Coronavirus: Edinburgh firm cuts jobs amid hopes of vaccines boost for aviation sector

OHN Menzies has said it expects the aviation services market to recover from the second quarter as coronavirus vaccines are rolled out around the world despite the recent surge in infections and underlined its appetite for acquisitions.

However, the Edinburgh-based group also underlined the scale of the impact of the slump triggered by the Covid-19 coronavirus pandemic on its business.

The group provides support for airlines in areas such as cargo and passenger handling.

A spokesperson for John Menzies said yesterday it now expects to reduce total employee numbers by 30 per cent under a cost saving drive initiated last year.

In September the company had said it expected to reduce job numbers by 20%. It employed 32,000 before the programme started, including 6,500 in the UK.

It is not clear how the cost cutting programme will impact on job numbers in the UK.

It is thought around 60% of employees in the UK are currently on furlough.

John Menzies highlighted the importance of the financial support it has received from the Government amid the pandemic.

In November the Chancellor, Rishi Sunak, extended the furlough scheme to March.

In an update on trading John Menzies said revenues were down 37% last year compared with 2019.

Lockdowns introduced around the world to slow the spread of the virus have been accompanied by a big reduction in air traffic resulting in what the group described as “extremely challenging conditions” in 2020.

While activity started to pick up after governments eased lockdown measures in the summer, conditions deteriorated following a sharp increase in coronavirus cases as the year drew to a close.

John Menzies expects market conditions to remain challenging through the early part of 2021.

However, it told investors: “The positive developments with regard to the roll out of vaccination programmes are encouraging and support assumptions of a gradual recovery in volumes from the second quarter of 2021.”

John Menzies’ directors remain confident that there is medium and long-term growth potential in the aviation services market.

They reckon that as a leading player in that market John Menzies will be able to take advantage of a range of growth opportunities, including acquisitions.

Chairman and chief executive Philipp Joeinig said: “I see the opportunities for the business as being stronger than ever. I am pleased that we have not wasted this crisis, having instead used it to become more competitive.”

John Menzies said it had demonstrated effective cost management in response to the challenges posed by the coronavirus crisis and kept net debt below expectations.

It noted: “The actions taken to structurally reduce costs, should show an increasing benefit in the current year, with government support schemes also continuing to provide a material benefit in the first quarter.”

The group launched a statutory consultation last year about plans that it was thought could result in 1,200 jobs going in the UK, including 300 in total at Edinburgh and Glasgow airports.It did not update on the process yesterday.

John Menzies acquired a 51% stake in Pakistan’s Royal Air Services for an undisclosed sum last month. The group said yesterday that the acquisition created a strong platform in an attractive growth market.

It added: “We have also secured a new licence that will see our entry into Cyprus and confirmation that our new joint venture in Iraq will commence operations in January.”

John Menzies decided to focus on aviation services after running businesses connected with the news trade for more than 100 years.