We started planning 9 months ago for the summer peak, and our own resources are on track – We started ramping up our own operations in November 2021, and encouraged airlines and their ground handlers to do the same. Planning has been based on summer peak demand exceeding 85% of 2019, broadly in line with actuals. All parts of the airport are now fully operational. We have hired 1,300 people in the last 6 months and will have a similar level of security resource by the end of July as pre-pandemic. We have additional service colleagues and our entire management team is deployed on “Here to Help” shifts to support passengers in the terminals this summer.
Airline ground handling shortage is now the constraint on Heathrow’s capacity – The number of people employed in ground handling fell sharply over the last 2 years, as airlines cut costs during the pandemic. We have been raising our concerns over lack of handler resource for 9 months. We estimate that airline ground handlers have no more than 70% of pre-pandemic resource, and there has been no increase in numbers since January. In the second half of June, as departing passenger numbers regularly exceeded 100,000 a day, we started to see a worrying increase in unacceptable service levels for some passengers; an increase in delays to get planes on to stand, bags not travelling with passengers or being delivered very late to the baggage hall, low departure punctuality and some flights being cancelled after passengers had boarded. This showed us that demand had started to exceed the capacity of airline ground handlers and we took swift action to protect consumers by applying a cap on departing passenger numbers, better aligned with their resources. Airline ground handler performance has been much more stable since the cap came into effect, and we have seen a marked improvement in punctuality and baggage performance. Heathrow’s cap is 50% higher than Schiphol, which shows how much better the airport and airlines have planned at Heathrow than our competitors. The cap will remain in place until airlines increase their ground handler resource.
Heathrow remains loss making and we do not forecast any dividends in 2022 – Our adjusted loss before tax reduced by £466m to £321m as a result of higher passenger numbers, higher aeronautical charges offset by increased costs as we invested ahead of demand. Passenger numbers, operating costs and revenues are in line with the H7 business plan submitted to the CAA. Our balance sheet remains strong with gearing ratios now below pre-pandemic levels and strong liquidity.
The CAA’s H7 Final Proposal will deliver worse outcomes for passengers – It focuses on cost cutting to improve airline margins when we should be rebuilding capacity, with a focus on safety, consumer service, resilience and efficiency. It contains errors, such as the wrong opening gearing, and disallowing investment in service to vulnerable passengers that both passengers and the CAA itself tell us we should do. Overall, it doesn’t provide enough cashflow to allow us to invest in operations and capital investments, such as a new T2 baggage system or new security lanes to meet the DFT’s 2024 deadline, at a time when they should be encouraging investment. The CAA took a similar approach in the 2000s, which led to years of “Heathrow hassle” for consumers and high margins for airlines. It is not too late to correct these errors and we will submit a detailed assessment in early August.
We welcome the Government’s commitment to a 10% SAF mandate by 2030 – Sustainable Aviation Fuel is the only pathway to decarbonise long haul aviation, but it needs a massive increase in production. The new mandate will give investors the demand signal to scale up production and should lead to a significant UK based SAF industry. At Heathrow, we have already put in place a SAF incentive for 2022, which has been over subscribed, and will see more SAF uploaded at Heathrow this year than any other airport in the world. Our aim is to use the incentive to progressively increase the use of SAF at Heathrow.
Heathrow CEO John Holland-Kaye said:
“The summer getaway has started well at Heathrow, thanks to early planning and keeping demand in line with airline ground handler capacity. I’m proud of the hard work everyone at Heathrow is doing which has helped millions of people get away already, and will help millions more travel on their well-earned summer breaks in the weeks ahead. We can’t ignore that COVID has left the aviation sector deeply scarred, and the next few years will need investment to rebuild capacity, with a focus on safety, consumer service, resilience and efficiency. Airlines need to recruit and train more ground handlers; airports need catch up on underinvestment during the COVID years – at Heathrow, that means replacing the T2 baggage system and new security lanes. Recent months have shown that passengers value easy, quick and reliable journeys, not penny pinching, and the CAA should be encouraging the investment that will deliver for consumers.”
Tags: Heathrow Airport
