JOHN Menzies director John Geddes has played down fears about the potential impact of the Omicron variant of Covid-19 on the aviation markets the company focuses on although he said the outbreak is a concern.
Edinburgh-based John Menzies issued a bullish update in which it said it expected trading in the current year to be at least in line with market expectations following a strong performance in recent months.
The company has been a beneficiary of the recovery in aviation market activity which has followed the easing of lockdown measures around the world.
John Menzies said it expects the recovery to continue and currently forecasts 2022 flight volumes to be at around 80 per cent of 2019 volumes.
Asked whether the advent of the Omicron variant in recent days could derail the recovery, Mr Geddes said: “We will have to wait and see; I’m obviously concerned about it.”
However, noting that there have been conflicting reports about the severity of the pubic health challenge posed by the new variant, he said he remained confident about the outlook for John Menzies.
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Mr Geddes appears to think it is unlikely that Omicron will result in a return to the kind of lockdowns that were imposed last year, which resulted in a huge contraction in the aviation market.
“If you look at where we are, I think we’ve got to live with Covid for the rest of our lives,” said Mr Geddes.
He added: “It’s about how you react. I don’t think we can close down the world again.”
Mr Geddes noted that major airlines such as Ryanair and easyJet have not been cancelling lots of flights.
He suggested the sector of the market that is most likely to be impacted by Omicron is long haul. However John Menzies has limited exposure to this.
In the trading update issued by the company, chairman and chief executive Phillipp Joeining said: “Despite current news on travel restrictions, we have proved time and again that we are a resilient business due to our product mix, geographical diversity and the fact that less than 10 per cent of our business relates to long haul passenger flights.”
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The company said: “Whilst regional variations exist, domestic and regional markets are generally stronger, particularly in the Americas.”
Directors are confident that the company is in a robust position following its decision to increase its exposure to the cargo market and to reduce its reliance on the provision of ground services related to passenger flights.
Mr Geddes noted that cargo flights continued to operate during lockdowns. These resulted in a boom in ecommerce which generated increased cargo traffic.
“I don’t see any of that going away,” said Mr Geddes. “From a cargo point of view there’s going to be huge growth over the next 10 years.”
Directors’ optimism about the company’s prospects is reflected in the fact John Menzies is recruiting in Glasgow and Edinburgh currently. It has not put the programme on hold since the first reports about the Omicron variant broke last week.
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The company cut employee numbers in Scotland to around 500 from more than 750 before the pandemic under moves to reduce its cost base in response to the downturn.
Regarding employee numbers in Scotland, Mr Geddes said: “We hope to start building that back up again.”
The company will continue to follow a strategy which involves using bolt-on acquisitions to help it move into attractive markets and looking to win more business from existing customers.
John Menzies noted an operation it acquired recently in Costa Rica is performing well. Last week the company announced that it had renewed all its existing business with easyJet. Shares in John Menzies closed up three per cent, 8p, at 270p.
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