Posted: 02 Nov, 2020
On 22nd October TMA, in partnership with EMW Law, hosted an insightful webinar in which Alison Addy, Head of Community Engagement at Gatwick Airport, spoke about Covid-19’s impact on the airport and how this, in turn, has affected the businesses and communities that surround it. If you missed it, you can find the webinar recording here.
Andrew Pepper, TMA UK Director, opened the webinar and welcomed Rebecca Walker who chairs the TMA South East Counties regional board and who moderated the session. Rebecca introduced Frank Bouette, Principal in EMW’s restructuring and insolvency team, and opened the floor for Alison to speak.
How has Gatwick been impacted by Covid-19?
To begin, Alison said that Gatwick Airport is widely considered to be the largest driver for economic growth in its local area which means the challenges faced by the airport have been felt widely. Gatwick’s success relies on passenger numbers which dropped to almost nothing in April and have not yet recovered to anywhere near usual levels. Alison shared the graph below to illustrate her point.
Having worked at Gatwick for over 25 years, Alison said with conviction that she has seen nothing impact the industry in the way Covid-19 has. The pandemic has caused more than an 80% drop in passenger demand resulting in catastrophic financial and job losses.
Earlier in the year, Gatwick hoped to see some recovery of passenger numbers in August but due to strict quarantine measures the airport only saw around 900,000 passengers in August compared to the 4.9 million passengers the airport handled in August 2019.
Turning to Gatwick’s role in the local economy, Alison said that pre-pandemic, 1 in 12 jobs in the Gatwick diamond were directly or indirectly linked to the airport. Crawley, where Gatwick is located, has been particularly hard hit and latest figures suggest that there were around 25,000 workers in Crawley still on furlough by the end of October.
And beyond the impact on jobs, the impact on the airport supply chain has also been devastating. Pre-pandemic, Gatwick spent around £100 million per year with businesses located in the Gatwick diamond but with few flights and passengers this expenditure has taken a dramatic dive.
How has Gatwick responded to the crisis?
In response to the crisis, Gatwick has taken a few critical measures to ensure its survival.
First, it significantly reduced its capital expenditure. Gatwick’s planned capital expenditure has been reduced by £157 million for 2020 and £196 million for 2021. Early on, Gatwick also secured a £300 million bank loan along with wavers on its banking covenants so from a liquidity point of view, Alison said that Gatwick is in a fairly good place.
Gatwick has also reduced its operational costs by over £100 million by consolidating passenger traffic into the north terminal and by extensively shutting down some of its infrastructure operations. Some operations have had to continue. For example, Gatwick’s engineering team have been flushing toilets and using sinks at over 2000 closed locations across the airport to ensure that pipes keep working and legionella doesn’t build up.
Gatwick has also had to take some difficult decisions in terms of reducing pay and hours. At the start of the year, the airport was set up to manage nearly 47 million passengers in 2020 but with these numbers significantly reduced, the airport furloughed around 90% of employees with some 75% still on furlough by the end of October. Gatwick has also undergone a significant organisational restructure which has unfortunately resulted in a large number of staff leaving the business, either through voluntary severance schemes or compulsory redundancy.
But while some staff have left the business, Alison said that retaining staff has been a key priority for the airport. Even post-restructure, Gatwick has retained around 12,000 more people than they need over the winter period to ensure they are equipped to be agile and responsive as passenger demand picks up.
How is Gatwick planning to recover?
Looking ahead, Gatwick has been lobbying Government to support it with its recovery. In summary, Gatwick is asking Government:
- To remove the need for quarantine through the use of testing thereby giving passengers the confidence to start flying again.
- To help the UK compete by reversing plans to scrap tax-free shopping and bring in a temporary cut in Air Passenger Duty.
- To deliver fair regulation and ensure that Covid-19 measures are proportionate to airside settings.
- To unlock capacity by requiring airlines to hand back any unused slots thereby allowing competition to use them to resume or expand flying schedules.
- To encourage best use of existing facilities and provide support for local communities and businesses.
When faced with a crisis there is a tendency to want to look after number one, but Alison said the airport also takes its role in the recovery of the local economy very seriously. But interestingly, whereas conversations with those in the surrounding community usually revolve around how Gatwick can provide support now the local community is asking how they can support Gatwick.
And while its focus is on recovery, Alison did say that Gatwick hasn’t taken its eye off how it can stay competitive and is continuing with some of its investment plans. Currently, Gatwick train station is undergoing redevelopment by Network Rail with the airport investing over £30 million pounds in the project.
The airport is also investing in and progressing with its plans to bring the northern runway into routine use. The northern runway is currently Gatwick’s maintenance or emergency runway and can only be used when the main runway is not in use. Gatwick hopes to bring forward a consultation next year and thinks the plan shows it to have a sustainable, resilient and competitive future.
While the airport’s forecasted passenger numbers for Q4 2020 do not paint a very positive picture, looking to 2021 Gatwick is hoping to see around 30 million passengers and hopes that a robust testing regime will enable its recovery. Alison said that the airport’s current message is “keep healthy, keep safe, keep flying” and although these are difficult times, she is optimistic about the future of aviation in general and Gatwick in particular.
Thank you to Alison for giving us an insider’s view of what’s going on at Gatwick and to everyone who joined to listen. We hope you found this webinar useful and can join us for the next one where we’ll hear from Alieda Moore, an agent of the Bank of England, who will give us an update on the state of the economy.
If you’d like to see what other events EMW have coming up, make sure you check out www.emwllp.com/latest/
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