Covid-19: Gatwick duty and tax free income down 65% in first half of 2020

By Luke Barras-hill |

Net retail income at London Gatwick Airport (LGW) fell by 60.5% to £35.5 million/$44.4 million in the six months ending 30 June year-on-year, as the coronavirus (Covid-19) crisis took a heavy toll on operations.

Revenue from duty and tax free stores suffered a 65% loss during the period to total £9.6m/$12m, while sales from specialist shops fell 60% to £8.3m. However, net retail income per passenger grew by 16.8% year-on-year to £4.73.

Seven-and-a-half million passengers travelled through the airport during the period, a 66% drop (-14.7 million) compared to the same period in the prior year.

NORTH TERMINAL: 75% OF TENANTS OPERATING

A statement from Gatwick Airport Limited parent Ivy Holdco Limited read: “All categories have seen the extreme impact of Covid-19 due to the reduction of the number of passengers travelling and the various government restrictions that have been implemented to control the spread of the virus.

“As the number of passengers is set to increase in July and August, Gatwick is working with retailers to re-open their units at the Airport. Gatwick is also working closely with concessionaires to ensure the appropriate measures and processes are in place to safeguard passenger safety whilst they travel through the airport and whilst they enjoy the retail offering.

“Net retail income per passenger increased as new contract terms were agreed across multiple categories as well as strong sales growth in catering prior to the Covid-19 pandemic as the development work in the North Terminal neared completion.”

Net retail income decreased by 60.5% in the six months ending 30 June 2020 year-on-year. Click to enlarge. Source: Ivy Holdco Limited/Gatwick Airport Limited.

LGW notes that 75% of shops and food & beverage outlets in the North Terminal are open in line with the government’s Covid-19 safety guidelines, while commercial negotiations remain ‘ongoing’.

Revenue dropped by 61.3% to £144.2m for the period year-on-year, with EBITDA sinking by 98.3% to £3.2m and net debt rising 18.7% to £3bn.

‘FIVE-YEARS TO TRAFFIC RECOVERY’

This week, it emerged the operator will jettison nearly a quarter of its jobs as part of a significant restructure.

More than 740 employees have left the business on severance packages or have had their fixed-term contracts terminated.

The virus had a lesser impact in the first two months of this year, before the full impact was felt from mid-March onwards.

Traffic sunk to near-zero levels in the second quarter of this year and while this is now beginning to rebuild – easyJet restarted limited services in June followed by BA, TUI and Norwegian in July – there remains continued uncertainty over the pace of the recovery in the context of UK quarantining decisions.

The airport has remained open during the Covid-19 pandemic, although all revenue streams have been impacted. Click to enlarge. Source: Ivy Holdco Limited/Gatwick Airport Limited.

Ryanair, Belavia, Wizz Air and Vueling are among the carriers that continue to operate flights, although Virgin Atlantic has revealed its decision to withdraw save retaining its slot portfolio.

Gatwick has been operating out of the North Terminal only since 15 June, having initially limited business to a single pier in the South Terminal when Covid-19 first took hold earlier this year. This arrangement is expected to continue until Summer 2021, says LGW.

A variety of health and safety measures are in place, including one-way flow and floor markings; hand wash stations, hand sanitisers and face masks for passengers and staff; perspex screens at check-in, security and other areas; and new technologies implemented such as UV disinfection of security trays and enhanced cleaning regimes.

LGW notes it is ‘well placed for the recovery’ in spite of the fact it does not expect traffic to reach 2019 levels until 2024.

This year, LGW forecasts passenger traffic to be around 65-70% lower than what was recorded in 2019.

Capital expenditure has been slashed by £157m in 2020 and £196m in 2021. Cost-saving measures are expected to yield more than £100m in 2020.

Gatwick Airport Chief Executive Officer, Stewart Wingate said: “Like any other international airport, the negative impact of Covid-19 on our passenger numbers and air traffic at the start of the year was dramatic and, although there are small signs of recovery, it is a trend we expect to continue to see. However, we are focused on ensuring the business remains robust and is best placed to take advantage of future growth.

“We are going through a proposed company-wide restructuring programme and I want to thank all my staff for their hard work to date while we go through this difficult time. We will emerge a fitter and stronger organisation, best placed to remain flexible and agile in responding to growth opportunities. This includes continuing to do all we can to protect the safety and wellbeing of our staff and passengers.”

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