Heathrow recovery begins after worst year in its history - Results for the 12 months ended 31 Dec 2021
Passenger numbers fell to 19.4m, lowest since 1972 – Heathrow was the only European hub to see a reduction in traffic last year, due to tighter travel restrictions than EU countries. Cargo, mainly carried on passenger planes, was 12% down on pre-pandemic levels.
Cost reduction helped to stem losses for the year – We have worked hard to achieve £870m of cost savings over the last two years, however cumulative losses during the pandemic have risen to £3.8bn due to lower passengers and high fixed costs.
Balance sheet remains strong in face of headwinds – Gearing is reducing towards pre-pandemic levels helped by cost savings. Liquidity of £4bn is sufficient to support recovery, but we are keeping a close eye on cashflows to protect financial covenants and credit ratings. Ratings agencies have been clear that the CAA’s final H7 settlement will be a key determiner for maintaining Heathrow’s investment grade ratings. No dividends were paid in 2021 or forecast to be paid in 2022.
Passenger numbers currently 23% behind forecast, but a strong summer for outbound tourism predicted – Despite lower than expected passenger numbers in January and February, we are expecting a surge of Brits heading for summer sun and are working with our airline partners to ramp up operations to ensure they have a great experience at Heathrow, including reopening Terminal 4 by July. We expect to meet our 2022 target of 45.5m passengers.
Inbound tourism and business travel remain key challenges – Removing testing restrictions in the UK has boosted outbound tourism demand, but inbound tourism and business travel are suppressed due to testing in other countries. 63% of our markets retain some form of travel restriction or testing requirements, and government responses to Omicron show how uncertain broader travel demand remains. We don’t expect travel to return to pre-pandemic levels until all restrictions have been removed, passengers can travel with no checks and are confident they will not be reimposed.
Maintaining passenger service levels key to recovery – Heathrow was rated by passengers as one of the world’s top 10 airports in 2021 in the Skytrax survey. Our plan for H7 seeks to maintain this level of service by delivering easy, quick and reliable journeys while keeping the increase in total ticket prices below 2%, despite significantly fewer passengers. We are anxious that the CAA will undercook the investment needed to avoid the return of “Heathrow hassle” with longer queues and delays.
Plans for net zero aviation by 2050 remain on-track – We are making good progress on decarbonising aviation, tackling noise, and providing skilled careers for local people, and have set more ambitious targets in our updated Heathrow 2.0 plan for sustainable growth. We are proud that all of our supply chain will now be on London Living Wage by the beginning of April, and that other employers at the airport are following suit.
Pandemic has strengthened the strategic case for expansion – While we have paused work to expand Heathrow during COVID-19, the crisis has shown the pent-up demand from airlines to fly from Heathrow, as well as how critical Heathrow is for UK’s trade routes and the risk to the economy of Britain relying on EU hubs which can close borders overnight. We will review our plans for expansion over the course of the next year.
Heathrow CEO John Holland-Kaye said:
“While 2021 was the worst year in Heathrow's history, I am very proud of the way that colleagues focussed on passengers, and we were able to maintain our position as one of the top 10 airports in the world for service.
"Demand is now starting to recover and we are working closely with airlines to scale-up our operations and reopen Terminal 4 for the summer travel peak. We're excited to welcome more passengers back to Heathrow to experience the joys of travel and get Britain's economy firing on all cylinders again.
"To deliver this, we have outlined an investment plan for the next five years which meets the needs of passengers, drives fast traffic recovery and incentivises investment in a critical national asset, while keeping the increase in ticket prices below 2% despite significantly fewer passengers. I am anxious that the CAA will undercook the investment needed to avoid the return of “Heathrow hassle” with longer queues and delays.”
| At year ended 31 December | 2020 | 2021 | Change (%) |
| (£m unless otherwise stated) | |||
| Revenue | 1,175 | 1,214 | 3.3 |
| Cash generated from operations | (95) | 613 | 744.2 |
| Loss before tax | (2,012) | (1,792) | 10.9 |
| Adjusted EBITDA(1) (4) | 270 | 384 | 42.2 |
| Adjusted loss before tax(2) (4) | (1,214) | (1,270) | (4.6) |
| Heathrow (SP) Limited consolidated nominal net debt(3) (4) | 13,131 | 13,332 | 1.5 |
| Heathrow Finance plc consolidated net debt(3) (4) | 15,120 | 15,440 | 2.1 |
| Regulatory Asset Base(5)(4) | 16,492 | 17,474 | 6.0 |
| Passengers (million)(6) | 22.1 | 19.4 | (12.3) |
