CPH annual report: Challenges on the journey towards sustainable aviation
Copenhagen Airport is undergoing rapid change on our journey towards sustainable aviation. However, our business is under pressure, and the recent years investments at about DKK 2 billion per year are substantially higher than the earnings. Profit before tax fell by 8.7% in 2019 to almost DKK 1.3 billion.
It was a busy year for Copenhagen Airport in 2019 as passenger numbers on the 188 direct routes reached close to 30.3 million. That meant 82,895 travellers passing through the terminals on an average day on their way to or home from a vacation or a business trip.
“Connecting the world through air transport not only creates cultural and social value. Every single air route creates wealth for all of Denmark, so we shouldn’t fly less. But we should fly sustainably and with climate considerations,” said Thomas Woldbye, CEO of Copenhagen Airports A/S.
Europe’s most efficient airport
CPH reached a milestone on 4 June 2019 when H.R.H. Crown Prince Frederik inaugurated Pier E, a DKK 2 billion project for a new terminal building that provides more space for travellers and large modern aircraft on long-haul routes out of Europe.
SAS has decided to base the company’s new fleet of eight modern, fuel-efficient and quiet Airbus A350 aircraft at Copenhagen Airport. At the same time, the direct route to Los Angeles has been moved from Stockholm to Copenhagen.
“We would like to thank SAS for trusting in us and strengthening Copenhagen Airport’s position as the Nordic region’s most important hub,” says Thomas Woldbye.
SAS is the largest airline in CPH with 33% of traffic. Norwegian follows with 17%, Ryanair with 8% and easyJet with 6%. Ryanair and easyJet saw passenger growth in 2019 of 20.6% and 4.3% respectively.
“We work closely with all airlines to have an attractive airport and ensure that the operation at Copenhagen Airport is as efficient as possible for all parties,” says Thomas Woldbye.
In 2019, CPH was named Europe’s most efficient airport for the 14th time out of 16 possible by the Air Transport Research Society (ATRS).
Business under pressure
However, the business of Copenhagen Airport A/S is under growing pressure, and about DKK 2 billion has been invested annually in recent years to develop the airport.
“These are record investments that are much higher than our current profit before tax. That is not a sustainable situation in the long term,” said Woldbye.
The CPH cash flows have come even more under pressure due to global economic uncertainty, Brexit, trade wars and the corona virus.
“We aim to continue investing in the Airport of the Future and to improve Denmark’s international connectivity through direct routes to all parts of the world. The plan is to develop the airport as passenger numbers increase. However, in light of the growing global economic uncertainty, all of the planned investments may not be possible given the cash flows available. That is proper diligence and due care,” said Thomas Woldbye.
As a result, CPH will assess and amend the level of investments according to the general economic development and risk situation.
“If we are to succeed, we will need as stable a framework and as predictable a financial platform as possible. Climatic and financial sustainability is essential for the airport,” said Woldbye.
Drop in revenue and lower dividend
Profit before tax for 2019 fell by 8.7% to almost DKK 1.3 billion, primarily due to a drop in charges paid by the airlines for using the airport’s infrastructure and services.
That is in line with the guidance provided in the Q3 2019 report.
The aeronautical business was marked by lower charges paid by airlines for using the airport. Charges were lowered 10% in 2018 and by another 5% in 2019.
In addition, traffic at the airport was affected by [a number of] bankruptcies, a seven-day strike by SAS pilots and by Norwegian’s new strategy of focusing on profitability rather than growth. Aeronautical revenue was down by 6.2% to DKK 2.4 billion.
The non-aeronautical business is based on, among other things, rental income, concession revenue from parking and the shopping centre. Overall, the non-aeronautical revenue for the year was up by 3.2% to DKK 1,930.5 million.
CPH’s overall revenue fell by 2.2% to DKK 4,345.7 million (2018: DKK 4,444.8 million).
Historically, CPH have met the shareholders’ expectations of dividend payments, including that of the Danish state, and has annually distributed 100% of the net profit; but in light of the situation with the global economic uncertainty, lower charges and a very high level of investments, the Board of Directors have decided to recommend to the Annual General Meeting that no dividend will be paid for the second half of 2019.
For the first half of 2019, dividends of 50% of the half-year result were paid. Thus, for the full financial year 2019, a total dividend of 23.3% is paid. The dividend policy to pay out 100% of the company’s result over time is maintained.
Accelerating the green transition
Woldbye emphasises that the airport’s financial strength and the necessary green transition are inextricably linked. CPH accelerated the transition in 2019, involving everything from solar panels and energy savings to adding new electric vehicles.
The airport operations were certified as carbon neutral by Airports Council International. This is the highest level of certification under the ACA programme (Airport Carbon Accreditation). The accreditation is based both on CPH’s own climate and environmental efforts and through a certified climate project in Laos. The next target is to make airport operations completely emissions-free by 2030.
In 2019, the Danish aviation industry teamed up to launch a climate initiative based on the ambition to make Danish aviation a zero-emissions industry by 2050.
“Through the proposal to establish the Aviation Climate Foundation and active participation in the Danish government’s climate partnership with the aviation industry, we can work with scientists, policy-makers and climate organisations to chart the direction and accelerate the transition to sustainable aviation,” said Woldbye.
New strategy: Architects of the future Airport
In 2019, CPH launched a strategy for the airport of the future: Architects of the future Airport.
“While building on our existing platform of efficient and safe operations, our new strategy is also focus on our role in society, sustainable developments and on taking the passenger experience to the next level,” said Woldbye.
“We must focus even more on passengers, the airlines and all our other customers. We need to innovate and simplify, making everyday things easier and providing an even better experience for all the airport users,” he said.
CPH has identified a number of core areas – a range of take-offs to drive innovation and change. Their focal points include sustainable aviation, engaging stakeholders and neighbours even more in creating the airport of the future, accelerating digitalisation and developing the jobs and skills of the future.
New master plan for the airport of the future
Also in 2019, CPH submitted an application to the authorities to enact new legislation that would constitute the framework for the continued development and sustainable transition to the airport for the future.
Supported by SAS, Norwegian and DAT, CPH wants to relocate the rarely used third runway – the cross-wind runway. This will free up space for the modern fuel-efficient and less noisy aircraft types of the future.
According to our new “master plan” CPH will develop the airport within the current area, with all facilities under one roof and with the shortest possible walking distances to gates and public transport.
An approval of the “master plan” is one vital part among several providing CPH with the operational framework that enables a continued green transformation of the industry.
All-time high passenger satisfaction
The year ended with good news. According to the international Airport Service Quality (ASQ*) survey conducted at more than 350 airports the world over, the passenger satisfaction rate at Copenhagen Airport improved from 81% to a record 86% of passengers saying they are satisfied or very satisfied with the service, the facilities and their passage through the airport.
Woldbye believes that the passenger satisfaction rate is a direct and measurable result of the many new facilities and the excellent service offered to passengers at Copenhagen Airport by the airlines, the police the customs authorities, the groundhandlers’ check-in and baggage handling staff, shop and restaurant staff and by CPH’s own staff in areas such as cleaning and the security checkpoint.
“All of these good efforts bode well for the future and for everyone working together to create a sustainable airport that also future generations can be proud of,” said Woldbye.
Outlook for 2020
Global aviation is under pressure from amongst other factors economic uncertainty, climate change and the recent outbreak of Coronavirus COVID-19.
The Corona outbreak significantly affects the number of flights – both in terms of holiday and business travel. Airlines have announced they are cancelling and reducing operations in line with declining demand.
Due to the great uncertainty COVID-19 has created for air travel in Denmark and the rest of the world and uncertainty about the duration of the situation, it is currently not possible to make a reasonable assessment of the financial impact of the Coronavirus at this time. Hence, it is not possible to give an outlook for revenue, profit before tax and total investments.
As a consequence, CPH will continuously assess and adjust the level of operational costs and investments.
Click here to download the Annual Report: https://www.cph.dk/en/about-cph/investor/publications