Prestwick cuts loss but state loan rises by £8m
EXCLUSIVE GLASGOW Prestwick Airport has revealed it made an underlying operating profit in the first six months of its current financial year, while reporting reduced but still substantial losses and higher turnover for the 12 months to March.
The Scottish Governmentowned airport’s underlying operating losses narrowed by 38 per cent to £3 million during the year to March 31, from £4.8m in the prior 12 months, according to its latest accounts laid before the Scottish Parliament yesterday.
But the loan to the airport from Transport Scotland on behalf of Scottish ministers jumped from £30.4m to £38.4m during the year.
The underlying loss excludes charges for capital expenditure on operating assets and interest, as well as non-recurring expenditure. Prestwick’s bottom-line loss narrowed to £7.6m during the year to March, from £8.6m in the prior 12 months. The airport’s turnover climbed by 34% to £18.2m during the year to March.
Prestwick non-executive chairman Andrew Miller said the airport achieved an operating profit in the first six months of its current financial year, after interest payments but excluding charges for capital expenditure. He revealed turnover had shown a rise during this period.
Mr Miller highlighted the airport’s focus on cargo traffic, refuelling for commercial and military aircraft, and executive jets.
The accounts show passenger revenue was only £850,000 in the year to March. Ryanair is currently the only airline offering scheduled passenger flights to and from Prestwick, Mr Miller noted.
The number of passengers passing through the airport in the year to March, at around 702,000, was up by 4% on the prior 12 months.
Mr Miller noted that, because of the Scottish Government’s purchase of the airport for £1 five years ago, UK accounting standards required capital expenditure to be written off entirely in the year in which it was incurred. He contrasted the treatment of such expenditure on assets categorised as “distressed” with the usual practice of capitalising it and then charging depreciation gradually over a long period.
The net charge for capital expenditure in the year to March was £3.1 million. The interest charge was £1m.
Mr Miller said: “Things like runway extensions and repairs are usually on a 25-year horizon. Because the [Scottish] Government paid £1 for the business, it means you have to depreciate everything 100% in the operating year in which the capital was spent. All distressed assets, if they continue to trade, have got to treat capital expenditure in that way.”
He highlighted the potential for the airport’s accounting treatment of capital expenditure to revert to normal if Prestwick could show progress “towards [a] break-even situation”.
Mr Miller, who noted that aviation-related operations in and around the airport employed between 3,500 and 4,000 people in total, is confident Prestwick will post a further reduction in losses for the current financial year, both on an underlying operating and bottom-line basis.
He said: “It is still probably going to be a loss. I can’t say what the degree of the loss will be. It will definitely be better than the accounts that have been laid before parliament this year.”
Asked if passenger numbers would rise again this year, Mr Miller replied: “It is too early to say. Our passenger numbers are directly related to Ryanair. They are the only passenger airline flying into the airport. They are very supportive of the business.”
Mr Miller highlighted the airport’s focus on specialist areas such as the transport of equipment for companies in north-east Scotland serving the oil and gas sector to the likes of South America, Africa and Asia.
He highlighted the airport’s ability to handle cargo such as 50 or 60-foot drills, as well as large components for windfarms.
Mr Miller also noted there were stables at the airport. He pointed out this enabled Prestwick to handle horses being brought to the UK from the likes of the Middle East for races and allowed UK stables to transport horses to the US through the airport.
However, he flagged challenges for the airport, including Brexit.
Mr Miller said: “We’re actively pursuing a number of opportunities to capitalise on Prestwick’s market-leading capabilities and heavy-lift infrastructure, something which is of significant value to sectors such as renewables, engineering, and oil and gas.
“Whilst the passenger market is still important and we are keen to expand the number of scheduled services, it’s an extremely challenging environment with a number of airlines experiencing financial difficulties. Uncertainties regarding Brexit, rising fuel costs and concern at continued APD (air passenger duty) charges all make it very difficult to attract additional passenger services.”
Mr Miller added there were no current offers for the airport but, seeing potential to attract bidders, he added: “It is the expectation, as the numbers improve, we will have more people ringing our doorbell.”