MIA results inevitably hit by the pandemic

The dramatic drop in demand for passenger air transport since the onset of the COVID-19 pandemic and the ensuing containment measures, is threatening the viability of many companies operating in both the air transport sector and the rest of the aviation industry.

Nevertheless, the recently implemented easing of travel restrictions together with several traffic developments led to an improvement in passenger numbers handled by Malta International Airport (MIA) during June 2021 when compared to the previous months.

However, the industry’s recovery continues to be impacted by increased uncertainty as travel restrictions continue to change, resulting into new setbacks to consumer confidence in both air travel in general and Malta as a potential tourist destination. To this extent, the lack of uniformity in restrictions imposed by governments across Europe contributed to increased uncertainty and low consumer confidence in air travel, slowing the industry’s recovery in H1-2021.

With consumer confidence and air travel demand remaining subdued, MIA’s latest traffic results for July 2021 illustrate a drop in passenger traffic of circa 60.1 per cent when compared to the 2019 levels. In view of the ongoing pandemic related developments, and with passenger movements still remain below normality levels, MIA further reported that seat capacity deployed by airlines in July 2021 amounted to just 35.5 per cent of those registered in July 2019.

As per latest 2021 interim results, MIA further reported that with consumer confidence and air travel demand remaining particularly low in the winter months, the company registered an overall drop of 87.6 per cent in passenger movements during the first half of 2021 when compared to 2019.

Total consolidated revenue during H1-21 decreased by €2.3 million (-15.5%) on a comparative basis, with revenue from the Company’s aviation segment registering a drop of 30.6% and revenue from the non-aviation segment, which includes rents, parking, and VIP products, slightly improving by 3.6%. In addition, when compared to pre-pandemic levels (2019), consolidated revenue for the first half of 2021 dropped by 71.7 per cent.

On the expenditure front, total operating expenditure, which is primarily composed of staff costs, other operating expenses and impairment losses on financial assets, amounted to €10.2 million during H1-21 (H1-20: €12.4 million), translating into an overall decrease of €2.2 million or 17.7% on a comparative basis.

As a result of this strict costs mitigation procedures implemented by the company throughout the pandemic, the Group’s EBITDA registered only a slight drop of 7.4% over the previous corresponding period, from €2.6 million in H1-20 to €2.4 million as per latest H1-21 interim results.

Additionally, in an attempt to preserve liquidity, MIA made drastic adjustments to the original capital expenditure programme for 2020 and beyond until the pandemic situation stabilises. In this respect, MIA has shifted its focus to the maintenance or renewal of the company’s assets as well as on major projects which were already started prior the pandemic and are expected to deliver an immediate return to the company.

Management recently reported that these capital expenditure projections mainly include the installation of the planned PV system and the expansion of the Cargo Village. In view of this, capital expenditure incurred by MIA during the first half of the year amounted lower to €4 million (H1-20: €5.4 million).

Upon estimating when MIA is expected to fully recover from the current crisis, it is key to highlight that much will depend on both the duration of this crisis and the extent of the impact on the local economy as well as, the scale and effectiveness of mitigating measures provided by the local and global authorities.

Nevertheless, moving forward, close monitoring is imperative, namely in relation to specific pandemic related events. The coronavirus variants continue to pose undisputable risks and their unpredictability will going forward condition the pace of economic recovery.

This article was issued by Andrew Fenech, research analyst at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.