John Menzies today issued a relatively upbeat trading statement, noting that the second quarter was better than expected.

It said the aviation services business had sufficient liquidity to support it into 2021, following “significant proactive cost action”, and the benefit of various government schemes.

The business furloughed 17,500 staff in March, more than 50% of its headcount, but today’s release did not mention whether there would be any permanent redundancies.

However, it said the board was “confident in the sector’s growth potential” and that John Menzies would “emerge strongly from this challenging period”.

Its freight forwarding business, AMI, “continues to trade well and in line with 2019 performance, with a positive outlook for the coming months”.

However, April and May saw the group’s ground handling and fuelling business down 75% on 2019, while cargo handling saw volumes down 37% year on year in April.

“Despite the significantly reduced revenue, strong cost management, together with quick and effective mitigating actions, resulted in an overall performance for April and into May that was better than expected at the time of the March trading update,” said the company.

“We continue to tightly manage outstanding payments with our airline customers and are pleased that, in the majority of cases, payment terms continue to be adhered to.” It said it had incurred no bad debts during the crisis.

The group expected “subdued” activity this month, but a gradual return from July,

“As volume builds, we expect to see short-haul capacity return first, with long-haul capacity taking longer to recover. In addition, we expect cargo revenues to continue to build back as customers employ more innovative measures to meet demand, such as using passenger aircraft for cargo-only flights.”

The group’s liquidity, which benefited from government schemes and unwinding its working capital, would be in excess of £180m ($223m) by the end of this month.

“As volumes begin to grow from July, the group will need to reinvest to build back its working capital to prepare for a return to more normal activity.

“However, after taking into account the benefit of the actions taken and support schemes, the board believes that current available liquidity is capable of providing sufficient headroom under its current loan facilities for the group through the remainder of the year and into 2021.

“The group has maintained a close dialogue with its lending banks throughout the crisis and is in constructive discussions regarding a revised banking covenant structure that will be required for the remainder of 2020 and 2021,” it added.

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