Cynulliad Cenedlaethol Cymru

Yn ôl i Chwilio

Y Pwyllgor Cyfrifon Cyhoeddus

Public Accounts Committee

02/03/2020

Aelodau'r Pwyllgor a oedd yn bresennol

Committee Members in Attendance

Delyth Jewell AC
Gareth Bennett AC
Jenny Rathbone AC
Mohammad Asghar AC
Nick Ramsay AC Cadeirydd y Pwyllgor
Committee Chair
Russell George AC
Vikki Howells AC

Y rhai eraill a oedd yn bresennol

Others in Attendance

Adrian Crompton Archwilydd Cyffredinol Cymru, Swyddfa Archwilio Cymru
Auditor General for Wales, Wales Audit Office
Deb Bowen Rees Prif Swyddog Gweithredol, Maes Awyr Caerdydd
Chief Executive Officer, Cardiff Airport
Helen Jones Swyddfa Archwilio Cymru
Wales Audit Office
Huw Lewis Cyfarwyddwr Cyllid ac Ysgrifennydd y Cwmni, Maes Awyr Caerdydd
Finance Director and Company Secretary, Cardiff Airport
Matthew Mortlock Swyddfa Archwilio Cymru
Wales Audit Office
Roger Lewis Cadeirydd, Maes Awyr Caerdydd
Chairman, Cardiff Airport
Terry Morgan Cyfarwyddwr Anweithredol, Maes Awyr Caerdydd
Non-Executive Director, Cardiff Airport

Swyddogion y Senedd a oedd yn bresennol

Senedd Officials in Attendance

Claire Griffiths Dirprwy Glerc
Deputy Clerk
Fay Bowen Clerc
Clerk
Joanne McCarthy Ymchwilydd
Researcher

Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.

The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.

Dechreuodd rhan gyhoeddus y cyfarfod am 13:35.

The public part of the meeting began at 13:35.

2. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau
2. Introductions, apologies, substitutions and declarations of interest

I welcome Members to this afternoon's meeting of the Public Accounts Committee. Also, welcome to our witnesses, here to discuss Cardiff Airport. As usual, headsets are available for translation and sound amplification. Please turn off or put on silent any phones—or airplane mode, I suppose, would be more appropriate today. In an emergency, follow the ushers. We've received one apology today, from Rhianon Passmore. I'm also pleased to welcome my colleague Russ George, the Chair of the Economy, Infrastructure and Skills Committee, who's joining us today because of his interest in this particular area. Do Members have any declarations of interest they'd like to make at the start? No. 

3. Papurau i'w nodi
3. Paper(s) to note

We've got a couple of papers to note. First of all, Clare Pillman has written with further information following her attendance at committee on 20 January. Are Members happy to note that correspondence? Following Members' recognition during the evidence session of the progress Natural Resources Wales have made in addressing issues previously raised by the Auditor General for Wales, I suggest that we now close this inquiry. Okay.

Secondly, the Welsh Government have written in response to the letter of 14 January seeking clarification on a number of points, and have asked that the letter be taken as the supporting paper for their forthcoming evidence session, scheduled for 23 March. As the letter has relevance for today's session with Cardiff Airport officials, it's been added to today's agenda. Is there anything the audit office want to add? No. Okay, if we note that correspondence, then. Two areas—the loan facility that's been on offer, and relationships between the airport and airlines, which Andrew Slade has suggested we raise directly today with the witnesses in our session shortly. 

4. Maes Awyr Caerdydd: Sesiwn Dystiolaeth gyda Maes Awyr Caerdydd
4. Cardiff Airport: Evidence Session with Cardiff Airport

So, without further ado, item 4, and our evidence session with our representatives from Cardiff Airport. Thanks for being with us today. Would you like to give your names and titles for the Record of Proceedings?

Roger Lewis, chairman of Cardiff Airport. 

Deb Bowen Rees, chief executive officer, Cardiff Airport. 

Huw Lewis, chief financial officer, Cardiff Airport. 

And Terry Morgan, non-executive director of Cardiff Airport. 

Great, thanks for being with us. We've got a number of questions for you, but, first of all, and right up to date, obviously, there are concerns at the moment regarding the coronavirus and its spread, and the impact of that on our airports and how they're managed. I understand you'd like to say a few words about what Cardiff Airport is doing in this regard. 

Thank you, Chair. And to be brief, and to save the time of the committee, we'd like just to leave a paper with you to say that COVID-19 has been very front of mind for us at Cardiff Airport since the outbreak was declared. We held a board meeting specifically with this as the No. 1 item last week, and we've working very closely with the UK Government and also the authorities here in Wales. I'd emphasise that the No. 1 priority are our staff and our passengers, so that's our No. 1 priority given the circumstances of this. I'd just like to ask our chief executive, Debra, just to give a few highlights from the paper that we're going to leave with you today, Chair. 

Thank you. We have got a long-standing relationship with Public Health Wales and the Association of Port Health Authorities , and as soon as we became aware of the outbreak of the COVID-19 virus, with a notification through the World Health Organization, we made contact with our colleagues within both organisations. Since then we have a daily update briefing with them, and I've just got the latest from the call this morning. Effectively, the key topic under discussion was whether enhanced monitoring or screening of passengers should take place at Cardiff Airport, because, obviously, we are taking advice from both of those organisations in terms of how we respond and what we do. The advice this morning is that screening at the airport of passengers travelling from category 1, which is effectively the locked-down areas, or category 2, which is the adjacent areas, is not seen as a requirement at the moment. The risk at Cardiff Airport is still assessed as moderate, as we don't have any direct flights into the airport from the affected regions. But I would emphasise that that is under review. It's a very fast-moving situation, as you all know, so things may change. But the bottom line is we're working with both port health and Public Health Wales to continually review our processes at the airport in the light of the current situation and how it's changing, and, as Roger says, the key priority is to minimise any risk, not just for our passengers but also the team working at the airport. 

13:40

Thank you, Deb. Chair, we're happy to take any question from your committee on this particular subject.

Thank you very much, Chair. Good afternoon. We know that middle-east airlines, many airlines, are cutting down their staff, cutting down their travel service to various areas around the globe, and we know that Qatar Airways is one of the main contributors to Cardiff Airport for many different financial and other areas, what impact is it going to have on you if Qatar cuts down its airline visits?

On that, Chair, if I may ask Deb to say a few words, and then briefly Terry Morgan, our independent non-executive director. He's one of our three—well, four, with myself—non-executive independent directors. Terry's not been before you before. Terry's been with us for a number of years now and has worked in 17 airports around the world, so will have a particular insight today not only on general subjects, but on this subject in particular. But Deb, you first, and then perhaps Terry. 

As you'd expect, we're also in very close contact with all of our airline partners. We're liaising with them regularly in terms of any changes to procedures that they're making. Obviously, the impact for Qatar at the moment is flights into China, as they are for all the other airlines. Other than that, their flight schedule is operating as normal. But as I say, it's a fast-moving situation, and we're in constant dialogue with all of our airline partners. 

What appears to be happening is that a lot of airlines, not just middle-eastern airlines, are actually cutting frequencies, mainly not because of health concerns, but because the underlying passenger demand has dropped off. So, they're basically saying, 'If we've got triple daily services to a destination, we'll cut that back down to two, because there just aren't enough passengers to warrant a higher frequency.' So, that's the pattern that's emerging. But as Qatar is just one service a day from Cardiff, they can't—well, they can cut it, but they're quite happy to maintain that service at current levels.

Thank you, Chair. Obviously, this is something that could turn into something far bigger. We still don't know exactly what's going to happen. How much of a financial hit do you think this could mean facing Cardiff Airport? Is that something that you've planned for? And just another question: are there any circumstances where you think that you might be forced into cancelling some outgoing flights?

On the financial impact, Chair, if I ask Huw, our chief financial officer—and then Debra to address the second point. 

If I just take the third question first.

Yes. [Laughter.] There's probably a better way around of doing it.

In terms of cancelling flights, that wouldn't be our decision, that would be the decision of the airlines.

But do you think there might be circumstances where you might be forced into that because of a decision?

Again, it wouldn't be our decision to make. We could close the airport. That would be the only thing that we particularly could do. But in terms of flights, that would be a decision for the airlines to make.

Sorry to interrupt you before you come in—on that, which you've just suggested, the larger-scale thing that you could do of closing the airport, presumably, there are some circumstances where that would have to be considered.

I think, again, if it did develop into a pandemic, one of the key issues that we've got is the availability of our staff. That would be the critical thing. Part of our contingency planning at the moment is that we're identifying the minimum levels of staff that we would need to safely and in a secure way run the airport operation. So, it would depend on the scale of the pandemic.

I think everybody is right and absolutely correct in taking this thing seriously, because it's an unknown situation we find ourselves in, but I think it's also useful and necessary to put it in the context of 'normal' flu. As Deb said, the airport has employment contingency plans for flu virus, and I think the coronavirus falls into that category.

13:45

Before I hand over to the financial officer, I just reassure the committee our No. 1 priority is the health and well-being of our staff and our passengers, and that will override any economic concerns—hence working so closely with the UK and Welsh Governments. 

I think to give a pure quantum in terms of what this could mean, what we're doing as part of our business planning process, because we're in that cycle at the moment, is we're doing a number of sensitivity scenarios around the range of outcomes that could arise. So, from a governance perspective, we're making sure that we're aware of the scenarios that could cause passenger reductions, and what additional cost we'd have to invest in the business to manage any guidance that comes through from the public health authority. So, to give you a direct answer, 'No, it's very difficult to quantify what the pure financial impact would be.' But we are scenario planning behind the scenes for not just only the operational outcomes, but also the financial outcomes, as part of our business planning process.

Okay. Any other questions on this particular issue? Clearly, it's a fast-moving situation, so we'll be keeping an eye on the way things develop. Let us know if there are any further developments relative to this.

Okay, moving on to our substantive questions, and question 1 from me: the airport's passenger numbers have grown every year since 2014, reaching around 1.7 million in 2019. How does the trend compare with the airport's projected figures? And is it on course to meet its target of 2 million passengers by 2021?

Thank you. Deb, will you take that first?

Yes. I'll hand over to Huw with the projections. Like I say, we set the business plan back in 2013, and up until now I think we are pretty close to the targets that we set at that stage. Huw, do you want to pick up?

In terms of the progression against the original plan to date, I think we've always said that we're about 12 months behind the original projections. And for this year, we'll deliver passenger numbers around the 1.7 million mark. Where we do face a challenge going into next year is, obviously, we saw the liquidation of Thomas Cook last year, which will have an impact on our business of about 150,000 passengers. We see bounce-back in the future from that, but these things take time to turn around. So, in terms of our progression to date, yes, it's pretty much been in line with the plan, but we do see a one-year change in the cycle next year. 

It's worth emphasising, Chair, that since the Welsh Government took ownership of the airport there's been a 60 per cent increase since 2013 on passenger number—that's 60 per cent. One of the Members very kindly mentioned Qatar Airways. Qatar's role within this has been critically important for Wales and Cardiff, for having that link to a hub in the Gulf. That's the important thing: a hub in the Gulf to take us beyond. Qatar's relationship with Cardiff Airport has been transformational. Since the launch of Qatar in Cardiff Airport some 20 months ago, we've seen in excess of 100,000 passengers, so we're very, very pleased with that performance, and we're forecasting over 100,000 passengers on Qatar Airways in the year ahead. 

Sixty per cent, yes, since 2013—60.

You mentioned Thomas Cook, and obviously there's Flybe as well. How do you manage the related risks in respect of the potential impact on targets and projections? Or do you think, actually, when you look at the success of the Qatar link, that dwarfs any of these problems? 

Again, we model this very, very carefully—very carefully indeed. One wouldn't put Qatar as being substitutional for the Thomas Cook demise. But Huw, do you want to just give an outline in terms of our projections not only for next year, but our projections for the year after, and the year after that?

Yes. As I say, we will see a reset based on the Thomas Cook impact for next year, but we do see a return to growth in terms of the ongoing years. I think the piece that we would like to say from a risk management perspective is that actually we're constantly engaging with airlines to look to see where we can develop new routes, and also to fill existing capacity that we've lost. We're delighted to announce that, a couple of days ago, Loganair introduced a service to Glasgow, which was new and incremental to us. Eastern Airways are now flying to Teeside as well. So, whilst we see some drop-off from the Thomas Cook impact, we are seeing traction with other airlines coming in and operating from the airport.

I'll hand over to Deb to give you a bit more colour, but the point is, the hits that, inevitably, the airport will receive next year—because the numbers this year, which is the financial year ending March, are very encouraging indeed, and we might talk about more about those, so very encouraging numbers at the end of this year. Next year will be a tough year with the Thomas Cook demise, but also, as the finance director said, the year after, and the year after that, we see ourselves picking back up. And Deb, some other news.

13:50

Yes. The other airline that we've seen some growth with this year has been TUI, which obviously operates in the same market as Thomas Cook did. They're adding additional flights to the airport next summer and also, over the winter, they're returning flights to Sharm El Sheikh in Egypt.

Okay. Moving on, and Delyth Jewell. Sorry, Russ George wants to come in.

Can I just ask a question on this? In terms of the 2 million target, I think I'm right in saying your master plan was hitting 2 million by 2021. I think you've outlined in your answer that your projection is—effectively, you've lost a year, in that regard. I know that the Welsh Government have told us that there was a 2 million target by 2025. So, I'm just a bit unclear. When do you believe that you're going to hit that 2 million target?

Okay, I'll hand over to the finance director to give precise numbers, but as I say, we've been tantalisingly close with 1.7 million this year. And of course, the things that happen in this business are things that literally come left field, such as no-one foresaw a year ago the demise of Thomas Cook.

I understand that. The question was: when are you going to hit the 2 million target? When do you project to hit the target?

Let's put some context in first, sir, if I may.

Well, briefly, but then answer the question, if that's all right.

Yes, certainly. But some context is that we're tantalisingly close with 1.7 million. No-one foresaw the demise of Thomas Cook within the planning, particularly in 2013, because let's contextualise it, we're talking about a plan that was discussed seven years ago. No-one foresaw the other changes: no-one foresaw COVID-19, which is going to have an impact in the year ahead; no-one foresaw the volcano in the Philippines, et cetera, et cetera, around Manila. So, these are all things that are outside of our control, sir. But let me get Huw to answer your question precisely.

The first point is: we did see the blip for Thomas Cook. In terms of the Welsh Government's letter around 2025 for the 2 million, that's the revised forecast in terms of where we get to. To give a little bit of context around that, we've seen the liquidation of Thomas Cook and the closure of the Flybe jet base, which both have had impact on numbers. Looking at the global impact of airlines, I'm sure everybody's aware that, within the airline industry, the assets that airlines have are mobile and they can place them wherever they can around Europe—the world, in fact. So, we've seen a couple of challenges: Brexit uncertainty up until this point hasn't helped; fuel prices have also been a significant challenge in operating within the UK; and, thirdly, we've seen the 737 MAX issues—all of which have had knock-on impacts in terms of the delay from the original number of 2021 moving out to 2025.

So, 2025 is our current estimate, and that's based on the business planning cycle that we've just gone through in the last couple of weeks.

But just to check your earlier answer, I understand the master plan target was 2021, you earlier mentioned that you're one year behind. So, I'm just trying to understand how that sort of correlates.

In the context of the earlier answer, we are one year behind at this point in time. So, there will be a pause and a revision downwards because of Thomas Cook, but then we'll see growth continuing for the next five years, following next year, so we will hit the target of 2025.

So, by 2025, you'll be four years behind your original target. Is that right?

And if we put this into an economic context—and this is something, Chair, forgive me, I might say a number of times today—our revenues this year are greater than our costs. Our revenues this year are greater than our costs.

This year will be the third year that we've achieved that goal, since probably 2007.

If you look historically at the industry as a whole, it's quite a consistent pattern that—when there is a big shock to the system like the financial crisis, an oil crisis, or a war—is quite noticeable that the industry's volumes take a hit, and then it takes about between three and five years to get back to where you started. So, the delay from our original plan is pretty much in line with what the industry tends to do when there is a shock to the system. So, it's not surprising that we'll be three to four years behind where we thought we were going to be.

And when you say revenues are now greater than your costs, is that your total costs?

This is from an operating perspective; this is before we look at the depreciation and amortisation of our assets.

13:55

So, if you take into account all costs, then your revenue is not higher than your costs.

No, it is higher than our costs, because what I'm talking about is the cost of operation—

So, the cost of operation in terms of—running the airport on a day-to-day basis, our revenues are higher than our costs, and they have been for the last three years. Recognising the losses within the financial statements, that is driven by increased amortization and depreciation, which is as a result of the investment we've made in the last five years.

Diolch, Gadeirydd. You've reported a significant increase in commercial income in 2018-19. Could you talk us through— around what you've already said, if there's anything you'd like to add to it—how you achieved that and whether you think that growth is sustainable, considering the recent developments we've already been discussing

Thank you for that. Deb, do you want to give an outline of what we've done?

The key driving factor for the growth in commercial revenue has been the investment that we've made in the airport infrastructure and the customer experience, and there have been a number of key projects that we've worked on over the past couple of years. In particular, we've massively improved the departure lounge and expanded it, we've introduced new food and beverage outlets with a Costa franchise that has been immensely successful, WHSmith—we've expanded and they've added a whole host of new ranges to the offer, including a pharmacy range. We've introduced car park meet-and-greet services, which, this summer, has been the dominant means of booking car parking at the airport. We've made big improvements to the executive lounge, and we've also built a new car hire centre, so that's a direct result of the investment that we've been able to make in the airport and the infrastructure.

As a result of that, we've seen commercial revenue grow nearly 30 per cent in the year that ended March 2019, so that has been the predominant factor behind that.

That's a sustainable measure of growth that will continue, or do you think that that was a—not quite a one-off, but do you think that was very particular to this moment? 

That was absolutely a step change, because the sort of improvements that we've made within the terminal were major improvements and offered a lot of new facilities that we hadn't been able to offer. But we do absolutely still expect our commercial income to continue growing. We're doing a huge amount of work with our concessions at the airport, our duty-free offer and things like that. So, we've got a lot in train that we expect to see—

To reassure you, I'd hand across to Huw. We've got a continuous programme of improving our commercial performance. And as Debra just mentioned, we've recently put out a significant tender to certain of the potential partners that we're working with, and we were hugely encouraged by the response to that Deb. Huw, do you want to give a bit more—

Absolutely. Deb's covered off the bulk of the points, but I think what's pleasing is that we made a significant investment in the terminal, and we saw our commercial income grow by 35 per cent, including some diversification opportunities we had within the business. Just our pure commercial and car parks opportunity, in terms of retail, and car parking, grew by 16 per cent in the published financials. What I'm really pleased about is that this year, we've then seen—and this is from our latest management accounts in December, which are unpublished, I appreciate—a further 12 per cent growth in commercial revenues this year. So, we're really pleased that the work that we did in 2018 is actually up—

And just one other point to answer your question: is there opportunity for further growth? We believe that there is, but that would come with a cost of investment, but with the footprint of lands that we have around the airport, which we've begun, obviously, a considerable amount of work on, on our master plan, we feel that there are some very quick wins if certain things were to arise. Deb.

I think the other thing we're finding now is that, as confidence is growing in the business and we've seen the growth that we have, we're now getting increasing confidence from our existing and potential business partners. Roger just mentioned the tender process that we've just gone through with our duty free; the stuff that's included in that tender is going to be, again, a significant enhancement.

We've also had a new forward-base operation, which is handling of business aircraft, come to us last year, and the difference is that they've had that confidence to make significant investment themselves. So, that company has developed facilities on the south side of the airfield. They brought in a significant number of staff, a significant number of new jobs, and, again, that all adds to our growing commercial revenue.

Just to emphasise that our diversification has also, now, in this last year, taken on the responsibility for the runway at St Athan—

14:00

And we're very proud to have taken on responsibilities for Valley at Ynys Môn. With Anglesey, that is an all-Wales play for us now and we are very much wanting to and are encouraging an all-Wales play for Cardiff Airport, so it's not perceived as something just of the south. So our relationship with Anglesey we feel, strategically, is so, so important for us. 

Thank you for that. I wanted to ask you about the commercial identity of the airport, almost. In September, the Welsh Government told the committee that the airport isn't operating purely on a commercial basis, because the airport is discharging some Welsh Government policy in terms of needing there to be a real living wage, and so, I wanted to ask firstly if you could explain to what extent considerations of that kind from the Welsh Government would inform policy decisions made by the airport and the impact that would have financially on you. Also, as a follow-up to that, we'll be coming back to further questions on the loan that the airport has received, but that loan was made on a commercial basis, which means the airport isn't obligated to report on all elements of how it's spent. Do you think that there's almost an existential conflict between the commercial considerations of the airport and the fact that the Welsh Government would be requiring certain policy decisions to be made in line with their values—which I would support, just to put that on record, but do you think that there's an existential almost conflict there?

Okay. I'll split the two questions, if I may. To take the first one, I think it's worth emphasising, Chair, that there is a commercial arm's-length relationship between Cardiff Airport and Welsh Government. We're a limited company, we have a responsibility to act in the best interests of the shareholder, which is Welsh Government, but we have a fiduciary responsibility to make sure that we address all of the business demands of the airport appropriately, and we're governed legally to achieve that. 

In terms of the real living wage, that is something that we were committed to; we wanted to pay that, but when it was the time we could afford to pay it and, luckily we could bring that forward. We're committed to the Well-being of Future Generations (Wales) Act 2015 and we are committed to doing that. We're committed to a green agenda. We have a climate change agenda within the airport. We are committed to that, because we think that that is the corporate responsibility of a proper business in this environment. 

Forgive me for interrupting you a moment, but as well as it being a corporate responsibility, is it the case that, as well as that, you would be required in some way by the Welsh Government to have these considerations as well?

There is no undue influence brought to bear on Cardiff Airport and the board of Cardiff Airport by, dare I say, not only the Welsh Government but by any politician. I'll also share with you that that was why I took on the position five years ago. We needed to have that integrity to make the right decisions for the enterprise to go forward.

In terms of the second question, which is a fascinating question, Huw, do you want to pick up on that? I'm happy to address it, but perhaps another voice.

You start, Roger, and then I'll—

Okay. This is very much the elephant in the room, really, and it's how does one invest, when and at what levels, in an enterprise such as Cardiff Airport? That decision will rest with the shareholder. The relationship we have with Welsh Government is one of a commercial loan. That is a straightforward commercial loan that we have with the Government. And you know the number; it is £36 million. That is the extent of the loan that we're servicing. 

Just before I hand over to Huw, I'd just like to put it into the context of similar airports with the debt that they carry in their holding companies. So, if you look at Liverpool, it's carrying a debt of some £102 million; Newcastle, £367 million; Leeds Bradford, £125 million; and Bristol Airport, £590 million. That's against the position that we're servicing a commercial relationship with Welsh Government. So you could say that we're punching well above our weight to achieve what we've done, and to sustain the enterprise is something impressive. 

I think in terms of the loan, the financing we receive, I'm sure there'll be a question on it, but to address it now, if you look at the loan extension that we went through earlier this year, which was signed off in October, that process started in March, as part of our business planning cycle. We went though a comprehensive period of due diligence through the summer, which was both from a state aid perspective and from a pure due diligence perspective. The loan is forwarded to us on an arm's-length basis at a commercial interest rate, and there are requirements during the due diligence for that loan to be repayable within a 20 to 25-year term, which are also factored into the projections that were included within the due diligence report that we went through. 

14:05

I just wanted to go back to the first half of the question, which was about the impact on us of Government-imposed policy. I think that, one of the key areas where that does have massive impact is the cost of regulation. It's one area that we are mandated to cover, and also not just in terms of cost but in terms of time and when we fulfil capital projects. Over the next couple of years, for instance, there's a huge change to the way in which passengers will be screened going through to departures. It's called 'next generation security checkpoint'. That is going to cost us in the region of £5 million, we think; we're just finalising that now. As I say, that is a mandated regulatory change that we have to do. We're having to do an airspace change around the airport at the moment which is mandated; another £1 million. We had to completely replace our whole baggage screening system a couple of years ago; £2 million. So, there are huge costs associated with that, and the issue that we have as a smaller airport is that all of that cost has to be recouped from the passengers, effectively, who fly through our airport.

As we said, we've got 1.67 million passengers to spread that cost across. Now, the cost for bigger airports—Bristol, for instance—the cost to them of running their air traffic operation is not significantly different to us, but they've got 8.5 million passengers to spread that cost across. So, I think when you look at our requirement for cash and capital, that is one of the driving factors towards it in terms of meeting our regulatory burden. 

To be clear, the costs that Deb has just alluded to are actually UK Government costs; they're not Welsh Government-imposed measures. So, it's the UK, either the Department for Transport or the Civil Aviation Authority, their regulatory burden on us is far bigger than the Welsh Government's. So, I think we need to just make that point. 

Thank you for that. Just to bring you back to the question in terms of—. Thank you for the information that you've just given us; that's really helpful for the record. Do you recognise—. Would you agree that there is a potential, again, existential tension between the fact that there are some Government—I won't use the word 'mandated', but what's 'disgwyliadau' in English—expectations of policy, set against the fact that you are operating commercially, particularly with this loan, that there are some things that can't be reported on? 

As Terry said, regulation we accept, and just to talk philosophically, some people's regulation is other people's intervention but, no, we accept regulation. But in terms of any undue influence coming from Welsh Government on ourselves to behave in a way that we feel is inappropriate for the commercial objectives of the organisation, no, there is no undue influence whatsoever. Deb. 

I think one of the key points to make is that, as a commercial company at arm's length, we're not subject to things like the Well-being of Future Generations (Wales) Act 2015. We're not subject to the Welsh Language Act 1993. But as a responsible business, our 100 per cent shareholder is the Welsh Government, then as a company, we consider it absolutely right that we adhere to that policy as closely as we can within the context of the commercial company. 

I think a great example, again, is the real living wage. As a business, we felt that it was something that we should be committed to, but it had to be at an affordable time. In terms of where we were as a business, we were able to bring that forward because we recognised the benefits to the team at the airport, and being mindful of the wider context that it's operated in, we thought it was the right thing to do at the right time. 

Thank you, Chair. In your accounts for 2018-19, you include £140,000 for restructuring costs, so I just wanted to ask about those costs, your restructuring costs of £140,000. How and why are you restructuring the business and what do you expect to achieve? That's such a big question, but if you can answer it in summary, if you can. 

We've got to get the right teams and the right operation to deliver what our passengers need and, as you change that, you make changes to the business. It's a simple commercial activity, and it's the outcome of right-sizing and right-shaping the areas of the business to do that. 

14:10

Can you give us some examples of how you're spending that £140,000?

In terms of them, a lot of them are quite sensitive areas, so I'd rather not go into detail in public forum on them.

But happy on that to take them privately, of course.

Absolutely. Address them privately, no problem. 

What we can do there then is we can go into private session at the end for a short period for you to be able to answer some of those questions. 

I'm grateful for that. You also—you forever use the EBITDA measure when you're talking about your set of accounts and your progress. Why is that measure so important, and what other measures do you take in context with that as well? Are there other measures you take apart from that?

So, it comes back to, simply, we're a really simple business; we actually get cash in and we pay our suppliers and our team. We don't have—. We're not a complex set of accounts where we have unusual provisions knocking around necessarily. So, why EBITDA is important is everything down to that level is basically cash in, cash out. So, it comes back to Roger's point that he made earlier, which is that our revenues are in excess of our costs from an operational point for the last three years. So, that's why we reference EBITDA, from an internal business point of view, as being incredibly important. 

And I'll ask Terry now to give you a reason why airports are focused on EBITDA, earnings before interest, taxes, depreciation, and amortisation, to— 

And then, after, as well, if you can just keep in mind, there's also interest in what other measures you use as well as that.

Okay. So, we'll come back to that. And, Ter, if you give the EBITDA metric. 

Yes. EBITDA is the industry standard in terms of valuation of airports, because airports are usually sold on a multiple of EBITDA. And the reason that EBITDA is chosen is that, as Huw's alluded to, it's a measure of how pure or well the operation is being managed, because things below EBITDA, such as amortisation and interest, are actually—they're very important, but they are actually indicators of how you finance the business, not necessarily how you manage it. So, when prospective buyers or existing owners look at an airport and say, 'How well is this airport being run?', they'll look at EBITDA, because, as I say, the other measures, although important, and very important in terms of financing, they can be—. You have choices as to how to structure those.  

And what are the other important measures that you mentioned as well? What are they?

So, the fundamentals that we look at are obviously revenue, in terms of growth, but we would then drill down in terms of that into revenue per passenger—what are you delivering for every passenger that travels through the airport; operating cost per passenger, which is slightly difficult to measure, because we are a very, very fixed cost business due to regulation; passenger numbers are a key, fundamental measure; and then we also look at commercial revenue per passenger, so taking that down to another granular level. 

From a pure financial perspective, I will always look at depreciation levels. I try to keep to a reinvestment ratio of 1:1, so that our capital programme equals our depreciation each year, which means you've got a consistent profile going forward. And then we've got a number of non-financial areas that we look at, such a customer satisfaction scores; we've got a QHSE dashboard—so, quality, health, safety and environment—that we look at; on-time performance, and then we look at how well we're interacting from a community engagement perspective, being a good neighbour—we try and measure in terms of our actions in that area. 

And the headline here is, with 1.7 million passengers, when we start increasing our passenger numbers, because, as Deb said, we have regulatory costs that we have to do, fixed costs we have to do, there's a tipping point in the business where literally everything starts flowing to the bottom. 

No, I understand that, absolutely. When do you expect the airport to return to profitability as well?

So, I think the question you asked about 2 million passengers earlier on is a real, fundamental one. Roger's point about us having a heavy fixed cost base means that, once you get to the 1.6 million, 1.7 million passengers, all the revenue you earn starts to drop down past the EBITDA level to the bottom line. Two million is broadly the level where we will start to return a positive bottom line. 

Which is—. So, effectively, you're saying you'll return to profitability in 2025, effectively.

From a bottom line basis, yes. From earnings before interest, tax, depreciation and amortisation, we're already there. 

So, again, we've put in a positive EBITDA this year. 

14:15

The Deputy Minister for Economy and Transport told the Economy, Infrastructure and Skills Committee in January that the Welsh Government considered the broader pictures of the airport's performance, looking at it as a source of innovation and potential test bed for automation and artificial intelligence. It would be very interesting to hear your views on that, as I can't see anything in the Northpoint plan relating to this.

Okay. I'm not aware of any AI development. There's a lot of other fabulous technology there, with the BAMC maintenance centre. But, Huw.

There are a number of projects, which I'm happy to touch on more in private session, where we've worked with other partners. We've looked at autonomous pods, in terms of partnership. We've worked with Welsh Government officials to look at—

If you look at Heathrow terminal 5, the business car park there, there are pods that you jump into, and they self-drive you to the terminal—electric vehicles.

We've worked with a number of partners in Wales, Welsh universities, where we've actually—and, again, we're bound by non-disclosure agreements on some of these, so it's very difficult to talk in public forum—supported them in testing their projects from a feasibility point of view.

One of the things that we focus very heavily on at the airport is to be involved in innovation. And, if you look at our purpose, it's to be a pioneering airport. And we do, wherever we can, look to work with emerging technology. We've done it in our security area, where we've provided facilities for new passenger screening to be tested. We've worked with Airbus, when they're looking at new engine variants and they've wanted to do fuel testing. So, as Huw says, there have been a number of projects that we've been involved in that we've enthusiastically embraced, because we see that as a really important role. And I think, from a national, UK, perspective, then that is one of the areas where the regional airports can become really heavily involved, and can add benefit to the national aviation network, in that we have got the capacity to enable us—runway capacity, space— to really get involved in those projects. Environmental projects as well we've been very heavily focused on.

And the biggest example—the biggest and best and brightest—at the moment is the British Airways maintenance centre, which employs over 600 highly skilled jobs. It is of such significance. As you know, His Royal Highness the Prince of Wales visited it last week, the chief executive worldwide of British Airways came down, Alex Cruz. And the headline here is that that facility is secured for the future because it's moved from servicing Boeing 747s to the Boeing Dreamliner, a 787—and you will see 787s parked up now at Cardiff Airport—with 600 highly skilled jobs as part of the British Airways supply chain. That then links up to Nantgarw, and the interiors centre at Nantgarw of British Airways, which is so important, and the avionics centre at Llantrisant, linking up then with a worldwide play for, not only British Airways, but British Airways, as you know, is owned by IAG, and that IAG link is so important to us. And then we can get into another world, where one of the major shareholders in IAG is Qatar Airways, but that's another conversation.

Okay. So, just going back to these autonomous pods, given that one of the challenges for the airport is that you don't have a direct rail link, is it possible that autonomous pods could be used to connect passengers from the Rhoose railway station to the airport terminal?

One of our directors, Mark Bailey, who's our director of airport planning and development, that is one of his key areas of focus. And he's very heavily focused on sustainable transport, and how we can improve surface access to the airport, utilising public transport. And we have actually been working with a company to look at electric vehicles and self-driven vehicles. And it is absolutely one of the areas where we do see potential. As you know, the train service to the airport at the moment—

Yes, between terminal 5—

It reminds me of the ULTra pods plan—Roger knows what I mean—from many years ago in Cardiff.

Yes. So, they run from terminal 5, they link with the other terminals, they link with hotels along the route. So, we absolutely see technology like that as having a potential place at Cardiff Airport, particularly where you look at our rail connectivity into the airport.

Okay. Because you could make it feel like a tram service that connects to the railway.

Yes, and—. Sorry. We're also working very closely with the universities. So, Mark was at a meeting a couple of days ago, looking at decarbonisation of transport with one of the universities and that is all around this type of technology and how the airport can be involved.

14:20

Well, for us, as I say, we're obviously bound by the timescale of the research and how it's developing, but I don't see that it's that far away, to be honest.

Well, if it exists at one of the London airports, there's no reason why it can't be—

I think one of the key things there is, we work with partners to help them develop the technology, but there is going to be a cost associated with it. So, the cost of delivery is not insignificant, so that would be one of the hurdles to having that project delivered.

All right, that's—. Thank you for that. The Welsh Government's recent letter to the committee notes that the first draw down of the extended £21.2 million commercial loan was required to repay the previous loan facility and accrued interest. So, how much of this £21.2 million represents new money for the airport to invest in things like these autonomous pods, as opposed to just refinancing existing debt?

Just for a point of clarification, the £21.2 million was new money in addition to the existing loan facility. So, the mechanism for issuing the new loan was to roll it up into one new agreement. So, the first draw down always settles the previous borrowing and rolls it into a new balance. So, the £21.2 million is all new money for future investment.

Okay. So, are you saying that that information from the Welsh Government was wrong, then?

I would have to look at it, but the interpretation is that the £21.2 million is entirely new financing.

Not to repay the previous—

So, it's just all been rolled up into one—

It's all been rolled up into—.

So, the overall new agreement is a total agreement of £71 million, of which £38.2 million plus some £4-and-a-bit million of accrued interest was historical money, with the £28 million being new money, of which £21.2 million is readily available to Cardiff Airport.

So, just before you—. Sorry to interrupt, but it's an important point you just raised. Just to be clear on this: that £21.2 million commercial loan wasn't required to repay the previous loan.

Because we were led to believe by a letter from the Welsh Government that it was. But we will check that and that's not necessarily an issue for you—that's an issue for the Welsh Government.

I'm happy to have a look at the original letter and comment, but that is the substance of the loan.

So, how much debt do you expect the airport to hold at the end of this financial year?

At the end of this financial year, the airport will hold about £58 million of debt.

All right, thank you. That's very clear. What can you tell us about how the airport plans to prioritise the use of the extension to this commercial loan facility, given that the sum approved by the Welsh Government is less than the £28 million that you sought?

So, in terms of—. What we've done, as the airport team, is planned prudently to make sure that we can operate within that £21.2 million. We will then work with Welsh Government officials to go through further analysis in terms of the long-term funding of the airport to understand the additional draw-down requirements for the £6.2 million. We plan to operate within that £21.2 million in the short term.

Okay. You were speaking, or rather Deb was speaking, earlier about the increase in the refreshment facilities at the airport. Presumably those are self-financing, aren't they—the providers are actually installing their own logos, et cetera? They don't need Government money to—.

The bulk of the commercial investments, they refurbish their facilities from their own finances. However, we had to extend the departure area for them to enhance their facilities; we had to create the car park meet and greet, which is our operation.

Sorry—we invested in the car park meet-and-greet facility, which created expanded parking space within the airport as well.

Just to be clear: we operate the car park. We extended the space within the terminal to create an opportunity for franchisees to come in. Also, then, we have to do things like significantly improve things like the toilets and the general infrastructure of the building.

14:25

I think that, as well, the other thing to remember—as I said earlier—is that we've got some huge expenditure coming up in terms of regulated projects that we have to do. So, we've got the security area; we've got runway resurfacing that we're going to be needing to do in the near future; we've got the replacement of the instrument landing system. So, there are a significant number of really major capital projects that we're committed to over the coming years.

For the avoidance of doubt, we're not subsidising any commercial partner to come into the enterprise.

Yes, quite. One of the points—. We mentioned a number earlier on, Chair, and just for clarity, the figure that we gave earlier on regarding the debt that was carried by Cardiff Airport was a 2018-19 figure. Now we are talking about a 2019-20 figure.

Okay. Yes, I'd understood that in your answer, but it's useful to put that on the record. So, I think that the Welsh Government letter talks about £5 million that you are going to need to invest in increased security requirements. What about any increased public health screening that might be required from coronavirus? Is that going to be paid for by public health, or will the airport be forced to pay for that? 

That's what we're talking about at the moment. That was a subject of discussion this morning. Public health are looking at ways of working with us to enable us to introduce that screening service. But, at the moment, we don't have the full facts in terms of what we would be required to fund, and what would be provided by Public Health Wales. So, we're just working through that with them now.  

Just to reassure you again that, if we have to do something, we will do it, and then we'll argue afterwards about how we pay for it. Public health and interests and safety, and the interests and health and safety of our staff, are paramount. 

So, in terms of the debt that you're carrying, as a lay person, it would look like a place like Bristol Airport is much more exposed to the current uncertainties created by coronavirus and other global incidents that we may not know about yet. The airport industry carries considerable risk.

I think that Terry—. With your experience, Terry, of some 17 airports, I think that it's worth you commenting on this.

Yes. Clearly, as the level of debt goes up, then the airport is vulnerable to shocks because they've got to still service the debt. The added complication—and this particularly applies to airports like Southampton and, to a certain extent, Bristol—is that if you have an airport that has a very high dependence on one carrier, then the risk is even higher. For instance, Southampton: I think that 80 per cent of Southampton—

More than that. Ninety.

Yes, 90 per cent of Southampton's passengers are flying on Flybe. So, any weakness in the Flybe operation, Southampton gets pneumonia rather than a cold. Cardiff is fortunate in the sense that, I think, the biggest carrier carries 30 per cent. So, we have a mix of carriers that means that we are more robust. If one carrier has a problem, we can sustain that. That has a definite knock-through to the ability to carry debt. So, it's a couple of things. It's the size of the debt, but it's also the traffic mix, and how vulnerable you are—or a business is—to a carrier either reducing its operation or disappearing altogether. We've got more robustness in that sense.

You recently commissioned a review into the airport's performance. What was the reason that you decided to do that, to commission that report?

Thank you for that. The reason being is that I just felt that there was a lack of understanding in the public domain over the performance of Cardiff Airport in the context of the aviation industry. Dare I say, even today, there was a report in one of our national media here in Wales that didn't give the full picture, which is the perhaps the nicest way I can say it. So, we though that, to set the record straight, 'Let's commission an independent expert.' We've tabled this report to you to make sure that Cardiff Airport is understood, its business performance is understood, and understood in the context of the aviation industry. Deb, would you add anything to that? 

I think that that was the most important thing. As I say, although we are very proudly the national airport of Wales, we are, in the grand scheme of things across the UK, one of the smaller regional airports that sits within the group of airports below 3 million passengers and there are some very specific pressures that impact on that group of airports that we don't think are understood across the board, and that includes with our regulators in London. So, I think this was a really important piece of work for us to try to get that context understood more clearly and to enable people to measure our performance against that context, because that is so critically important.

14:30

Yes, Chair. And I have the executive summary here of it, and in terms of the economic impact, it says,

'Cardiff Airport’s economic impact matches that of LARGER UK airports, outperforming airports of its size.'

In terms of our financial performance,

'The financial performance meets expectations.'

It then ends—there are a number of points here, Chair, if I may—by saying that there is no sound operational, commercial or financial reason for the airport at this particular moment to go into private ownership. So, it's put itself out there as well.

We've provided the committee with that. 

And if I may? Coming back to the original question, 'Why did we commission it?', as non-executive directors, we're constantly asking the management, 'How are you performing?', 'Are you performing as well as you should be?' And some of the non-executive directors are not airport professionals, which actually brings a very beneficial perspective to the piece. So, the report helps the non-execs scrutinise the executives in a positive way. So, that was an additional reason for wanting to do this.

To be precise, it's Deb and Huw and Spencer and the senior leadership team whose responsibility it is to run the business. It's our responsibility, as non-executive directors, to make sure the business is well-run. 

Okay, thanks. Clearly, there were good reasons for doing the report and you've made that clear, and you need to compare with similar operations obviously and make that information available. So, I can see there were good reasons for it. But you mentioned the—is it pronounced RABA group, the Regional and Business Airports Group?

The RABA Group. Now, you're in that group with the other airports of a similar capacity. Northpoint did the report, but they also have a role within RABA, so could you outline how independent they are, given that you needed this report to be fairly independent to have some credibility? 

Well, I think Northpoint are one of the key consultancy groups, in terms of aviation, travel and tourism, and they have been trusted with reports for both the UK Government and our regulators. So, we felt we needed a company that had a good knowledge of the sector and would be able to articulate clearly with an understanding of the context that we're talking about.

Right, that's clear. Do you have any issues over the information that's come out, in terms of comparability factors, because there seem to be some discrepancies in some areas? 

It's quite difficult to have a very clean comparison between airports, because of a number of different factors. So, for instance, airports may have, and probably do have, different approaches to the insourcing and outsourcing of activities, and that has an impact on metrics such as operating costs per employee. Airports have very different make-up, in terms of how much property portfolio they have. So, airports such as Southend and I think Bournemouth have got very, very large land banks that they can develop and generate quite large commercial revenues from, which is not available to Cardiff. The way that the airport is financed makes a big difference, because a lot of the other airports are financed through shareholder loans, not commercial loans. 

So, all of these factors mean that, whilst it's valid to do a benchmarking activity, and there are some quite interesting positives that come out of it in terms of Cardiff, you've got to be cognisant of the fact that there are different structures and different approaches to certain parts of the business that will skew the result. And that's why it's a valid exercise to do, but you've got to really dig deep to work out where the differences lie and why. 

On one of the other points you made in terms of inconsistency of data, one thing that's very challenging, which we've tried to do as a business, is to benchmark versus publicly available data. And what we find is that the sources of data tend to be available at different time points. So, that again then results in inconsistencies between some of the data that is comparable. But you have to—and Northpoint have used it, I think, in the best available way that they can.

14:35

So, the data that was complied was as good as you could get, basically.

And I think, additionally, having reviewed the accounts of certainly Southampton, Bristol, Belfast, Bournemouth, we were pleasantly surprised, from a public scrutiny perspective, that we probably include more information in our financial statements than comparator airports.

Thank you very much, Chair. I was just looking through the papers, and before I ask my question, I've got the Cardiff Airport financial performance in front of me, on page 68. The thing is, I heard Deb saying that there was a 30 per cent increase in revenue income, and I heard you saying, Roger, about the undue influence of Welsh Government. Don't forget that Welsh Government in the last five years, from 2014-15 to 2018-19, injected more than £36 million, plus £6 million last year for issuing shares. So, they must have influence on your business or Cardiff Airport. Without their input, Cardiff Airport won't be able to survive. That's fact.

And the fact is, which my concern is—. The second question is: the losses shown before and after taxation are roughly £16 million, which is an extraordinary figure in a one-year loss. The thing I just can't digest is how public money is there. And the value of assets is the third question. The value of assets has gone down from £45 million to just under £16 million this year. How can that happen? Where is the area that your assets' value has gone down?

Just to—. Sorry, to interrupt. This is actually coming from our own brief, not from the information that you provided. So, if it's not something that you're familiar with, that's why.

The thing is, Chair, these are the accounts in front of us. I need to know the financial performance by the airport officials, how that happened. Briefly, if you can give it to us.

Okay. I'll pick up on the first point, which is there is no undue influence from Welsh Government, or any political influence from Welsh Government on Cardiff Airport, but we have, via a holding company, a relationship with the holding company where we are responsible to deliver on certain key performance indictors. So, that is what our performance is measured against for the shareholder, and that is done at an arm's length from Welsh Government. And that's something we all take very seriously, and the meeting—I think the next one is on Friday, Deb.

Friday. But in terms of what you mention on the accounts, most probably it's best to ask Huw just to take that apart.

So, I think there were about six questions within that.

So, I'll try an be as brief as I can. Welsh Government took ownership in 2013. The airport was under 1 million passengers. At that point in time, you need to invest to grow. So, the £36 million has been invested in a combination of growing the passenger numbers and improving the facilities. In terms of the £6 million equity injection, we had to go through a robust business case again to get that funding put in to redevelop the terminal. So, it was us who went forward to Welsh Government to ask for that funding.

I just want to add there that one of the key things we had to do in 2013 was to start to turn around the massive underinvestment that had been put into the airport before. I started my time at the airport in 2012, which is when the airport was probably at its lowest point. I was the operations director at the time. We put together our capital programme for the year, which was all the necessary maintenance and other fabric of the building. We asked for £5 million. We were told to bring it down. We brought it down to £3 million, and we ended up with £600,000, which just about paid for runway repairs. So, a huge chunk of that investment that Huw has talked about has been literally repairing the fabric of the building and business-critical equipment. In 2013, we had a baggage system that was hanging on, literally, by a few bolts, and that is a business-critical part of the airport. If that infrastructure fails, you're hand-checking every single bag. So, we had a huge amount of work to do to turn around that massive underinvestment.

14:40

I think we've been fairly transparent when we've been here before that we've been through a period of trying to turn the airport around. So, the investment has been there not just to repair the ageing infrastructure but to go through this period of recovery, which we've just come out of with the fact that our revenues cover our operating costs and we've achieved that for the last three years. 

I think the point you make is you're looking at the net asset value of the balance sheet. If you look at our overall asset value that we've invested in, it was at £60 million. Clearly, when you look at the net assets of a company, you have to take off its liabilities. As our debt has gone up, therefore the total asset value has gone down. So, it's a function of the increasing investment that we've made; it means that we've got increasing debt. If you looked at Bristol Airport's accounts, as we have done, their net asset value will be hugely positive because they carry their entire debt within their holding company.

Huw, my question is about Cardiff. I'm not interested in Bristol or wherever. Basically—

But what I'm trying to—. Sorry, I'm just going to—. What I'm trying to say is that the way that we have our debt structure sits within the operating business. A number of other comparative regional airports have it within their holding company. So, to compare net asset value year-on-year is not a fair comparison.

I've got no doubt in your ability, and you're doing wonderful, all of you, but the fact is, when you look at the figure that the Civil Aviation Authority has given us from 2004, when the international passengers were 1.5 million and domestic passengers were 300,000, and 2018, they're not even that number. That is the concern. Look at the figure on page 94, the civil aviation figure: Cardiff Airport—the average passenger volume 2004 to 2008, if you look at that, domestic is 310,000, international 1.5 million, and 2018, domestic is—

Oscar, this is from our brief again, so they won't necessarily have all these figures—

If you go back to the 2004 to 2007 passenger numbers, which, I think, you're referencing there, I think there's a key point to make, and Terry based it: that was based on an incredibly fragile business model. It was Bmibaby, which was 50 per cent of the volume, and four tour operators. If you remember the financial crisis of 2007—. I'm not defending history—I wasn't around at this point in time—this is just more context. In 2007, Bmibaby went into financial trouble. We were dependent as an airport on about 50 per cent of our volume for them. There was consolidation within the tour industry market where they went from four tour operators to two. So, combine that with the global financial crisis as well, Cardiff Airport went from 2.1 million down to about a million passengers across the period, because, at that point in time, actually, the business model was very risky and pretty fragile. What we've tried to do as a team is try and build diversification, as Terry's mentioned, where we've kind of got an internal metric from our risk review where we don't want to be more than 30 per cent dependent on any one airline, and the more varied airlines that we can have operating from us mean, from a longer term basis, that we'll be more sustainable and less susceptible to Thomas Cook happening or Flybe having a wobble and its jet base closing.

And the headline on the independent report—. The independent report said:

'The robust financial performance shows sound management of operating costs while accommodating higher passenger numbers'.

This financial performance certainly meets expectations.

I agree, and I just, again, reiterate my words: I'm not doubting anything on your ability. You're doing a wonderful job. But the fact is the results are not there yet. So, basically, the thing is, if you want to bring any private investor to buy that, its value has gone—

I think the point you make is actually a good one, in that, last year, within the accounts, we took the difficult decision as a board, bearing in mind the global crisis, to look at the length over which we recognise the value of some of our assets and take the challenging decision to actually shorten the life over which they recognise them and take a write-down, hence the £9.3 million intangible asset write-down that you'll see within the accounts. Additional to that, we've got about £7 million of depreciation and amortisation, which results from the investments that we've made to date. Combining that, that's about £16 million of the bottom-line loss that you're talking about. We've got interest on our loans, which is between £1 million to £2 million as well. So, from a break-even, where our revenues have covered our costs, we have those items that have taken us down to a bottom-line loss. The intangible write-down of £9.3 million we fully expect to be a one-year action, based on our review of the global position and the challenges the industry has faced.

14:45

And we did this on my watch as chair, and I thought it was the right thing to do. These sorts of things at other companies can be pushed down the line, and we took that pain, if you like, now, and I thought that was the very responsible thing to do, because that could have been—as you know, in other businesses, that can gets kicked down the road, but we decided to take that now. And that puts the enterprise, I think, three, five years from now, far more attractive to whatever our shareholder wishes to do with it.

And I think, alternatively, coming back to the 2025 point, where we've talked about the 2 million passengers, our below-the-line charges, as we call them, the depreciation and amortisation will start to reduce, so actually we will see a bigger knock-on effect of the positive performance of the 2 million passengers hitting the bottom line.

And as a matter of fact, you know that, as an accountant, depreciation doesn't make an effect on profits anyway. It's only where they are the fixed assets. Can you please summarise the main findings of the report in respect of the airport's commercial and financial performances? Huw, please.

So, from the two lines that I would like to say is I think the one that I'm most pleased about was—I think it's table 9 within the Northpoint report, which looks at our operating expenses—

I think you've pretty much covered this, to be honest, haven't you? But, I mean, if you'd like to add a little bit.

Sorry, Chair, whenever I get talking about numbers, I get quite into it. [Laughter.]

And the second one is: the report benchmarks the airport's financial performance against peer airports. Why are the selected airports appropriate for comparison purposes, please?

Sorry—that last question?

I'll repeat again: the report benchmarks the airport's financial performance against peer airports. Why are—? Sorry.

They picked airports that had broadly similar passenger throughputs. So, there's a category of airports that are between 1 million and 3 million, I think. And then they picked slightly bigger airports, up to sort of 5 million to 6 million. They stopped there, because as soon as you get beyond that, the comparators start to become very difficult. So, you know, you don't pick a Manchester or a Birmingham or a Gatwick, because the quantums are such that the financial ratios go slightly—they're very difficult to compare, basically.

So, basically, they have similar dynamics to Cardiff Airport, particularly in their regionality and their relationship with—beyond the likes of London, beyond the likes of Manchester.

Yes, and they also have broadly similar passenger mixes, in terms of low-cost, full carrier, charter. So, that was one of the other reasons they chose those airports.

In your penultimate answer, I thought I heard you say that you'd spent £36 million on growing passenger numbers. Did I hear right?

Sorry, it's a mix of helping to grow passengers numbers through commercial facilities, plus also meeting the regulatory burden, plus also putting back the wear and tear of—[Inaudible.]

Okay, so you're not spending £36 million on providing attractive offers like £35 a flight, and that sort of thing.

Who's paying for that? Is that yourselves, or the airlines, paying for incentives to fly with X or Y?

It's a completely mixed economy here. The relationship that airlines have with us and also have with their passengers and have with their pricing: there's as I say, a three-dimensional matrix of requirement there, and—.

I think our one concern is: airlines determine the pricing, and we're not in a position to influence that in terms of by subsidy or incentive, in that regard.

No, but I do think it's important to say that where we see airlines—similar airlines within our market—charging markedly higher rates at Cardiff, we absolutely challenge them as to why they're doing that. But that's a commercial decision for them.

That's fair enough for you to point out that it's much cheaper to fly from Cardiff than from some other airport, but you're not passing money to any of the organisations who fly from Cardiff to get them to subsidise the fares?

Not to subsidise fares, no.

I think, obviously, when we construct a contract with an airline, then there are huge elements that are incorporated into that agreement, and there are, you know—. With some airlines, we might support them in terms of marketing, to enable them to get the route established and things like that. So, there are mechanisms within airline contracts where we will add funds to the airline operation at Cardiff in terms of marketing and support like that. 

14:50

It's also quite common—and I've done this in a number of airports—that, because of this effect of when you get to a tipping point of passenger volume, most of it goes to the bottom line. What airports tend to do, when they're discussing landing fees with airlines, is say to them, 'If you can get beyond a certain throughput, we will discount the landing fee by 10 per cent, 15 per cent.' So, we'll structure a deal in order to incentivise an airline to bring more volume to the airport. It might have a very short-term cost to the airport, but it has a medium and long-term benefit because it gets you closer to the tipping point faster. 

And I think the really important point to make, as Huw's sort of alluded to just now—we're talking specifically in the context of smaller airports below 3 million passengers. We do not have the leverage that bigger airports have. I mean, the sort of deals that Heathrow would do with an airline, for instance, are enormously different to the deals that smaller airports will do. 

They won't do any deals. 

They won't do any deals. [Laughter.] And they won't reduce fees. 

Well, exactly. And this is another of the challenges that the smaller airports face, in that, for the smaller airports, the airlines are absolutely in control of what they will put into a contract. 

So, that's led us then to consider what levers we can create, hence our work in fuel supply—that's been really important for us; our work with cargo—that's been important for us; and then our creative use of marketing funds, and we've been very hard-nosed on that because that is promoting a Wales and Cardiff message in certain parts of the world, to attract people to travel to Cardiff and to Wales using our airport. 

Thank you, Chair. With regard to the Northpoint report, it uses the 2017-18 accounts to benchmark the airport's financial performance against other airports, and not the latest set of your accounts, which are also used for the comparison with other larger regional airports. So, I just want to understand why that would be.

In terms of the detail—we provided Northpoint with the 2018-19 accounts. I think there were some underlying costs that we've included within these accounts, such as the write-down of the intangible assets, which, actually, sort of skewed the report away from the true underlying nature. So, that's why they utilise those accounts.  

So, just to be clear, you supplied them with the 2018-19 accounts—clearly, they've got all of the accounts available to them. 

They have. We supplied them with all the information that was available. 

But they used the 2017-18 accounts to make certain comparisons, and then they used the 2018-19 to make other comparisons. Am I right in that logic, or is that incorrect? 

It's in terms of the—. Yes, that's right, because of the relevance of the data within the accounts, because of the change in the business and the structure of the business, and what was available. 

And also from other airports—I'm looking at a series of figures here. There are different financial accounting years, for instance Newcastle is a January to December accounting year, Bristol is a January to December accounting year, whilst Liverpool is an April to March accounting year. So, I suspect that that has an impact on—

It's the availability of data and comparative data. 

From a scrutiny point of view, it's clear, when you haven't got a direct set of comparisons, you think of somebody trying to manipulate the data—that's the point. But you don't think that's the case.

It's just the availability of data—from other airports, not from our airport. 

Yes, and I think also, in support of what Huw said earlier, the way that different airports present their accounts is very different. So, our understanding from Northpoint is that they had all the data available and they were trying to find commonality between some very different sets of accounts. 

Sure, that's fine. But Northpoint also uses your set of accounts, it uses other airports' accounts, and they make analysis from that. But they also seem to look at other data as well to make their analysis, and I don't know if that's absolutely clear in the report, but perhaps—. I've not got a clear question on this, but I'm just trying to get your thoughts on the fact that it's not always clear, by reading their report, whether the information is either all from the set of accounts from your accounts and other airports, or whether they're using other data apart from sets of accounts as well, to come up with their analysis.

14:55

The only thing I could say to that, sir, is that they're a very experienced operator in this particular world. They publish numerous accounts.

And I think—. Beneath each table, they actually cite the source of where the numbers have come from for that particular table. And you'll see, when you look through it, that it does vary. Sometimes, they're referring to CAA data, other times it's company accounts and other analysis. So, I think it just demonstrates the difficulty within the industry of having a single source of data.

But you're comfortable that their analysis, interpretation, is all correct and that you're happy with it.

To reassure you—I just double checked with Huw—our brief to Northpoint was not directive. Our brief to Northpoint was for the question that was asked earlier on, 'Why did we commission it?' And so, we allowed them to produce the report in the context of the overarching question, but we didn't point them in particular directions, Huw.

No, I think the purpose of the report was to inform. It was really an education piece to make sure that people who aren't steeped in the aviation industry can have a good view of how Cardiff sits amongst its peers. From my point of view, there are some great pieces in there that I wouldn't have had access to if the report hadn't been done either. So, I think it's a good benchmark where we can improve performance.

So, you didn't direct the areas of that report? That was left to—

Just to prove how sad person I am, before we even got a copy of the Northpoint report, I actually sat down one afternoon and tried to do a similar exercise using Companies House published data, and it became quite evident to me, personally, that it's quite difficult to get a clean set of comparable data. So, when the Northpoint report came in, and they were actually sourcing from different sources, I understood exactly why they did that. Because, if you rely on one source, you will get an incomplete picture. So, you have to go around picking data from different places.

I'm tempted to ask if you could make your own notes available as well.

[Laughter.] Huw's got them. 

Has he? Right. Well, if you're happy to, it'd be useful to see that.

Yes. I may need to top and tail the spreadsheet, but, yes, I'm happy to share.

No, no. It just helps us to perhaps understand some of the figures and where they've come from. On a perhaps slightly different issue, the recent expansion that's been for Bristol Airport—proposed—which has being rejected by North Somerset Council—. So, Bristol Airport's plans are obviously to increase its passenger numbers from 8 million to 10 million. How do Bristol Airport's plans, really, impact in terms of your passenger numbers that you talked about earlier and gaining that market share?

One headline, and I'll hand over to Deb—. Bristol Airport has invested hugely, as I said earlier on, into the future of the return on it, and its long-term debt, which is held in a holdco, in its holding company, not within the airport, is £590 million. Our long-term debt of last year, which was £36 million—it's increased this year—is held within the airport. So, there's been huge investment into Bristol because they feel that this part of the United Kingdom, and I think that's worth—. The south-west of the UK has opportunity for further growth. And, as we know, there is leakage from our airport at the moment to Bristol. We've attracted, particularly with Qatar Airways, passengers from the south-west of England, out of Birmingham, the west of London, and around the corner into the west country. So, I think they're looking at their enterprise, and hence the huge investment into it, to see how they could attract further passenger growth from Wales, dare I say, Deb.

So, how does that—? The question is: how do their plans impact on your numbers?

I think, yes, as Roger says, when you look at the Bristol Airport submission for planning, the numbers that they predicted to grow beyond where they are now, on new passengers, they're effectively passengers that they would expect to take from other parts of the south-west or from Wales. And the view was that Bristol Airport was the only airport that could service those passengers' needs.

Now, from our perspective, I think we are very much focused on the levelling out of capacity across the airport network, and this goes back to the Heathrow argument and the bigger regional airports. You've got a network of smaller airports that serve local communities, put huge economic benefit back into their local communities and they have capacity. At the same time, you've got larger airports that are banging up against the upper limits of their capacity, or are full, and they're pulling passengers from other regions of the UK to support that passenger growth. So, our argument absolutely is, 'Look, we've got capacity at Cardiff Airport. We've got passengers from Wales that continue to drive past Cardiff Airport to Bristol that we can really adequately service, and, what's more, the environmental impact is reduced because those passengers aren't getting in cars, getting on trains to drive to a further airport when they've got a local airport that they can use.'

15:00

Thanks, Deb. Can I just ask as well, perhaps on the back of Jenny Rathbone's earlier questions, but—? When the Government gave evidence to the Economy, Infrastructure and Skills Committee recently, they talked about the wider benefits of the airport, they talked about the wider economic benefits and the airport being used to help Welsh Government's vision and objectives. I sensed perhaps a shift, perhaps, from their previous position to this perhaps new position. Is that a sense that you get, that the Government is looking at the airport perhaps more strategically in terms of meeting their own objectives, outside of your own objectives, and how do their wider objectives match with yours?

For us, what's been particularly exciting about working on this enterprise is to view it as a strategic asset for Wales, and we've turned that imperative into a positive business case for us, hence—. I mentioned the British Airways maintenance centre. That could only exist if Cardiff Airport was there. Those 600 jobs would only exist—. The direct economic benefit to the region is £246 million, which we've had looked at. And so then, as Deb said, in terms of our relationship with universities, with Cardiff and Vale College—all of those other areas, St Athan, Valley—by positioning ourselves as a strategic asset for Wales, we've made business sense of it, and that's very different from another airport.

I think the point Russ is trying to make—is that coming from the Welsh Government, or is that coming from your own initiative?

No, dare I say, immodestly, it's come from ourselves as a board.

And does—? And the master plan, the original master plan, does it talk about and address some of the issues you've talked about? I don't know if it does.

Absolutely. The genesis of the master plan was, 'What else can we do with our footprint? What else can we do—?' and, again, the things that excite us. I mentioned BAMC because then that has a relationship with Nantgarw, it has a relationship with Llantrisant, it has a relationship way beyond the footprint of the airport. St Athan we embrace, because we feel that that is of great strategic interest for ourselves as well. And then, underpinning that, yes, was the master plan, which is a long-term master plan that shows the opportunity that this enterprise can offer the future.

And, just briefly, how does Transport for Wales—is there a role for Transport for Wales in terms of the airport, in its operation and management in the future?

Two things on this. What I would say is that why we've been fleet of foot as a company is the way we were established back in 2013, where we're a limited company, we're all directors of that limited company with that arm's-length relationship to Government, and that is so important. We can make what we think are the right decisions to make sure we have a profitable and sustainable enterprise, going forward. That's our overarching ambition. If you then wrap it into—

If you wrap it into a bigger enterprise, I'd be concerned over that, because I think they've got so many other bigger issues to address. But the point where we have a relationship—we have a very good relationship with the chair Scott Waddington and the chief executive James Price—is over connectivity.

Yes, and I think one of the key areas we've talked about for a very long time is the critical importance of integrated transport planning. That's where our relationship with Transport for Wales is so important, because the airport has to be considered as part of that—

I'm a little bit concerned here, because we've strayed massively into Vikki's area of questioning.

Can I just clarify one last point, Chair, with your permission? Do you believe that Transport for Wales's role is limited to what you've just set out, or do you think there's a future role for Transport for Wales in terms of the management and operation of the airport? Briefly.

Personally, I don't think it would be appropriate at this time for us to be structurally part of Transport for Wales. That's my personal opinion, professional opinion, and that's based on a cultural view of business activity. But, without question, we need to have a very close working relationship with Transport for Wales.

The other point, by the way—this goes into, which Deb's hinted on, a whole discussion to take place in the UK on integrated transport, because, when transport is mentioned, people don't talk about airports; they talk about road and rail, and then buses. 

15:05

They talk about public—. Transport for Wales is public transport, isn't it? Airlines wouldn't really come under that remit, would they?

But then—. Thank you for that, but I would say it's about national assets, national service, positions in Europe and positions around the world. 

Vikki Howells, do you have any questions left, because I think Roger's actually answered everything in answer to Russ. [Laughter.] I feel very sorry for you, actually. 

I've been waiting very patiently to ask my questions, but being as about 50 per cent of them have now been snaffled up by other Members unwittingly, the good news is I won't keep you very long now. But, just to go back to the master plan and, in particular, the areas that are around supporting diversification and decarbonisation, I'm just wondering how you're going to fund those and also how they will sit alongside some of your other plans, such as for a new terminal and for a four-star hotel.  

Okay. Well, I know all four of us would love to answer that, because it's a very passionate—. But I should give Debra the honour of answering this, because this is something that is really front of mind for us, Deb.

Yes. I think the way we're approaching the master plan is in very much a phased approach and a sequential approach. We're doing a huge amount at the moment that is positioning us for what we talk about in the master plan out to 2040. We're looking at our existing terminal and how we can improve that in an environmentally sustainable way, as we progress forward. So, I think, from our perspective as a company, this is all about the direction of travel and a phased approach to the implementation of the master plan, based on the growth and what we financially achieve. 

And, by all means, let's be a bit more granular with you, just to give some of the colour, some of the things that you've been embracing, Deb.

We've been doing a huge amount on the environmental perspective. We launched our environmental flight path last year. We've just signed a contract for a solar photovoltaic array at the airport, which will significantly reduce our requirement for electricity off the grid. We've got electric vehicles on the airport; we've got electric charging points. So, from an environmental perspective, we're making huge progress towards the vision of the master plan. We're also progressively looking at the diversification of business. The FBO, the forward base operator, that I talked about earlier is one such development on the south side of the airfield. We're working particularly with Qatar on the cargo development, we're working with education establishments. Cardiff and Vale College are looking to grow significantly their presence in the airport area; we're working with another university, Embry-Riddle Aeronautical University, looking at how we can develop aviation-related training. So, there's a huge amount going on already that is progressing us towards that ultimate goal. 

And other colours we factor in: heat generation, power generation, reducing our footprint in a range of different ways—incredibly granular. I was just teasing Huw here. We got down to, in a board meeting last week, where we're using mugs in the lounges, not disposable items. It's down to that level of detail. Electric points in the car park we're putting in. And so it's something we've taken very seriously. 

I'd also emphasise that the aviation industry is taking this very seriously. Terry might want to pick up on this, but smaller planes flying longer distances, more fuel efficient, using materials that are more suitable—. And just to pick up on your point, Jenny, we know that there are some amazing companies in Wales that are doing some extraordinary work on how one powers aircraft, and that is very, very exciting indeed. So, the industry is taking this very, very seriously. It's not putting its head in the sand. 

Terry, would you support that?

Yes. There are technological improvements. So, you've mentioned—. The new generation aircraft are burning 30 to 40 per cent less fuel than conventional aircraft, and also there are changes in the way that the airline industry is structuring itself. So, the old model used to be to have one big hub—Heathrow being an example—and then for small aircraft to feed into that hub and then people get onto a bigger aircraft and off you go. That is actually environmentally quite damaging, because it's much better to have a direct service from A to B, rather than having to go via C. You could argue that the hub concept in Europe is starting to break down a little bit. So, the advent of new technology aircraft and the advent of more point-to-point traffic is actually making huge strides in making the industry more carbon efficient, so to speak. That actually works in Cardiff's favour because, whereas before an airline may have been tempted to fly from Cardiff to Gatwick or Heathrow and then you transfer on, direct services are now much more viable between Cardiff and—. Qatar is a classic example of that. 

15:10

That's all very useful and very reassuring, but if I can just bring you back to two points within my question, which were about the construction of the new terminal and the hotel: to what extent have you factored in the environmental issues around those, or will you in the future? 

That's absolutely critical and, like I say, we're looking very much at a phased approach to it. If we were in a position to construct a new terminal, then the absolute objective would be for it to be a carbon-neutral building. That is very long term in terms of the master plan. So, we're doing a huge amount of work at the moment on the existing terminal. Mark Bailey and I met with companies last week looking at how we can change our old gas boilers for biomass boilers, for instance. We're looking at how we can utilise energy much more efficiently—all that kind of stuff. So, it's front of mind for us, absolutely, that for anything we do the environmental question is a massive part of the decision making that we're doing. 

I just want to touch on, in the context of financial performance as well, we're looking at the solar farm, and having ran the numbers on the solar farm, actually, like-for-like electricity unit charges, we're going to be equivalent to where we are now. And over the long term, that acts as a really good energy hedge for us. So, what we see is a longer-term benefit as well as the environmental impact that will arise from that. So, we can see the benefits of doing things from a financial perspective, as well as from the decarbonisation perspective. 

Everything we're looking at is futureproofing for the ultimate outcome of the master plan. So, with the biomass boilers, for instance, what we're looking at is a containerised solution so that we can plug them in now to the existing terminal building, and then as we progress through the master plan and look at the potential for a new building those biomass boilers can literally be picked up and plugged in to a new building. So, we're looking at how we can manage investment with that eye on the future.

You said earlier, I think I'm right in saying, that you're not bound by the future generations legislation.

No, we're not bound by it, but we embrace it.

We're not bound by it. We're just doing our current iteration of the business plan, and we have a huge section within that—

Because of our ownership structure, I think. Because we're not a public body. Because we're a commercial company—arm's length. 

But, again, just to reassure you, we've embraced it and our current business plan contains many pages on how we are interpreting the well-being of future generations Act. One other point I'd like to emphasise is that the negative carbon impact on people from Wales driving down the M4, which is 1 million plus, is extraordinary. That's why, again, in a climate change agenda, Cardiff can be seen as very positive here.

Okay. I've got one final question that I don't think anyone else has covered, but feel free to tell me if they have. When you came to the committee in June of last summer, you said that a new model for investment in the airport was needed in the long term. Now, the Northpoint report concluded that the prospects for Welsh Government as a shareholder of the Airport look good, but it will be at least three years before it will be in a position to sell some or all of its shares. In the meantime, the Government will need to continue to offer support in the form of commercial loans. What are your views on that conclusion in the context of what you said to us previously? 

Ultimately, this has to be a decision, as in any corporate structure, with the shareholder. It is the shareholder's decision. I think the Northpoint report is very, very helpful in this, because it says that at this moment in time it would be inappropriate to consider that investment model, but it will be a decision of the shareholder to decide, 'Does the shareholder wish to invest in the enterprise, or would the shareholder wish to consider a relationship with any other investor to come alongside them in that?' So, as I say, from a corporate point of view, we would say that decision rests entirely with the shareholder. But what we've done, we've not sat back waiting to be asked, is we've prepared a range of options on how the enterprise can go forward, and at the heart of that is the master plan. 

Any further questions? Go for it, Russ, we've finished within good time. 

Probably just following on from Vikki Howells's question, but what more does the shareholder, the Welsh Government, need to do in your view in order to get the airport to a position of sale?

15:15

It will need, over the course of the coming years, clarity on the investment strategy and how that relates to the future of the enterprise in the context of a UK aviation play and, in our case, a UK aviation play for the south west of the United Kingdom. Terry, would you?

Yes. I think we've been very transparent with Holdco as to what the short term investment profile needs to be. And then, five years plus, we'll be equally transparent as to what the options are. 

So, the Welsh Government needs to provide you with an investment strategy is what you're saying.

I'd be a little bit more disciplined than that, really. We report to the shareholder, we act in the best interests of the shareholder, we provide the shareholder with a range of options, and it's then up to the shareholder to opine where that sits within all of its priorities for Wales.

I was asking for your view, of course, from your perspective. But your view is—

It's a nightmare having two Chairs on a committee, isn't it? [Laughter.] It's like a two-headed beast. 

What I would say is that I seriously would pay tribute to the team at the airport, with Debra, Huw and Spencer, the senior leadership team, for what they've done with myself, Terry, Fiona Gunn, who is one of our non-executive directors, and Geraint Davies. We've created an enterprise that I think is absolutely worthy of further investment, because I think the opportunity now that we've created for Wales, actually, and dare I say for the south-west of the United Kingdom, particularly the Qatar Airways position—. Because let's not forget, the only way to get to the Gulf in the whole southern part of the United Kingdom below Birmingham is Birmingham, London and now Cardiff. That's the only way you can get on a scheduled aircraft to the Gulf. So, I think the enterprise, and where we're at today, as it says within the Northpoint report, is one that is certainly worthy of significant further investment.

But just to be clear, you would like the Welsh Government to provide you with an investment strategy.

That would be a decision for the Welsh Government to take. We've provided them with all of the options that they can consider, but we're very mindful that there are many mouths to feed in Wales.

Just going back though to some of the comments you made to Vikki Howells, you spoke about the different projects you've got—I think you mentioned electric charging points as one of them, and others—there was quite a list there. So, how are you going to fund all of those different projects? Is the funding in place there, or are you relying on the Welsh Government to come up with an investment strategy?

Again, to pay tribute to the team, and Huw can pick up on this, our revenue has met our operating costs, and our investment, as mentioned earlier on, has gone into improving all aspects of the facility. 

So, the vast majority of these projects, whilst they have a positive environmental impact, are actually revenue generating or cost reducing at the same time. So, where we can invest now, we can save in the future. Therefore, we can reinvest that further on down the line. So, the projects that we're choosing to look at at the moment are the ones that, in essence, are self-funding within a short period of time. 

And I think that point that Huw's made again is fantastic for us in terms of understanding and having confidence in the business that Cardiff Airport has grown, because we are now getting companies that are very keen to make that investment and work with us, and that was not something that we were seeing a few years ago. 

And you're happy with the Welsh Government's current strategy for the airport. Do you think that there's suitable vision there, working with yourselves, of course, for the future?

Dare I say, I think the responsibility rests with the board of the airport to provide a vision to the shareholder, and then it's a question for the shareholder to decide whether it wishes to embrace that vision. So, the master plan is at the heart of that vision, and I'd like to think we've proved that the organisation can deliver, hence the numbers that we've produced to you today, which are 2019-20 numbers. And what I would say, which is really important, is we have produced a terrific set of numbers this year in 2019-20, but not to mislead—because I won't be here this time next year—the numbers next year will take a bit of a drop because of the Thomas Cook hit. But as the finance director said—

I thought you were going to say because you won't be here. [Laughter.]

No. I'm pleased to say we've projected beyond that and the numbers will improve the year after, and the year after. And as Terry said, the cycle within these enterprises is such that, when you take a bit of a hit this year, it takes a while to catch up. So, we've produced a solid set of numbers this year, very solid indeed: 60 per cent growth since 2013, 1.7 million passengers, another positive EBITDA, our revenues have matched our costs. But, just to reassure you, when you have this meeting this time next year, it will be a challenging year. Also now with COVID-19 coming in as well, that is going to have further challenges for the reasons that were given by Terry earlier on, because people are taking a different view on travel over the course of the next few months, and that's been reflected in share prices of airlines over the past week.

15:20

Okay, great. You're going to stay with us; we're going to go into private session and you'll stay with us just to answer some of the commercially sensitive questions that some Members had earlier. So, thank you, publicly, for being with us today; it's been really helpful and we'll be sending you a transcript of today's proceedings for you to check before we issue it. 

5. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o'r cyfarfod ar gyfer y busnes a ganlyn:
5. Motion under Standing Order 17.42 to resolve to exclude the public from the meeting for the following business:

Cynnig:

bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).

Motion:

that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).

Cynigiwyd y cynnig.

Motion moved.

Okay., I move Standing Order 17.42 to move into private session for the remainder of this.

Derbyniwyd y cynnig.

Daeth rhan gyhoeddus y cyfarfod i ben am 15:20.

Motion agreed.

The public part of the meeting ended at 15:20.

Dysgu am Senedd Cymru