JOHN Menzies has slumped into the red after the fallout from the grounding of Boeing 737 Max aircraft took a toll on revenues.

The Edinburgh-based aviation services firm made a £4.4 million loss before tax in the six months to June 30. It made £8.3m profit on aviation market work in the first half last year.

The company faced a range of challenges during the latest period amid turbulence in the aviation industry. Airlines have faced pressure on revenues while Boeing 737 Max planes have been grounded since March following a crash in Ethiopia and one off Indonesia, in which 346 people died in total.

Chief executive Giles Wilson noted: “The first half of 2019 has been constrained by well documented weaker markets across the wider aviation sector, which has seen a reduction in expected airline flight schedules, cargo volumes and yields.”

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He added: “During the first half of 2019, cargo volumes and yields have been weak and we are seeing a number of airlines failing to fly their stated schedules further compounded by the grounding of Boeing 737 Max aircraft.”

Travel giant TUI also highlighted the impact of the grounding yesterday saying it could incur up to €300m (£280m) costs in the current financial year as a result. The company, which runs six airlines and a range of tour firms, has been required to lease additional aircraft to replace lost capacity.

The reverse suffered by Menzies may lead some to question the company’s decision to sever its historic links with the newspaper distribution business in order to focus on aviation services.

The company sold its newspaper distribution arm to private equity firm Endless for £74.5 million in July last year after facing repeated calls for a break up.

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However, it has faced challenges since focusing on the aviation market.

John Menzies announced in March that Forsyth Black had stepped down as chief executive and highlighted “soft cargo volumes” and continuing labour challenges in the North American market.

A former chief financial officer of the group Mr Wilson became acting head. He was confirmed in post in June.

Last month John Menzies issued a profit warning noting trading across the group had been disappointing.

The company’s shares have fallen significantly in recent months. They closed down 14p at 401p yesterday, after selling for 645p on the day the sale of the distribution division was announced.

But a spokesperson for John Menzies said the company had been right to sell the distribution business, noting the challenges firms face in the market it has exited.

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“Despite the share price performance, which we believe reflects broader industry issues affecting the Company, the sale of distribution and creation of a pureplay aviation services company has made it a materially more attractive investment proposition for the long term,” said the spokesperson.

Mr Wilson said the structural dynamics of aviation services markets remain strong. Menzies expects to benefit from growth in the wider aviation market along with moves by airlines to out-source operations in the hope of reducing costs.

John Menzies has implemented a cost and efficiency programme it expects will deliver over £10m of savings, the majority of which will be realised by 2020.

“The global commercial team has been restructured with a new sales based incentive programme put in place,” observed Mr Wilson.

The company has won new contracts following the integration of the recently acquired Airline Services plane de-icing business.

Analysts at joint house broker Berenberg noted: “The independent ground-handling market is highly fragmented .... We believe Menzies has significant opportunity to deploy its balance sheet in accretive deals.”

The company declared an interim dividend of 6p per share in line with last year.