Menzies falls 75%, but July flights may start recovery

Edinburgh-based global airport services giant John Menzies plc said on Monday its ground handling and fuelling activity in April and May 2020 was 75% lower than 2019.

Menzies’ cargo business was slightly more resilient with volumes down 37% year on year in April.

“As a result of this substantial reduction in activity levels, revenues in April and into May were consistent with expectations at the time of the March trading update and c64% below budgeted levels,” said Menzies.

However, Menzies said its trading in the second quarter to date “has been ahead of management expectations, with a recovery in flight activity anticipated to begin from early July.”

Menzies shares rose about 7% to 155p. The company’s shares were trading at over 400p in February.

Menzies has about 32,000 employees globally. It operates at more than 200 airports in 34 countries for about 500 airlines.

In a trading statement, Menzies said: “The board believes the group now has sufficient liquidity capable of supporting the group’s requirements into 2021 following significant proactive cost action taken and the benefit of government schemes around the network …

“Additional actions are being progressed to ensure the group retains a robust and flexible financial position through this crisis, including constructive discussions on necessary revisions to the group’s banking covenants …

“The board is confident in the long-term growth potential of the aviation services market and believes that, as a global leader, John Menzies plc will emerge strongly from this challenging period …

“During April and May 2020, ground handling and fuelling activity was c75% lower than 2019, with the group’s ancillary passenger airline services similarly affected.

“Cargo performance continues to be slightly more resilient overall with total volumes down c37% year on year in April.

“As a result of this substantial reduction in activity levels, revenues in April and into May were consistent with expectations at the time of the March trading update and c64% below budgeted levels. 

“Despite the significantly reduced revenue, strong cost management, together with quick and effective mitigating actions, resulted in an overall performance for April and into May that was better than expected at the time of the March trading update.

“We continue to tightly manage outstanding payments with our airline customers and are pleased that in the majority of cases payment terms continue to be adhered to.

“At this time, whilst we have been affected by the impact on our customers, we have not incurred any material bad debts during the current crisis.

“Whilst the level of ongoing uncertainty is such that the board does not consider it appropriate to provide financial guidance for the remainder of the current financial year at this time, the group has been working closely with its customers on planning for forthcoming flight schedules.

“The board currently expects activity levels witnessed in May to remain subdued into June, before a gradual return from early July. 

“As volume builds, we expect to see short haul capacity return first with long haul capacity taking longer to recover.

“In addition, we expect cargo revenues to continue to build back as customers employ more innovative measures to meet demand, such as using passenger aircraft for cargo only flights. 

“Our freight forwarding business, AMI, continues to trade well and in line with 2019 performance, with a positive outlook for the coming months.” 

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.