By Kristy Dorsey

UK and European markets will be among the last to recover from the airline industry crisis triggered by pandemic travel restrictions, the head of aviation services group John Menzies has predicted, while countries with large volumes of internal travel have already shown “some degree” of rebounding.

Speaking after the Edinburgh-based group posted a £120.5 million pre-tax loss for 2020, chief executive Philipp Joeinig said overall volumes are not expected to regain 2019 levels until 2023. During the 12 months to the end of December, Menzies suffered a 59 per cent decline in ground service activity and a 46% fall in fuel servicing, while air cargo service tonnage held up better, down 18%.

Looking at the group’s various global markets, Mr Joeinig said domestic and regional passenger travel will be the first to recover driven by narrow-bodied, single-aisle aircraft. This will assist Menzies – which has a core focus on servicing these types of airplanes – in markets such as the US and Australia.

“In some countries volumes have already rebounded, obviously not in full but to some degree,” he said.

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Revenues fell to £824.2m last year, down 37% from £1.3 billion in 2019. The impact of the downturn in activity was mitigated by a total of £139.2m in grant money received from various government support programmes around the world, with Covid grant aid continuing into the current year.

Exceptional items linked to restructuring, refinancing, asset impairments and other costs of £81.6m took the pre-tax loss to £120.5m, compared to a profit of £17.3m a year earlier. On an operating level, losses before exceptional items were £18.5m versus a profit of £52.5m.

Mr Joeinig said Menzies is “well-placed” to prosper as the aviation sector gradually returns to structural long-term growth, having quickly cut back on its operations in line with reduced volumes. The company removed £30m from its fixed cost base during the year, two-thirds of which is permanent.

From a total headcount of 32,000 prior to the pandemic, it now has 17,500 active employees and a further 5,000 on furlough.

Company secretary John Geddes said Menzies has cut employee numbers in Scotland by “about 300” during the past year to 1,300 people. Roughly a quarter of those are currently on furlough, in line with the UK average that rose from 20% to 25% with the latest tightening of lockdown restrictions at the turn of the year.

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Menzies was forced to cut the number of ground handling staff at Glasgow Airport and elsewhere following the collapse of regional airline Flybe in March of last year. However, Mr Geddes said the situation was improved in November when Menzies signed a three-year ground handling and cleaning services agreement for all Edinburgh and Glasgow flights operated by Loganair, which picked up 16 of the routes formerly operated by Flybe.

Despite the difficulties across the sector, Mr Joeinig highlighted several commercial milestones during the year, including a five-year contract with Whizz Air at its main hub in Budapest, new contracts with Qatar Airways and outsourcing gains with Qantas across Australia. He also flagged prospects for further expansion as the pandemic subsides.

“We are seeing opportunities in more emerging markets,” he said. “Without naming them, we are under-represented in these markets, so we want to focus on those areas.”

Analysts at Shore Capital described the 2020 figures as a “resilient” set of results, while their counterparts at Berenberg described the company as “ready for recovery”.

In a note to investors, Berenberg said cost-cutting moves should make Menzies more profitable going forward. It has forecast margins of 5.1% for 2021 rising to 5.7% in 2022, compared to margins of 4.3% in 2018.

Shares in Menzies closed yesterday’s trading more than 2% higher, up 5p at 240p.