Part 1 – Will Luton continue Rising? Or sink further into the abyss?

The published rolling 12 month passenger figures for London Luton Airport are now in for October 2021, which shows that only 3.75m passengers passed through the airport, compared with 7.7m passengers the year before. This is a drop of 51% compared with last year and only around a fifth compared to 2019. 

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This is surprising, as it was expected passenger numbers would continue their recovery towards 2019 levels. The various COVID restrictions, and cost of living increases we are all seeing will have been factors in the continuing fall, or it could be a decline in the Eastern European labour markets, which are the mainstay of routes from Luton.   Time will of course tell whether 2022 will see the downward trends reversed.

Against this background, on the 17th January, the Executive Committee of Luton Borough Council (LBC) met to discuss the Revenue Budget and Capital Programme for 2022, and Treasury Management Annual Investment Strategy for that Financial Year.

These documents starkly confirm how LBC’s investment “strategy” for its airport company Luton Rising (LR), are continuing to drag both of them to the brink. The link below will take you to the LBC meeting calendar, should you wish to download the agenda pack for the meeting.  The Revenue Budget covers pages 91-228, Treasury Management from 229-270.

We would like to share two extracts with you, which have caused us to believe the situation within LR and LBC is now reaching a crucial tipping point.

In the Revenue Budget Report, Pages 118/119 contains a graph for the Dividend, Interest and Rate Analysis for LR, or LLAL as it is also known.   The first think you notice is that last year, the point of LR starting to pay LBC a dividend again was 2026. The graph now shows that slipping a year at least; but let us look at the figures within the graph in a little more detail, and why that one year slip could be very generous.

If we take away the rental income for LR, assuming that will continue, let us focus on the debenture interest and debt financing figures. 

For 2022/23 to 2026/27 those figure total £51 to £52 Million.    

For 2019/20, LR/LLAL received concession fee income of £2.90/passenger. Using that figure you will see that it would require a passenger throughput of 17.5-17.9 million passengers per annum to keep up with these huge repayment plans. Add to that the charitable donations which LR makes on behalf of LBC to avoid certain taxes, and we arrive at a figure that would actually need more passenger throughput than the current 18 million per annum cap.

In addition to this, we have LR giving back £15 million per year to the airport operator for the next three years. This would require another 5.1 million passengers per annum, and you get passenger throughput figures which cannot be physically attained.

How can LR continue to be seen as a solvent company, when the figures point to the opposite?

Part 2 of our observations will follow.

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