Scottish aviation giant steps up recovery with Costa Rica and Australia deals

JOHN Menzies has offered further evidence of its determination to bounce back from the pandemic as restrictions on air travel ease by buying a majority stake in a Costa Rica-based aviation services business, while expanding its presence in Australia.

Edinburgh-based Menzies, which has focused purely on aviation services since the sale of the historic news distribution business in 2018, has acquired a 51 per cent stake in Interexpresso Costa Rica Corporacion ILC, SA. It said the move would give it a “strong foothold” in Central America.

Interexpresso is focused on cargo handling and aviation security services, primarily cargo document handling, cargo security screening and aircraft access control, Menzies said yesterday.

The company’s operations are based in San Jose, the capital of Costa Rica, as well as fellow Central American countries Guatemala and El Salvador.

With the deal adding three new countries to Menzies’ international portfolio, the listed Scottish business signalled yesterday its hopes to build its product lines across Central America. It did not provide financial details of the deal, but analyst Robin Speakman at Shore Capital Markets said that “we expect operations in the Central America region to attract higher than average group margins as revenues build.”

Menzies said that its initial focus will be on developing and growing Interexpresso’s core cargo and security offerings across the region, highlighting the potential to move into cargo handling and ground handling services.

Menzies unveiled the Interexpresso joint venture while also announcing further contract wins in Oceania, securing new business with Virgin Australia.

The company declared the new contracts, which from the middle of October will see it provide ground services in Darwin, Cargo and Queenstown, mark a “significant expansion” of its operations on the continent.

Noting that the new deals build on existing business that has been retained at Sydney, Melbourne, Kargoorlie, Perth, Brisbane, Cairns and Gold Coast airports, Menzies said it will now handle around 8,000 flights and about 6,500 tonnes of cargo per annum for Virgin at 10 airports across Oceania.

The latest Virgin deals also follow recent contract wins secured by Menzies with airlines Qantas and Jetstar.

Philipp Joeinig, chairman and chief executive of John Menzies, said: “I am pleased to announce our expansion in the Central American region.

“We have found a knowledgeable partner in Interexpresso and, working together, we will be able to open doors in new, attractive, higher margin and emerging markets in the region.

“In addition, our contract wins in Oceania demonstrate our reputation in that region for providing excellent service and I look forward to developing our relationship with Virgin Australia as we move forward.”

The moves in Central America and Australasia are the latest in a flurry of deals that the company has secured as it bids to recover from the huge impact the pandemic has had on the aviation sector.

In June, the company won a contract to support new Norwegian airline Flyr at its base at Oslo Gardermoen airport and at Nice Cote d’Azur Airport on the French Riviera. That came shortly after the company made a multi-million-pound move into China which will see it manage and operate a new cargo terminal at Guangzhou Baiyun International Airport. Mr Joeinig said at the time that the deal would help Menzies fulfil plans to expand in global markets.

The Flyr and China deals came after Menzies raised £22 million via a share placing in May. In January, Menzies won a contract to provide services such as fuelling and ground handling at Baghdad International Airport in Iraq with joint venture partners, while the previous month it acquired 51% of Pakistan-based Royal Airport Services, allowing it to enter that country’s fast-growing aviation market.

Mr Speakman at Shore said: “We reiterate our view that Menzies is emerging from the pandemic smaller, but focused and able to capture opportunities in recovery – a testament to strategic delivery and effective cost management.

“We continue to see strong earnings recovery potential, underpinning the short-term equity story. As recovery gathers pace, with volumes expected to build on a recovery track from the pandemic, visibility should continue to improve with the financial performance.”

He added: “Menzies is poised to recover strongly from the pandemic, in our view, as a leader in its aviation services specialisms.”

Shares closed down 2p at 315p.

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992