May 25, 2022

UK airline group Menzies says travel recovery is accelerating

John Menzies, the aviation services group, said the recovery in international travel gathered pace on Wednesday as it hit a cautiously optimistic note.

But the British group said volumes in its ground services and refueling business remained low and were unlikely to return to pre-pandemic levels for two years.

The cautious optimism contrasted with bullish predictions 24 hours earlier from Ryanair chief executive Michael O’Leary, who expects his low-cost carrier to return to pre-pandemic passenger numbers this winter.

Ground services volumes at Menzies were down 62% in the first half of the year compared to the same period in 2019, while refueling services fell 45%.

However, air cargo services held up better, with volumes handled for the period 9% above 2019 levels.

John Geddes, group general affairs director for the FTSE 250, said the company, which provides cargo handling, refueling and aircraft maintenance services at more than 200 airports around the world, was generally “very positive ” but that “you have to be realistic too”.

“We’re still looking at a business that’s down 60% from 2019 volumes. We see that coming back and it’s just a question of when that will come back.”

Geddes said volumes in the UK in particular remained “very, very low”.

The company, along with other British air service groups, continues to press ministers for further support.

The government announced in January the launch of a new program of commercial airports and ground handlers in England affected by the drop in travel. The scheme provides support up to the equivalent of a company’s business rate liabilities or Covid-19 losses, whichever is lower, for the 2020-21 financial year.

According to Geddes, however, the program’s design meant that it was “unfortunately 99% suitable for airports and 1% suitable for handlers”, as the latter were service companies with no ownership.

Geddes was speaking when the company announced it had returned to profit in the first six months of the year as it benefited from the results of a restructuring program as well as government support during the coronavirus pandemic.

He said pre-tax profit for the six months to the end of June was £4.7 million, compared to a pre-tax loss of £80.1 million for the first half of 2020.

Underlying profit before tax, excluding exceptional and other one-off items, was £10.9 million, compared to a loss of £48.7 million the previous year. However, revenue for the period fell to £415.8m, from £431.5m in 2020.

Shares were up 2% at 329p in early Wednesday afternoon.

Geddes said the restructuring would deliver up to £25 million in annualized cost savings on a permanent basis. As a result, the company would be in a “more profitable business once volumes return”.

The company would continue to seek to expand, particularly in emerging markets, and was also considering follow-on acquisitions. In May, he raised £22million in a share placement to bolster his plans.

On Tuesday, Ryanair’s O’Leary said: “The recovery has been very strong.” He claimed ‘no airline has recovered as quickly as we have’ after estimating that Ryanair carried just over 10.5 million customers in August.

Between November and March, O’Leary expected Ryanair to reach pre-pandemic passenger levels on a monthly basis. Monthly figures are currently at 85% of pre-Covid levels.