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London — Heathrow airport raised its passenger forecast, but warned that demand is likely to drop off later in the year as a summer boom gives way to a “winter freeze”.

The airport, Europe’s biggest hub before the Covid-19 pandemic decimated travel, raised its annual passenger forecast by 16%. Even so, it will remain unprofitable this year after total losses from coronavirus disruption reached £4bn.

While the UK’s decision to drop Covid-19-related curbs sparked a travel surge over the Easter holidays, demand is volatile, the airport said in a statement on Tuesday. Airlines are already cancelling services into the fall, and higher fuel costs, a slowing economy and Russia’s war in Ukraine will all drag on the comeback, Heathrow said.

“There’s a huge amount of uncertainty,” CEO John Holland-Kaye said in an interview. “A lot of the demand that we’ve seen coming through involves people cashing in vouchers or taking postponed journeys. In a worst-case scenario, this wouldn’t continue, and we’d see a new wave of coronavirus in the autumn.”

Fee tussle

The comments follow a chaotic Easter break that saw understaffed airports and airlines swamped by large volumes, and come amid a tense debate over how to claw back some of the pandemic-driven losses. Heathrow is lobbying UK officials to allow it to raise fees to about £42 per passenger, while airlines want to keep increases to a minimum. The airport says service will suffer if its demands aren’t met.

The Civil Aviation Authority’s (CAA) proposal to raise fees up to £34.40 doesn’t go far enough, Heathrow said, and “will see passengers faced with longer queues and more frequent delays, as well as threatening Heathrow’s ability to fund itself affordably.”

The CAA has set an interim price cap of £30.19 per passenger. The airport says it expects a decision by July, though that will be subject to further consultation.

Heathrow is continuing to scale up operations while seeking to address a staffing squeeze, Holland-Kaye said. The CEO said operations will remain stretched during the summer peak, but that over Easter the airport successfully dealt with 80% of the 2019 passenger load with only 55% of the staff.

Profit outlook

With traffic now forecast for 52.8-million passengers this year — about 65% of pre-pandemic levels — there’s still no prospect for a return to profit or the resumption of dividend payments this year, Heathrow said. The airport said adjusted earnings before interest, tax, depreciation and amortisation to turn positive in the first quarter.

Heathrow had a loss of £1.8bn last year, narrowing slightly from 2020, after passenger numbers slumped to the lowest since 1972. The break-even point comes at about 65-million annual passengers, the airport has said previously.

More stories like this are available on bloomberg.com


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