Menzies cuts 1,200 jobs as airports arm tumbles into loss

John Menzies, the former retail group which has re-invented itself as an aviation services operator, is cutting 1,200 jobs after its main airports division slumped into loss.

One thousand of the redundancies are in the US. The other 200 are at Heathrow airport, though most of these have already been made. The cuts are a direct response to the terrorist attacks of 11 September. David Mackay, chief executive. said: "We can't be insulated or immune from the slowdown in the global economy, especially cargo, which was exacerbated by 11 September."

John Menzies provides baggage handling services as well as other support functions at airports, such as the maintenance of de-icing equipment and ramps. It sold its John Menzies stores to WH Smith several years ago and completed its exit from retailing in September, when it sold the Early Learning Centre toy chain. The business will be reclassified as a support services company on the stock exchange from the beginning of January.

The company was already seeing a decline in cargo volumes before the terrorist attacks as the US economy dipped. The decline worsened afterwards, with cargo volumes down by 20 per cent at one point while passenger number were down 34 per cent.

The business lost £2m of profit in September alone, Mr Mackay said. However, cargo volumes were now coming back. "Cargo has no fear of flying," he added. But passenger numbers are slower to recover. Mr Mackay pointed to the cuts in airline capacity. "Around 18 per cent of the world's fleet is parked in the desert," he said.

In the six weeks to 26 November Menzies' aviation business recorded a £2.5m loss, compared to a £2m profit in the previous year. Menzies had warned in late September that its full year profits would be below expectations as a result of the terrorist attacks.

Yesterday it reported flat underlying profits of £13m for the half year. But at the pre-tax level the business lost £16.1m after a £12.7m write-off on the sale of the Early Learning Centre.

Menzies' figures were bolstered by its resilient newspaper and magazine distribution business which maintained profits at £13m. Menzies bought Turners, a privately owned news distribution business, for £6m this month and is on the look-out for more small bolt-on deals. The shares rose 2.5p to 351.5p.