LIVERPOOL-3
Join Date: Feb 2004
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Sorry to read that. LPL is between a rock and a hard place. MAN decided it wanted more of the loco cake which has affected RYR and EZY's operations there. They can't charge less or they'll lose even more money, but they can't charge more either without possibly losing even more to MAN. They need to attract more carriers, but that will be no easy task either. Not sure what they can do 
Hope a solution can be found as there is obviously a market for LPL, they just have to try harder to find it.
Hope a solution can be found as there is obviously a market for LPL, they just have to try harder to find it.
Join Date: Sep 2002
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Liverpool's current throughput of around 4 million ppa is still a healthy total to work with in comparison to many other airports. Several UK airports dream of achieving such heights. Whilst a drop in throughput is perceived as disappointing, it is important to recall that LPL grew very rapidly from 250K to over 5 million ppa, so even a pullback to 4m ppa doesn't necessarily leave the business in a hopeless place. Of course, it is up to the management to monetise that passenger throughput, as we presume that the no-frills carrier customer base is not contributing significantly to the bottom line via direct fees. We must also factor in that cargo used to be a big deal at LPL and that sector now scarcely registers. GA still appears healthy.
The resolution to financial losses will most likely come in the form of cost savings and (sadly) job reductions. This would be a painful process, but an airport business enjoying 4m ppa throughput should not be under significant threat provided that costs can be reduced to more closely match income. Remember that many European airports are holding their own with a fraction of LPL's traffic levels.
Liverpool still has a decent catchment area to call its own even without significant contribution from Manchester. LPL management were surely aware that their MAN counterparts would eventually get their act together on no-frills carriers and reclaim many of the customers leaking from their own immediate catchment area. MAN's no-frills sector ineptitude / complacency gave LPL an artificial leg-up for several years. Now that MAG is finally competing robustly for this business, some reversal of LPL's fortunes was inevitable. But a rapid expansion from 250K to 4m ppa still leaves LPL a healthy legacy to build on despite the brief flirtation with even higher numbers. The existing flight programme is the bread and butter of the business; this is what really matters. New services are a bonus and there will always be times when the going is tough.
The resolution to financial losses will most likely come in the form of cost savings and (sadly) job reductions. This would be a painful process, but an airport business enjoying 4m ppa throughput should not be under significant threat provided that costs can be reduced to more closely match income. Remember that many European airports are holding their own with a fraction of LPL's traffic levels.
Liverpool still has a decent catchment area to call its own even without significant contribution from Manchester. LPL management were surely aware that their MAN counterparts would eventually get their act together on no-frills carriers and reclaim many of the customers leaking from their own immediate catchment area. MAN's no-frills sector ineptitude / complacency gave LPL an artificial leg-up for several years. Now that MAG is finally competing robustly for this business, some reversal of LPL's fortunes was inevitable. But a rapid expansion from 250K to 4m ppa still leaves LPL a healthy legacy to build on despite the brief flirtation with even higher numbers. The existing flight programme is the bread and butter of the business; this is what really matters. New services are a bonus and there will always be times when the going is tough.
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Historically 4 million passengers would have been a recipe for good profits at an airport. But that was before the new generation of airport owners started to give away airport capacity for peanuts, eager to gain first mover advantage in attracting low-cost carriers. The chickens are now coming home to roost, whether at Liverpool, Prestwick, Cardiff, Doncaster or wherever. And the situation has not been helped by ever-increasing security-related costs etc, which airports have found it difficult to pass onto customers, further squeezing profits. A vicious circle, I'm afraid. And in the case of Liverpool, it's difficult to see the same "tooth fairy" saviour as has happened with the taxpayer picking up the tab for future losses at Cardiff and Prestwick.
Even so, Liverpool is in a better position than those other airports. At least it makes a profit before debt service, which is not the case at the other sick airports. The problem is that Liverpool's shareholders borrowed a lot of money when times were good and the banks were feeling generous (or foolhardy). Now times are less good and the banks are less generous. Somehow the airport has to repay/refinance its bank debt. At other airports (eg Bristol) this has involved shareholders putting their hands in their pockets. But are Liverpool's newer shareholders in a position to do this? If not, a chunk of the airport could end up being owned by the banks....
Even so, Liverpool is in a better position than those other airports. At least it makes a profit before debt service, which is not the case at the other sick airports. The problem is that Liverpool's shareholders borrowed a lot of money when times were good and the banks were feeling generous (or foolhardy). Now times are less good and the banks are less generous. Somehow the airport has to repay/refinance its bank debt. At other airports (eg Bristol) this has involved shareholders putting their hands in their pockets. But are Liverpool's newer shareholders in a position to do this? If not, a chunk of the airport could end up being owned by the banks....
Last edited by BasilBush; 11th Jan 2014 at 08:13.
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It's a non-story. The airport is profitable (£5.2m in 2012/13) but has debts to service which resulted in an overall loss in the accounts. The shareholders are seeking to get better terms on serving that debt as would any responsible business. Read beyond the sensationalist headlines.
Join Date: Feb 2004
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Pax figures up 10% I believe in the last couple of months, which has got to help 
On the other hand its the financial experts that think there is a problem not the headline writers as we know they'll make it sound worse...
But auditors from KPMG nevertheless warned there was a "material uncertainty which may cast significant doubt on the company's ability to continue as a going concern".
...which sounds a little more of an issue than a non-story.
The debt will be renegotiated though in Q1 14, and the airport will continue, but where does LPL go next ? Debt or no debt, the future isn't going to be easy at Speak while MAG is flirting with the lo-co's.
On the other hand its the financial experts that think there is a problem not the headline writers as we know they'll make it sound worse...
But auditors from KPMG nevertheless warned there was a "material uncertainty which may cast significant doubt on the company's ability to continue as a going concern".
...which sounds a little more of an issue than a non-story.
The debt will be renegotiated though in Q1 14, and the airport will continue, but where does LPL go next ? Debt or no debt, the future isn't going to be easy at Speak while MAG is flirting with the lo-co's.
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Re pax figures, I read it as up 2% for the month of December but a 10% rise in the first week of 2014.
Nevertheless, the airport must be relieved to see an increase after a long period of contraction.
If FR are 5 based a/c for s2014, and EZY 7 based, is this the same as last year?
Nevertheless, the airport must be relieved to see an increase after a long period of contraction.
If FR are 5 based a/c for s2014, and EZY 7 based, is this the same as last year?
Join Date: Nov 2012
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Andy H52
The auditors' qualification means that it is probably more serious than you think. Yes, all airports have to refinance their debts when they fall due. The problem arises when existing bank debt has to be repaid (as seems to be the case at LPL) and the banks are no longer willing to lend as much to the airport as they did in the past. When this has happened elsewhere (eg Bristol) the shareholders have had deep pockets and have made up the difference from their own resources. In the case of LPL it is far from clear that Vantage, for example, have the funds to do this, now that their tie-up with Citibank has fallen away.
The airport will continue operating, but the future ownership structure may change.
The airport will continue operating, but the future ownership structure may change.
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This was always on the cards when Manchester finally woke up to locost.
The giant down the road has the muscle to dictate favourable terms to Liverpool's only two major tenants, where does Liverpool go ?
The network is contracting so you cannot grow revenue organically , at least not to a meaningful level. You cannot increase fees as your customers will simply walk away.
If you have large costs the only thing you can do is try to lower these by extension
or
maximising car parking fees, retail etc, difficult in a market which has shrank so dramatically.
The giant down the road has the muscle to dictate favourable terms to Liverpool's only two major tenants, where does Liverpool go ?
The network is contracting so you cannot grow revenue organically , at least not to a meaningful level. You cannot increase fees as your customers will simply walk away.
If you have large costs the only thing you can do is try to lower these by extension
or
maximising car parking fees, retail etc, difficult in a market which has shrank so dramatically.
Join Date: Aug 2007
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Bit alarming so see Liverpool in this state. What happened to their once thriving cargo which was the mainstay before the Loco`s turned up?..Its not helpful to be the hostage to fortune by the `Big Two`who will think nothing about pulling out if it suits them. Maybe this is why the banks are starting to be so cagey with them. Their spread is what you might call `a bit thin`..Nevertheless I wish them all the best, its a great airport to use, with lovely helpful staff. Nothing but good memories of the place. Long may it continue
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BasilBrush. The auditor's qualification is more likely the auditors doing what they do best and covering their own backs in the highly unlikely event that a group part owned by the multi-billion pound Peel Holdings, and one of the world's leading experts in accessing development finance (Citi Group, which owns 50% of Vantage Airports Group) can't find a bank willing to offer them favourable terms on financing.
You will note that as well as the note of caution from the auditor there is also a reassurance that the shareholders have indicated they are ready and willing to meet the costs of any payments which may be required to secure a refinancing (normally a fee is payable equating to a small percentage of the total money to be borrowed). So, no drama and very little in the way of a story.
You will note that as well as the note of caution from the auditor there is also a reassurance that the shareholders have indicated they are ready and willing to meet the costs of any payments which may be required to secure a refinancing (normally a fee is payable equating to a small percentage of the total money to be borrowed). So, no drama and very little in the way of a story.
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Andy
You are right that the impact on the airport itself is not likely to be serious - it remains profitable at the operating level. But if new finance is required from the shareholders it will not come from CitiGroup, who announced last August that they were withdrawing from this activity and seeking to sell their interests in Vantage etc.
Yes, Peel have deep pockets, and maybe the outcome will be that they buy back the shareholding they originally sold to Vantage, at a discount of course! Stranger things have happened.
And it should certainly not be assumed that banks will be falling over themselves to refinance the debt. Times are tougher than they were a few years ago, and a lot of airports are finding it difficult to secure as much debt finance as they used to. The recent decline in LPL's traffic, and the fact that both its major customers have been growing down the road at MAN, will be weighing heavily on the banks' minds. It will be a hard sell.
You are right that the impact on the airport itself is not likely to be serious - it remains profitable at the operating level. But if new finance is required from the shareholders it will not come from CitiGroup, who announced last August that they were withdrawing from this activity and seeking to sell their interests in Vantage etc.
Yes, Peel have deep pockets, and maybe the outcome will be that they buy back the shareholding they originally sold to Vantage, at a discount of course! Stranger things have happened.
And it should certainly not be assumed that banks will be falling over themselves to refinance the debt. Times are tougher than they were a few years ago, and a lot of airports are finding it difficult to secure as much debt finance as they used to. The recent decline in LPL's traffic, and the fact that both its major customers have been growing down the road at MAN, will be weighing heavily on the banks' minds. It will be a hard sell.
Yes, Peel have deep pockets, and maybe the outcome will be that they buy back the shareholding they originally sold to Vantage, at a discount of course! Stranger things have happened.
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Yes, and maybe the same will happen at LPL. Interesting times. Either way, Vantage are in a difficult position, with no obvious source of finance. They may have no option but to sell out, possibly at a distressed price.
But the airport will carry on - any drama will just be for its shareholders (and lenders).
But the airport will carry on - any drama will just be for its shareholders (and lenders).