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Copenhagen Airports - Interim report: CPH remains severely affected by coronavirus pandemic

11/13/2020 | 09:25am EST

Some 6.7 million passengers passed through the terminals at Copenhagen Airports (CPH) in the first nine months of 2020, which was 16.6 million fewer than in the year-earlier period corresponding to a drop of 71.3%. The airport continues to be hard hit by the knock-on effects of the coronavirus pandemic that took hold in March and locked down most of the world. Travel activity began to pick up over the summer period, but as the COVID-19 flared up again and travel restrictions were significantly tightened, the recovery in travel demand evaporated. In an effort to mitigate the decline in passenger revenue, CPH has taken measures to cut both investments and operating costs and in late August unfortunately had to let go of more than 600 positions in response to the significantly lower level of activity.

The dramatic drop in passenger numbers took a toll on CPH's results for the first nine months of the year. CPH generated a loss before tax of DKK 453.6 million for the first three quarters of 2020, compared with a profit before tax of DKK 1,065.3 million for the same period of 2019.

The loss for the first nine months of 2020 should be seen in light of the sharp decline in revenue from both the aeronautical and the non-aeronautical parts of CPH's business. Overall revenue came to DKK 1,325.0 million - a 59.8% decline from DKK 3,298.9 million for the first nine months of 2019.

'Our interim report is a reflection of the very serious crisis still facing the aviation industry. CPH derives most of its earnings from two main sources. One is the number of departing passengers, which has dropped by 8.3 million since the turn of the year. The other is our shopping centre and commercial activities, which have been severely reduced due to the low passenger numbers. Our earnings are consequently hard hit, and we have used our bank facilities to keep the airport in operation since the COVID-19 outbreak, although we did make use of the government's support packages,' says Copenhagen Airport CEO Thomas Woldbye.

In May 2020, CPH entered a two-year facilities agreement totalling DKK 6.0 billion with a club of banks. Simultaneously, CPH entered into waiver agreements with existing lenders, providing CPH relief from certain loan covenants until and including Q1 2021. The new facility, the strong support from CPH's shareholders and the waiver agreements ensure that CPH will continue to be able to meet its financial and investment commitments in a foreseeable period.

Summer optimism was short-lived

CPH's financial performance is a reflection of the fact that large parts of the airport's activities were virtually at a standstill in March and the following months. Rows of parked aircraft, closed shops and deserted terminals were the new reality during the spring months. In mid-June, the European aviation authorities introduced new protective equipment, hygiene and social distancing guidelines for airport travellers and staff. At the same time, a number of European countries successfully contained the spread of COVID-19, prompting many countries to allow travel again.

While this led to increasing passenger numbers over the summer period, travel demand was still materially below normal levels. In the first week of June, there were scheduled flights to and from 18 destinations. By August, the number of destinations had gradually increased to around 100. The many destinations notwithstanding, passenger numbers during the three summer months were still down by 80-85% from the summer of 2019 due to significantly reduced frequencies within the routes offered. For the period January to September, passenger numbers were down by 16.6 million - or 71.3% - from the year-earlier period.

In the third quarter, in response to COVID-19 flare-ups across the European continent, travel guidelines were tightened anew, triggering another sharp drop in passenger numbers.

'The hope shared across the industry of a gradual recovery of air traffic in the course of the second half of the year has been extinguished as travel guidelines have been tightened week after week. This is affecting not just our core business here at the airport, but the entire Danish tourism industry. Sadly, it has had far-reaching implications for many people, who have lost their jobs and income base,' says Thomas Woldbye.

CPH has also had to let go of many highly skilled colleagues as a result of the crisis. At the end of August, CPH had to make the very difficult decision of initiating large redundancies. A total of 625 full-time positions were cut through dismissals, elimination of vacant positions and voluntary resignations.

These job cuts in August reduced annual operating costs at the airport by about DKK 325 million, but due to notices of termination, only a limited proportion of these savings will feed through to 2020 results.

Additional cost measures due to dramatic drop in passenger traffic

In addition to the above-mentioned measures and as a result of the significant decline in passenger traffic in recent months, CPH has decided to launch further cost-saving initiatives. Among other things, this will be done by using the government's scheme for distribution of work as well as increasing supplementary training and upskilling of employees. In addition, it is expected that it will be necessary to do further redundancies. Together, the initiatives will provide an additional annual saving corresponding to approximately 325 full-time positions. However, the major part of these savings is expected to be found through the distribution of work scheme and education initiatives, and not redundancies.

'It is very unfortunate and sad that we have to reduce our employee costs again. When we said goodbye to skilled employees in August, it was with an expectation that passenger numbers would gradually improve towards the end of the year. Unfortunately, it has gone the opposite way, and we are now looking into a longer period with significantly fewer passengers and flights. As a result, further measures are needed to ensure that the airport gets through the crisis the best way possible,' says Thomas Woldbye.

Quick testing is key to restarting air traffic

However, cost reductions are not enough to turn the current red figures into black. A genuine restoration of air travel requires more fundamental measures, when the current COVID-19 flare-up is under control. For this reason, under the auspices of the government's restart teams, CPH has worked to establish a testing solution requiring passengers arriving in Denmark from countries categorised as red or orange to have a test that in less than 30 minutes will provide them with an answer as to whether they have COVID-19. Such quick tests are currently being trialed at other European airports. It is the view of the CPH Board and management that implementation of a quick testing solution across the various countries that our airlines fly to, is key to the recovery of connectivity at CPH and the economic benefit that the wider aviation industry brings to global trade.

'We need to get quick tests for travellers in place so travel restrictions can be eased and the current quarantine rules can be lifted without increasing the COVID-19 risk - while at the same time ensuring that COVID-19 does not spread across borders. The good news is that it can be done, and at the same time, we must work, together with the authorities, to establish a European testing regime with a standardised COVID-19 passport,' says Thomas Woldbye.

Sustainable transition has not lost momentum despite COVID-19

Despite the plummeting passenger numbers and the work to restore air traffic in the wake of the coronavirus pandemic, CPH has maintained its strong focus on the sustainable transition of aviation and CPH.

In the second quarter, under the auspices of the Climate Partnerships, CPH and the rest of the aviation industry presented the industry's recommendations for its sustainable transition. Shortly after, CPH and a number of other major Danish companies teamed up with the City of Copenhagen to launch the idea of establishing facilities for the production of sustainable fuel in the Greater Copenhagen Area. The plan is for these facilities to produce sustainable fuel for lorries, ships and aircraft within a foreseeable future.

The partnership continued working on the project in the third quarter, applying for financial support from Innovation Fund Denmark which - in combination with a triple-digit amount in millions of Danish kroner from the participating companies - will lay the groundwork for the launch of the first stage of the project, which may be ready in 2023.

Furthermore, in the beginning of October a consortium led by CPH in collaboration with 14 other European partners and the Danish Technological Institute won an EU tender to create the sustainable airport of the future.

'The fact that concrete projects are in progress to fuel the sustainable transition of aviation is a ray of hope amid the present severe crisis. To be able within the next decade to fill up a major proportion of the aircraft departing from Copenhagen Airport with sustainable fuel will be a critical and historic milestone, not just for the airport, but very much also for our surroundings and society at large,' says Thomas Woldbye.

(C) 2020 Electronic News Publishing, source ENP Newswire

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Sales 2019 4 346 M 708 M 708 M
Net income 2019 1 020 M 166 M 166 M
Net Debt 2019 8 371 M 1 364 M 1 364 M
P/E ratio 2019 44,0x
Yield 2019 0,53%
Capitalization 43 007 M 7 023 M 7 009 M
EV / Sales 2018 11,2x
EV / Sales 2019 12,3x
Nbr of Employees 2 600
Free-Float 1,40%
Duration : Period :
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Managers and Directors
Thomas Woldbye Chief Executive Officer
Lars Nørby Johansen Chairman
Kristian Durhuus Vice President-Customer Service & Operations
Rasmus Hagstad Lund Chief Financial Officer
Christian Poulsen Vice President-Assets & Technology