and airports are not something you can turn off and on again quickly.”

This point is echoed by Newquay airport managing director Pete Downes. Newquay closed to passengers on 3 January following a collapse in business for its few remaining domestic scheduled services. However, the airfield has to remain open.

“We continue to provide Air Traffic Control support for the airspace over Cornwall and provide the Air Ambulance Service and the lifeline flights to the Isles of Scilly,” says Downes, adding Newquay also has a role in bad weather diversions.

“We are doing that at cost to ourselves, which is not often realised. We have that role to play, so the decision to stay open is essentially not a commercial one. It’s a point that’s not sometimes fully captured by government and recognised in the calls for sector-specific support.”

The airport is run by Cornwall Council subsidiary Corserv. Newquay had an “exceptional year” in 2018/19, attracting its lowest level of subsidy ever (£1.32 million) after a record 462,000 passengers, but still losing £142,500.

‘Route to recovery’

Downes said the year to March 2020 would have seen the airport reach a record 500,000 passengers if not for the collapse of Flybe in the final month. The airport’s subsidy would then have fallen to less than £1 million, an investment estimated to return £62.7 million to the Cornish economy.

He says the airport’s future “was in real doubt” last summer. “If you asked me at the time, I could not have called it. We came closer to potentially losing the airport than most people realise.”

A £5.6 million cash injection was negotiated to support it this financial year and next, during which passenger numbers are predicted to be half previous levels.

Newquay and airports in remote parts of Scotland have a role to play in connectivity, he says, facilitating journeys not viable by other means. The Newquay-London connection, which has no viable alternative via rail or car for business day trips, provides 40% of traffic.

Downes estimates a full recovery will take “a minimum four years” and Dee is emphatic that summer 2021 “needs to be a success for airports and airlines to survive”.

Even when traffic returns, income will be hit due to a depressed economy, while another blow is the withdrawal of VAT-free shopping for UK departing passengers following Brexit.

The AOA believes smaller airports will need to offer airlines substantial discounts to attract services back, particularly long-haul – discounts they can ill afford given decreased passenger numbers and spend within terminals.

These forecasts bolster its case for support for operational costs and an extension of the Job Retention Scheme in the Budget.

“People have not forgotten the role we have played with cargo and PPE, but we haven’t won the argument over getting support,” says Dee. “In the absence of that support, our route to recovery is being able to fly again.”