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Cardiff Airport - General Thread


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Jarvo

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I don't think these numbers are a surprise to anyone. Moreover, it's the kind of news story I expect to be seeing every year for the foreseeable future.
Cardiff's terminal was designed and built in the 1960's, and the fact it's still operational nearly 60 years later is great testament to successive management teams. The 1960's aviation scene is a world away from the one we know today though. Even with the growth of sunshine holidays at the time and many charters operating, numbers were still very low and a different kind of customer, expecting a different experience used the terminal. Passengers at the time paid a relatively large sum for their flights and expected an appropriate level of service from the moment they stepped into the terminal to the moment they arrived back on Welsh soil. The airport design therefore, wasn't centered on milking the ancillary revenue streams that all modern airports rely on to thrive.
One of the more important changes that has happened at CWL over the years is the routing of all departing passengers through duty free. Encouraging passengers to make those impulse purchases, for which the airport takes a cut, is THE business model for a modern airport. In fact, a captive customer base already open to spoiling themselves as they see the airport as an extension of their holiday is the reason the beer house can charge £6 for a pint of Strongbow and still make strong sales.
Wherever you sit in Bristol for example, (an over used example in this form, but they do it well) there is always a shop within your eye line. Looking around the shops becomes a way to pass the time in of itself. Once you pass through duty free in Cardiff however, the opportunities for the airport to encourage impulse purchases decreases dramatically. I don't think I've ever seen someone walk back from the lounge to duty free to have another look. The only sales opportunities left come from a generic WHSmith or food outlets.
The new seating area recently opened is an impressive example of how the management has managed to find room in a constrictive design. This whole area however is totally dead space. The last thing an airport wants is for you to be able to sit down, get comfortable, pull your phone out and wait for your flight, yet with nothing encouraging you to do otherwise, that's what happens, and thousands of shopping hours are wasted away in this dead space every day.
And this is where the challenge for CWL is all too clear. In order to make the airport efficient and profitable, a complete redesign of the layout and retail experience that can only come from a new terminal is needed. As a loss making venture with a substantial investment required to make this happen, I can't see many takers, especially when the Welsh Gov seems intent on retaining a 50+1 stake in the airport.

As as government owned piece of infrastructure however, I really do think the simple profit/ loss statistic isn't fit for purpose. Just as all rail and road infrastructure is subject to a value for money assessment, the airport should be too. When considering the economic footprint of the airport is into the hundreds of millions of pounds and sustains thousands of jobs, the airport would no doubt come in as one of the Welsh Govs most prudent expenditures.
 

Jerry

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One of the more important changes that has happened at CWL over the years is the routing of all departing passengers through duty free. Encouraging passengers to make those impulse purchases, for which the airport takes a cut, is THE business model for a modern airport.
I don't think many people realise or care about the investment that has gone into CWL since 2013 to revamp the departure area so it is more in keep with modern airports as much as they can in the space it has. The departure area itself has had 2 revamps since 2013.
I think the problem is for an airport the size of Cardiff apart from the outlets it has now what else can it sustain to make money from?

As as government owned piece of infrastructure however, I really do think the simple profit/ loss statistic isn't fit for purpose. Just as all rail and road infrastructure
One of the problems is that airports by many in the UK aren't considered vital transport infrastructure like rail and road especially the smaller airports like Cardiff. Many people I know expect the government to spend billions on rail yet complain about any spending on the airport and think it should be in private hands yet it would be quite probable that any owner of Cardiff would be trying to get money out of the government either for route development, infrastructure investment or to just mitigate their losses in my opinion.
 

TheLocalYokel

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It seems that to me people seem to expect that the government would click it's fingers and airlines would be queuing up to serve Cardiff.
In fairness, that's what the previous FM was intimating when the airport was bought by the government. I remember clearly reading that he said that CWL would overtake BRS in passenger numbers following the purchase. Within a few weeks he had modified that statement saying that he wanted CWL to be like airports such as Bristol and Southampton. I wondered which one he meant or whether he knew himself.

Coupled with other public statements, such as telling an incredulous Radio Wales presenter on the day after the plan to purchase the airport was announced publicly that they would seek a private sector partner that would share in profits but be responsible solely for any losses, it seemed to be that the former FM was saying things that were mere pie in the sky utterings. So perhaps no surpise that the public expectation was higher than has been the case so far.
 

aviatorconcorde

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In fairness, that's what the previous FM was intimating when the airport was bought by the government. I remember clearly reading that he said that CWL would overtake BRS in passenger numbers following the purchase. Within a few weeks he had modified that statement saying that he wanted CWL to be like airports such as Bristol and Southampton. I wondered which one he meant or whether he knew himself.

Coupled with other public statements, such as telling an incredulous Radio Wales presenter on the day after the plan to purchase the airport was announced publicly that they would seek a private sector partner that would share in profits but be responsible solely for any losses, it seemed to be that the former FM was saying things that were mere pie in the sky utterings. So perhaps no surpise that the public expectation was higher than has been the case so far.
i remember him saying about getting A380’s at Cardiff.
 

Jerry

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Just with reference to the airport making a loss. Today it was announced that Leeds Bradford an airport that sees 4 million passengers a year use it announced a pre tax loss of £3.1 million for 2018/19 with an operating profit of £1.2 million.
I think it shows that an airport making a profit isn't guaranteed even an airport with an extremely large Jet2 base, a Ryanair base and 4? non based airlines flying into it regularly.
Even if Cardiff could attract an LCC base and get it's passenger numbers closer to 2 million people actually making a profit or even breaking even might not be guaranteed.
 

Jerry

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The Conservatives brought up Cardiff airports debts during First ministers question time today in the Senedd and the airport replied with a written statement.
This section is interesting to me. As it seems to be saying that airport debt is part of running an airport and that people should be thinking more long term.
"Airports are viewed as strategic, long term investments by investors and tend to be held for periods of 25 to 50 years. Regional airports in particular require finance to develop, it is normal practice for this to be in the form of long term debt. Within the UK it is common for airports and their holding companies to have significant levels of borrowing often in excess of £100m and in many cases more."
 

TheLocalYokel

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The Conservatives brought up Cardiff airports debts during First ministers question time today in the Senedd and the airport replied with a written statement.
This section is interesting to me. As it seems to be saying that airport debt is part of running an airport and that people should be thinking more long term.
"Airports are viewed as strategic, long term investments by investors and tend to be held for periods of 25 to 50 years. Regional airports in particular require finance to develop, it is normal practice for this to be in the form of long term debt. Within the UK it is common for airports and their holding companies to have significant levels of borrowing often in excess of £100m and in many cases more."
Manageable debt is usually healthy for and part of a successful company but the key word is manageable. In such companies the debt can be serviced whilst still making an overall profit.

Obviously manageable debt is a completely different animal to continuing losses which can suggest debt is unmanageable, although I'm not suggesting that in CWL's case. New or restructured companies can take several years to become profitable. Some never do and eventually fail, sometimes quickly.

I remember the dot.com 'bubble' of the later 1990s when many investors went bonkers and invested in many new Internet companies as it was thought to be the coming gold rush. Some of these companies quickly had a market capitalisation in billions of pounds or dollars but never made a penny profit and were soon no more. It was possible to make good money by investing in the early stages of the phenomenon but many people also lost a packet as the fad began to die its death.

Airports aren't like that but, as with airlines, they are not the most stable of investments given the many outside elements that can affect their performance. They can be a successful investment of course but there are also those that aren't; there have been some well-publicised cases in the UK both with airports and airlines.

Until this year CWL's losses weren't huge and the latest is exaggerated by the intangible asset write-down.
 

Jerry

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Are there any public stats of when CWL was last profitable? It must be about a decade if passenger figures are anything to go by?
2010 when it made £1 million profit according to this article.
 

TheLocalYokel

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2010 when it made £1 million profit according to this article.
Which shows that the airport can be profitable from year to year and one wonders why the previous owners apparently took a conscious decision to let it stagnate. It seems it wasn't part of their ongoing future plans and of course the major recession didn't help.

It's worth noting that the airport was still making money in 2010, as it had in the immediate years before that, despite the owners' intransigence, the recession effect and the huge fall in passenger numbers that was in full swing by then.

There will always be significant one-off costs for most companies that will impinge on profit margins in any particular year.
 

Jerry

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It's worth noting that the airport was still making money in 2010, as it had in the immediate years before that, despite the owners' intransigence, the recession effect and the huge fall in passenger numbers that was in full swing by then.
It would be interesting to know what the airport was doing back then compared to today to make it profitable and whether there was any major investment in the onsite facilities that may have reduced the numbers as well.
As for the previous owners maybe it wasn't profitable enough for them maybe. I do know a few people connected to the airport form that time are especially critical of the current management's running of the airport especially the deal with Flybe.
 

Foxlimayankee

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It was probably from about 2010 onwards where things started going wrong. Little investment was put in to the Airport, things were cut back such as cleaning and maintenance which started to show. It's often been said that CWL that was the duff part of the deal for Abertis as they only wanted to concentrate on LTN and to some effect BFS, which is where all the money went too. It's not surprise that 2010 onwards was unprofitable when Airlines started disappearing and passenger numbers started dropping. Even though passenger numbers are growing again, theres been a huge amount of money spent on various things like the terminal building, facilities and airfield upgrades. I would've thought there would have been some initial cost to bringing security, PRM and cleaning services in house before savings were seen, as well as the Airpot rebrand and Airline deals done.
What interests me in the next few years. Now most of the expenditure on terminal upgrades has happened, rebrand and internal services are settled, and big airfield upgrades are done theres likely to be less of a need of big investment. The only real things might be any on going or new Airline deals and marketing.
It would be interesting to see the financial results without all that investment on the bottom line. That's the true picture on if money can be made at CWL.
 

superking

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The change in profit in CWL to loss was not something that happened in 1 go,it has been over a number of years. The previous owners just let CWL get on with the running and no support or funds from owners to help the airport to do things to make money. Like many firms its very easy to lose profit than make profit.CWL has a lot of hard work to turn the airport round to profit and keep it in profit.
 

TheLocalYokel

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It would be interesting to see the financial results without all that investment on the bottom line. That's the true picture on if money can be made at CWL.
We can get a reasonable idea from the airport company's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation). For the past couple of years CWL has returned a positive EBITDA.

It's generally used as a mark of a company's current health and to compare other companies in the same sector. In simple terms the EBITDA figure is arrived at by starting with the net income and adding interest, taxes (these three together also known as operating profit), depreciation and amortisation. The rationale for excluding these items is as follows: companies have different financial structures with the result that interest expenses may not all be the same from company to company; taxes can vary according to country; depreciation and amortisation (an accounting technique to periodically lower the book value of a loan or intangible asset) are based on historical investment decisions and not on the current operating performance of a company.

So it's reckoned that EBITDA is both a better guide of a company's current financial performance and a better comparator with other businesses in the same sector.

The snag is that debts still have to be repaid in the real world and taxes paid, and depreciation of assets will at some stage need company cash, or a loan that will mean more debt and interest payments, to replace or make good those assets.

Nevertheless, if we regard its EBITDA as an indication od CWL's current performance it's doing all right.
 

Aviador

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HEAD OFFICE
I've added a airport news section located above the CWL forum page. The benefits of this is news articles can be featured on the site homepage; all the news items for CWL can be featured together in one place; it creates a one stop point for CWL news; it prevents the forums generic threads from being pushed off the 1st and 2nd page of the forum.

If a news item is relevent within a specific generic thread within the forum, the preferred way of reporting the news within the thread would be to add a link.

Examples below.

Adding a URL will show as:


or

Using the forums link code will show as:

Clickable link - Title goes here

News submitted here must be an official press release or be a news worthy forum post submission.
 

TheLocalYokel

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Much of the information and facts provided in the chairman's letter were already in the public domain, notably when the news broke about the increased losses brought about in part by a write-down of some intangible assets.

I read this sentence in the chairman's letter with interest. There is a distinct lack of understanding amongst some of the Assembly Members regarding the airport sector and Cardiff Airport in particular.

I can empathise with that, because when watching the various sessions of the Westminster Welsh Affairs Select Committee taking evidence last year into the subject of APD devolution to Wales, I was extremely surprised at the lack of knowledge and understanding of the industry displayed by some MPs on that committee. Had some of them been more clued up they would have asked more searching questions of all sides giving evidence and followed it up with supplementary questions at times as well. Instead, they all too often asked bland questions and for the most part accepted the answer given with no attempt to probe further. I know there were time constraints but that didn't stop some parliamentarians on the committee going off at tangents with insubstantial chit-chat.

I wonder now whether all AMs will take on board everything that the chairman said in his letter. He cleverly cited three other airports with 'similar characteristics', with current outstanding debt at all three considerably higher than CWL's. Bristol has the most of the three at £590 million (the other two airports are LPL and NCL) which compares with CWL's current debt of £36 million. Some AMs who don't follow the sector closely might well believe that if BRS's debt is 16 times more than CWL's, yet it handles nothing like 16 times more passengers, then all is well at Rhoose and perhaps not so well at BRS.

What the chairman didn't go on to say is that in any company debt can be healthy as long as it is manageable as it allows companies to grow. Latest figures show that at the moment BRS is managing its debt and remaining profitable (£41 million pre-tax profit that includes £35 million operational profit, and a net of tax overall profit of £36 million). CWL's overall latest loss was £18 million.

With EDITBA CWL is doing better. EBITDA is really only an indication of a company's current health and excludes long term items such as interest repayment and depreciation as well as tax liability. It's also used within business sectors to compare one company's performance with those of peers.

CWL saw an EBITDA surplus (profit) of £77,000 in the latest figures available, up from £7,000 the previous year. I've read elswehere that some people believe that CWL is profitable and they quoted the EBITDA as proof.

What the chairman might have done in his letter is to have included BRS's profitability figures instead of just the bare debt figure that he did include as an indication of what can happen if serious targeted investment is put into a company. Incidentally, the latest BRS EBITDA profit reported was £56 million whereas their 'real world' profit was £36 million.
 

Jerry

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Bristol has the most of the three at £590 million (the other two airports are LPL and NCL) which compares with CWL's current debt of £36 million.
I do believe that the point of quoting those figures is in essence counter propaganda to people saying that the airports debt is massive and are using it as a political stick to beat the airport with. Personally I was surprised by how high Bristols debt is but it is an airport that shows how long term investment has lead to success and Cardiff can learn from that.
I do think as well that Roger Lewis letter does show that the Chairman of Cardiff airport might have to some political nounce to do the job.
 

geoff

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Wales on line business section are reporting on a new air link Wales charter program set up by Flitestar Private air, a Cheshire based company, operating from Cwl, Haverfordwest, and Caernarvon airports.
 
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