Accounts reveal £550m impact of pandemic on Luton council's airport company

The impact of the pandemic resulted in cumulative financial losses of nearly £550m for London Luton Airport Limited (LLAL), during the last three years, according to its latest accounts.

An extra debenture loan of £4m has been drawn down by the Luton Borough Council-owned company from the local authority in April 2023, taking the overall subsidised amount to £491.1m.

A further impairment of £75.6m on the Luton direct air-rail transit (DART) revealed in the 2022/23 accounts increases that total to £260.3m. Costs for the “passenger cable car shuttle infrastructure and service” connecting Luton Airport Parkway railway station to London Luton Airport have risen to £361m.

That means a sum of only £100.7m will be recovered during its 40-year lifespan. Ticketing income from the year to March 31st 2023 was £144,000.

A qualified auditor’s opinion was issued for a third successive year around the £1.16bn airport valuation, despite this being £320m lower than a £1.5bn valuation in March 2021. Auditor Azets Audit Services would support a further write down of £150m reducing this to about £1bn.

Expenditure for its application to the government for a development consent order (DCO) totalled £71m at March 31st 2023. A phased annual passenger increase from 19m to 32m is planned.

Loans to LLAL, trading as Luton Rising, saw a £78m increase during 2022/23. The total is £20m away from the £507m loan facility advanced to the company by the council.

“This year is one of significant recovery from the impact of the pandemic,” said the directors’ report.

“Passenger numbers recovered steadily to 13.5m for the year or 81 per cent of pre-Covid levels, compared to 6.2m the year before. The current financial year shows continued and sustainable growth in these figures.

“The company achieved an operating profit of £19.9m (against an operating loss of £8,9m for 2021/22) before changes in fair value of investment properties and impairment charges.

“Valuation of the airport continues to be reported as an investment property in our accounts and as of March 31st 2023 is £1.17bn (£1.36bn in 2022).

The company recorded revenue of £59m compared to £22m a year earlier, with an operating profit of £19m. Its net assets fell to £655m from £863m driven in part by the downwards revaluation of the airport asset.

“We expect to secure a revised concessionaire agreement or alternative value added financial arrangement by 2032/33 to extend the resilience and expertise developed during the current concession tenure,” explained the report by Mark Turner, the company secretary and director, and LBC monitoring officer.

“LLAL will continue to explore opportunities to protect and enhance the value of its most significant asset on behalf of the Luton community.”

The total interest on debenture loans paid in the year was £36m (2022: £30m), of which £28m (2022: £23m) concerning the company’s development projects was capitalised, added the notes to the accounts.

“The forecast net cash outflows for building the Luton DART system were significantly higher than the initial plan, indicating an impairment over the capitalised costs, with these at £360.7m as of March 31, 2023.

“The recoverable amount was calculated as £100.4m, indicating a further impairment of £75.6m to the £184.7m reported in 2021.”

Under a private concession agreement, the airport is operated separately and as such has different shareholders and different accounts.