Challenging economy and geopolitical situation raise doubts over air travel recovery

Doubts have been cast on whether the levels of air travel recovery from the pandemic will be maintained from the summer onwards amid economic and geopolitical concerns.

The message came from the boss of air traffic control group Nats as it reported a return to the black in the year to March 31 with a profit of £8.7 million against a loss of £37.8 million the previous year.

The financial improvement came as the organisation handled 1.29 million flights as Covid travel restrictions lifted during the 12 months.  

While this was 95% up on the prior year, it was still only equivalent to 50% of pre-pandemic volumes, “which was the key driver in the operating cash outflow before capital investment and financing”.

Chief executive Martin Rolfe said: “The aviation sector appears to be at something of an inflection point now with Covid.  

“Air traffic volumes have grown strongly since the start of 2022, albeit with considerable variability.  

“While this has presented challenges across the sector, throughout the pandemic we have retained the essential skills to support the recovery in aviation. This was one of our key considerations when assessing available options for cost reductions in response to Covid which were necessary to protect our liquidity.  

“Our focus throughout has been ensuring we could safely support traffic regeneration while continuing to protect our employees.”

He added: “While recent traffic levels have been encouraging, it remains to be seen whether the rate of recovery will endure through the summer and beyond given the challenging economic environment and geopolitical situation.

“Normally we would have stable trends and reliable forecasts of future air traffic as we develop our price control plans.  

“In order to achieve the plan, we will be looking for the price control set by the CAA [Civil Aviation Authority] to recognise this uncertainty and provide the resources to deliver the operational service, technology change and airspace modernisation to meet stakeholder priorities for the future.”

Nats operates through a private public partnership with government having a 48.9% stake and a group of airlines holding 41.9% including British Airways, easyJet, Lufthansa, Tui Airways and Virgin Atlantic; Heathrow has 4.2% and an employee share trust 5%.

Chairman Dr Paul Golby said: “The Covid-19 pandemic continued to have a significant impact on aviation and our operation.

“Our licence requires us to provide a service capable of meeting, on a continuing basis, any reasonable level of demand. While air traffic volumes improved on the prior year, the cash receipts received for this level of flights fell far below the cost of keeping airspace open and safe during the pandemic.  

“Accordingly, our financial focus continued to be on our liquidity and continuing to limit expenditure to what was essential.

“Last summer we completed a full debt refinancing which bolstered our financial resilience to the benefit of the aviation sector overall and to ensure we are well placed for a range of recovery outcomes.

“Operationally, we maintained our focus on protecting our employees while delivering a safe and resilient ATC service. We have taken the actions necessary to support the recovery in aviation by retaining critical skills while also operating cost efficiently.

“During the period since Covid, the board has assessed the group’s strategy, its resilience and considered the opportunities likely to arise post-pandemic.

“This review considered longer-term objectives for the business through to 2040 and recognises Nats’ role as provider of the nation’s critical airspace infrastructure, anticipating growth in demand from new airspace users, the importance of our talented employees and our role in a sustainable future for aviation.”

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