Nevertheless, there will be limits to the goodwill. In pre-pandemic times, airports were seen as a safe investment — generating income streams that were relatively stable and predictable, and often linked to inflation. Most privatised airports are either owned outright or held on long term contracts and are protected by their monopoly positions as the exclusive provider in a particular region. “Lenders are basically saying it’s not your fault — we will talk sensibly about waivers and amendments and there is no one to blame”, he added. But on Thursday Airports Council International warned of a “severe airport investment crunch” in Europe after the industry was forced to take on more than €20bn of additional debt last year.
Instead, airport owners have reduced operating and capital spending to preserve cash, which together with equity injections and the suspension of dividend payments have so far supported companies’ cash flow. So far, most of the UK’s privatised airports have managed not to lean too heavily on government; only Gatwick, which is 50.01 per cent owned by France’s Vinci, has made use of the Bank of England’s Covid corporate financing facility, which provides temporary grants and loans.
“Lenders are treating borrowers very differently than post the global financial crisis,” said John Bruen of Macquarie Asset Management, which invests in the sector through AGS Airports, a 50:50 joint venture with Ferrovial that owns Aberdeen, Glasgow, and Southampton airports, as well as the much smaller Farnborough. “Back at that time it was quite a confrontational relationship; that’s far from the case now.” Airports are faced with the twin challenge of recovering from the pandemic and coping with climate change — putting the need for expansion into question at a time when the future of travel is uncertain.
Still, most industry figures believe air travel will recover. “Demand is expected to return to levels experienced before the pandemic by, or soon after, 2025 by which time congestion and capacity constraints will once again become an issue for the London market,” Gatwick’s chief executive Stewart Wingate told the Financial Times. He said he would have to “redo the numbers” to see whether the economics of a third runway still made sense — but that if it was needed in the south-east, it should still be at Heathrow.
“I suspect probably has changed the profile of demand for aviation in the future.” That has put expansion plans in doubt. Howard Davies, who led a nearly three-year, £15m inquiry into airport capacity, which recommended a new runway at Heathrow, this week said he was no longer sure whether it was needed. “Heathrow would be delighted to fill the two runways it has got,” he told LBC.
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