London Heathrow Airport reports 60.7% retail revenue slump in H1 to £59m

By Andrew Pentol |

Passenger numbers at London Heathrow fell by 75% to 3.9 million during the six-month period ended 30 June 2021.

London Heathrow Airport has reported a 60.7% drop in retail revenue to £59 million/US$81.2 million during the six-month period ended 30 June 2021. Retail revenue during the same period last year amounted to £150 million/US$207.4 million according to the airport’s six-month results published today (26 July 2021).

Revenue from retail concessions slumped 73% to £17 million during the period from £63 million during the previous corresponding period in 2020.

Other retail revenue fell 42.9% to £16 million during the six-month period from £28 million in the same period the previous year.

The airport said that the fall in retail revenue was driven by reduced passenger numbers, which fell 75% to 3.9 million. In addition, the mix of retail service available due to governmental restrictions on non-essential shops in the first five months of the year was a factor.

“This decrease is offset by the application of contractual terms with concessionaires, targeted promotions and a number of non-essential retailers offering a pre-order and collect service,” the airport said.

DIGITAL EXPANSION PLAN

As the airport waits for traffic levels to return to normal, optimising revenue through digital technology such as click and collect is an important objective.

Governmental restrictions on non-essential shops in the first five months of the year contributed to a 60.7% drop in retail revenue to £59 million during the six-month period ended 30 June 2021.

Heathrow remarked: “It is disappointing that the Treasury has baked in a competitive disadvantage for UK tourism by making this the only country in Europe not to offer tax free shopping. We now continue to work with our retailers to mitigate against the impact of this.”

TRBusiness launched a prominent campaign to last year against the move taken by the HM Treasury and HM Revenue and Customs to withdraw the VAT Retail Export Scheme and tax free extra-statutory concession at airports before the schemes were ended at the start of this year.

Revenue from retail concessions slumped 73% during the six-month period.

During the six-month period cumulative losses from Covid-19 grew to £2.9 billion. The airport said it took decisive management action to project jobs and the financial resilience of the business and reduced cash burn by over 50% versus H1 2021. London Heathrow also reported a 35% reduction in operating costs and a 77% cut in capex.

Total revenue in the period declined by 51.1% to £348 million (2020: £712 million). Revenue rose 53.8% during the second quarter alone compared to the same period last year, reflecting the increase in passengers.

London Heathrow Airport is expecting to handle 21 million passengers in 2021, having welcomed just 3.9 million in the first six months of the year.

Heathrow acknowledges the encouraging recent changes to the government’s traffic light system, which was implemented on 17 May 2021 to allow the partial resumption of international travel but has key concerns. “Fewer than four million people travelled through Heathrow in the first six months of 2020, a level that would have taken just 18 days to reach in 2019.

“Expensive testing requirements and travel restrictions are holding back the UK’s economic recovery and could see Heathrow welcome fewer passengers in 2021 than in 2020.”

PASSENGER TRAFFIC TARGET

The airport is expecting to handle 21.5 million passengers in 2021. This forecast is based on evidence of ‘pent-up demand for travel’ and the gradual addition of countries to the government ‘green list’.

John Holland-Kaye, CEO, Heathrow said: “The UK is emerging from the worst effects of the health pandemic, but it is falling behind its EU rivals in international trade by being slow to remove restrictions.

“Replacing PCR tests with lateral flow tests and opening up to EU and US vaccinated travellers at the end of July, will start to get Britain’s recovery off the ground.”

A statement on LinkedIn from Fraser Brown, Retail & Property Director, Heathrow said: “Behind the numbers are talks of colleagues across Team Heathrow who are working tirelessly to delivery recovery and remain focused on our vision of delivering the best airport service in the world. I am proud to be one of them.”

Click here for part of our recent interview with Fraser Brown, Retail & Property Director, Heathrow. 

For the full interview watch out for the Top 10 Airports report available in the TRBusiness July/August e-zine.

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