These long-awaited accounts were finally signed off on the 30th July 2021, and posted on the Companies House website on the 2nd August. They can be found via the link at the end of this article. The accounts give rise to many questions, which will no doubt never be clearly answered, but we’ll ask them anyway.
The Review of Business Section, page 1, states growth in passenger numbers was particularly strong, reaching 17.2 million in the year. It states that the effects of Covid-19, were only slightly felt during the final month of March. It then goes on to reference the direct effects, which meant that 2020-21 saw only 2.9 million passengers through the airport. On page 23, the accounts show that a Concession Fee of £54,187 million was received, along with £890,000 in other property income, giving £55,077 million in total. On page 5 however, under Results and Dividends, we are informed that at a LLAL Board Meeting of 26th March 2020, a decision was made to pay a dividend of £19.125 million to the parent company Luton Borough Council (LBC), which the Board decided to rescind due to the continuing impact of Covid-19 on the finances of the company.
These accounts are for 2019-20 so why was no dividend paid for that year as Covid had little impact? With the Concession Fee paid quarterly and in arrears the cash was already in the bank, so why was no dividend paid? Was a conscious decision made by LBC and LLAL that they would let the residents of Luton lose crucial income for services, to prop up the massively debt-laden LLAL development projects? Based on previous LBC decisions on LLAL, we would say absolutely they would, but we, and the other residents of Luton, will be happy to be told the true facts of the matter if we are off the mark.
Pages 1, 2 & 3 contain a detailed report, Review of Business and Future Developments. The opening statement is very confusing. It says LLAL ended the year in a strong financial position, yet then states that it took immediate action to negotiate an initial stabilisation plan with its shareholder, LBC, to enable the company to maintain itself as a going concern. How on earth can a company be financially strong, then on the brink of collapse, in the space of a few sentences? LLAL is very lucky that its owner LBC will indebt itself to the point of collapse itself, to keep its financial follies alive. In the real world, there are reports on how Gatwick airport is negotiating with its loan facilitators, to increase the length of time to repay its loans from the past months to stay stable and viable; it has to face the market forces, not have a Sugar Daddy always bailing it out.
We would then like to highlight paragraph 4 on page 2, where LLAL states that despite having no income going forward, and no money to pay its dividend to LBC for services, it does have the cash to continue to grow its property portfolio adjacent, or near to the airport, as those properties have long term strategic value, and can make a reasonable return in the short-to-medium term. How can a company still invest when supposedly it has no money? Surely whoever is selling such properties, knows their value to LLAL, and then inflates the price as it’s a sellers’ market, and LLAL ends up paying way over the odds? Surely this would make any borderline insolvent company, even more so?
Next we jump to page 16 of the document, Section 3 under Accounting Policies – Going Concern. Paragraph 2 refers to the cessation of all dividend payments to LBC until 2026. We find this confusing as only last month at the Luton Airport Consultancy Committee, the LLAL representative said its forecast was a return to 2019, full capacity 18 million passenger levels, by 2024? Are LLAL’s people deliberately telling falsehoods, or do they really not have any grasp of the situation? Yet again only they can answer that one.
The penultimate paragraph of this section on page 17 really does make the blood run cold as to what exactly is happening at LLAL. Here it states that at the time of signing off these accounts, 30th July, the stabilisation funding from LBC, in the form of another £210 million in debenture loans, was still in the funding process at the Government’s Public Works Loan Board. “The company and the shareholder expect approval for the funding request and to receive confirmation of availability to this funding shortly. However, accordingly this funding cannot be assumed with certainty. These factors indicate the existence of a material uncertainty which may cast significant doubt upon the company’s ability to continue as a going concern.”
These new Debenture Loans, detailed on page 29, take the total owed to £253 million, with a further £75 million available for use. Referring back to one our previous articles, ‘Over £500 Million and Counting’, this new figure takes the LLAL debt mountain to a truly eye-watering £710 million.
The 52 individual debenture loans have varying interest rates, which come out at an average 8%, which would give a total repayment of £767 million.
Yes, that is THREE QUARTERS OF A BILLION POUNDS, on provincial airport development, truly mind blowing?
Finally we note page 22, Section 5, the Concession Contract. The airport operator, London Luton Airport Operations Ltd (LLAOL), a joint venture between extremely wealthy Spanish and Australian enterprises, informed LLAL in March 2020, that it thought the pandemic fell under Clause 10.5 of the Concession Agreement, as a Special Force Majeure event and so would invoke that clause. Yes, the operator has staff costs to consider, but as the vast majority have been/are on the UK taxpayer-funded furlough scheme, and it still has income from the flights that it has operated over the past year, why could it have not been more generous in such trying times?
After over a year, an agreement was finally settled in May 2021. This was no doubt a very expensive legal wrangle, with LLAL spending yet more money which it hasn’t got, culminating in agreeing, what appears very one sided agreement. The agreement includes the information that LLAL would receive a reduction in its concession rate, which at 2019 was circa £3.00 per passenger/100 kgs of cargo, and that the end of concession date, 2031, could be extended. On top of this is something called the Passenger Access Mechanism. This is a variable element to reflect amounts receivable, or payable, by LLAL if actual passenger figures are above or below an agreed forecast figure.
What is missing, of course, is what that passenger figure is; and is there a time frame component for the process also? To us it appears that LLAOL has let the mask slip and has shown its true colours. LLAOL is using the situation to apply financial pressures to LLAL/LBC, which could mean no income for many years to come, and that in turn could lead to LLAOL taking over the complete ownership of the airport at a bargain bucket price, because LLAL will be in no financial position to refuse.
As always, we are basing these thoughts on our research and observations into the opaque relationship between LBC/LLAL and LLAOL, as there are many more questions to be answered.
Stop Luton Airport Expansion Now!