Barrons : These 15 Banks Have a Risky Specialty. It Isn’t a Problem—So Far.

These 15 Banks Have a Risky Specialty. It Isn’t a Problem—So Far.

Regional banks have received merciless scrutiny since the collapse of Silicon Valley Bank on March 10. Uninsured deposits and cash levels have been weighed—and where they’re found wanting, bank stocks have been cut in half.

The next worry for regional banks could be commercial real estate. Postpandemic changes in how we work and shop are leaving vacancies across the country. If a recession arrives, experts warn, large numbers of property owners could default on their loans.

Which lenders have the most at stake? Banking regulators have set guidelines for concentration in commercial real estate loans, so Barron’s asked S&P Global Markets Intelligence to scour federal filings for banks that exceed those levels. We then focused on the 15 largest banks in that group.

These lenders are mostly midsize banks in the bottom half of the nation’s top 100 in assets. Commercial real estate is their concentration, the banks tell Barron’s, because they’re good at such loans. Judging by their below-industry levels of bad loans, that seemed to be the case at year-end 2022. At 11 of the 15 banks, nonperforming loans amounted to less than half the regional bank median of 0.84% of total loans.

Most say their loans are well covered by the values of the properties—suburban office parks, retail locations, apartment buildings, and more. But if the foundations crack under commercial property in the coming year, investors will want to keep an eye on these and other local banks. In all, regional and community banks account for an estimated 80% of commercial real estate lending.

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The Panic is Ending
Some names on our list are familiar from recent headlines. The second-largest bank on the list is Pacific Western Bank. The shares of its Beverly Hills, Calif.–based holding company, PacWest Bancorp (ticker: PACW), skidded wildly after its venture-backed depositors pulled cash in the wake of Silicon Valley Bank’s collapse. PacWest lined up funding and says it has more than enough cash to cover uninsured deposits. Its loans are diversified and in good shape, it says.

PacWest’s loans include many for real estate. At the end of 2022, commercial real estate loans amounted to more than 375% of Pacific Western’s capital, its cushion for loan losses. The riskiest kind of real estate loans—for land and construction—came to almost 140% of the bank’s capital.

Federal guidelines define two tests that may prompt regulators to further analyze “the level, nature, and management” of a bank’s commercial real estate concentration risk. The first test is whether loans for non-owner-occupied commercial real estate exceed 300% of a bank’s capital and have grown more than 50% in the past 36 months. The second test is whether loans for construction and land development exceed 100% of capital.

Like all the banks we list here, PacWest exceeded the level of one or both of these “300/100” tests.

Commercial real estate loans are often a leading indicator in a downturn, when speculative land loans are some of the first assets to run into trouble, says banking consultant Kathryn Dick, who was deputy comptroller at the Office of the Comptroller of the Currency in 2006 when the loan concentration guidelines were developed.

“The crux of that guidance is to have a trigger point for a conversation with the regulators,” says Dick. “It was issued as guidance, not a hard-wired limit, because at many community banks, this is their bread and butter.”

PacWest didn’t respond to questions from Barron’s. But when PacWest reported 2022 earnings in January, Chief Executive Paul Taylor expected its “relationship” real estate lending would continue. “As you look at our balance sheet,” he told conference-call listeners, “one thing we do very well, and a lot of, is real estate.” At year end, the bank’s nonperforming loans—including loans past due by 90 days or more—were just 0.38% of total loans.

The largest lender with commercial real estate loans above the guidelines in December was Valley National Bancorp (VLY), a New York and New Jersey–focused lender whose commercial real-estate loan level was 440% of capital, after rising more than 70% in the prior three years.

Senior Vice President Marc Piro says that two acquisitions contributed to Valley’s growth. The bank’s commercial real estate loans are “highly diversified by region, property type, and loan size,” Piro writes. “We hold a highly granular portfolio with no significant concentrations in any specific area and continue to maintain exceptional credit quality.”

The third-largest bank with high concentration levels is Bank OZK (OZK), a Little Rock, Ark.–based lender whose commercial real estate loans topped 345% of capital in December, with construction and development loans topping 180% of capital. Saying it is in its quiet period, OZK wouldn’t comment on its loans. In its 10-K filed with the Securities and Exchange Commission in February, the bank acknowledged the lending concentration but said it has established appropriate underwriting and monitoring procedures for the loans. At year end, its common equity was among the highest of the banks on our list, at 14% of assets.

No. 4 on our list of concentrated lenders is Pacific Premier Bancorp PPBI +0.88% (PPBI), an Irvine, Calif.–based bank whose commercial real estate loans more than doubled over the three years ended December 2022, to a level of 329% of its capital. Two-thirds of those loans were for multifamily residential buildings, says a spokesman, and they have performed well.

“These [commercial real estate] loan concentrations have been well-managed through various economic and interest rate cycles,” he writes. “We have longstanding, disciplined credit underwriting standards.”

The shares of Washington Federal (WAFD) have held up better than most on the list. That’s because the Seattle-based bank’s loans are secured by commercial properties worth twice the loan amounts, says marketing chief Brad Goode. “Our nonperforming assets are one of the lowest among regional banks,” he says.

Real estate lending can be a profitable source of growth for banks that know their territory. The greater Washington, D.C., base of Sandy Spring Bancorp (SASR) has seen powerful growth in housing, offices, and retail for over a decade. The bank’s commercial real estate loans exceeded 360% of capital at December’s end, after doubling over the prior three years. A 2020 acquisition contributed to that growth. In an earnings call in January, CEO Dan Schrider said that retail was the largest piece of its loan portfolio, at about 29%, with another 15% in suburban offices.

“We just keep our loan-to-value ratios very low.”

— Greg Garrabrants, Axos Financial
Almost all the loans in the commercial real estate portfolio of First Foundation (FFWM), a Dallas–based lender, are on multifamily residential properties, says CEO Scott Kavanaugh, with the loans averaging a conservative 55% of the properties’ values when made. The bank’s percentage of nonperforming loans is the lowest on the list. “Multifamily is the best asset class in commercial real estate, in terms of default rates,” he says. “We’ve never taken a charge-off in our multifamily loans.”

From its base on New Jersey’s shore, OceanFirst Financial (OCFC) makes most of its commercial loans in the region from New York City to Philadelphia. Spokeswoman Jill Apito Hewitt says the bank has a diverse loan portfolio, with few urban offices. Only 0.11% of its commercial real estate loans were nonperforming last year.

Barron’s asked every bank on this list about their lending. All but seven responded.

While the 300/100 tests can lead to conversations about loan concentration, they may also highlight a bank’s expertise. San Diego–based Axos Financial (AX) had commercial real estate loans that exceeded 420% of capital at December’s end, with construction and development loans at 110% of its capital.

But Axos shares have dipped the least of all our listed concentrated lenders. The bank has low levels of uninsured deposits and one of the industry’s lowest levels of unrealized losses in its bond portfolio—the two most prominent pain points for regional banks in recent weeks.

Axos also has a distinctive way of real estate lending, in which it takes loan interests that are senior to nonbank lenders such as the Michael Dell family office MSD Partners, with whom the bank helped finance last year’s sale of Donald Trump’s Washington, D.C., hotel. Such arrangements keep Axos’ loans-to-value levels below 50%, so the properties would have to fall by half in value to endanger the collateral.

“We just keep our loan-to-value ratios very low,” says CEO Greg Garrabrants. “We are in a senior position and well secured in all of our commercial real estate and lender finance deals, including significant subordination from our fund partners.”

So, the concentrated levels of commercial real estate lending at a bank can represent risk...or a bank’s local expertise.

“Community and regional banks across the country fill a very important role,” says Sandy Spring Bank’s Schrider. “The last thing we want to do is see that role in the nation’s economy disrupted.”

WWD : The Pope’s Coat Focuses Attention on AI Images

The Pope’s Coat Focuses Attention on AI Images
After a fake image of Pope Francis in Balenciaga went viral, and as Levi's revealed it would use generated models, the implications of artificial intelligence are coming to the forefront.



PARIS — Was the Balenciaga coat a wakeup call?
After a photo-realistic image of Pope Francis wearing a white puffer coat from the brand caused an internet frenzy earlier this week, Elon Musk, Apple cofounder Steve Wozniak, and Skype cofounder Jaan Tallinn signed an open letter calling for companies to curb their development of artificial intelligence.

They were among the tech leaders stating that the rapidly evolving systems pose “profound risks to society and humanity.”

As unlikely as it may seem that the pope would be dressed by Demna, when the Midjourney-generated AI image went viral, most people couldn’t tell that it was fake. It was the first time many became aware of AI’s capabilities, and left the public to grapple with the implications of these new technologies.


Amid all this, famed brand Levi’s revealed it would be using AI-generated models in partnership with digital fashion studio Lalaland.ai to increase diversity and inclusion. The brand quickly faced backlash and calls for it to simply hire diverse human models instead of relying on technology.

The use of AI images has the potential to upend not only the fashion industry and creative jobs such as photography and styling — not to mention estimates from McKinsey that it could cost 400 million to 800 million jobs by 2030 — but also the way people view and analyze photographs, with profound implications for democracy itself.

“With the pope images, it’s fun, it’s sort of silly and it doesn’t matter too much in the sense of what those images actually are. But it’s opening up the conversation, and opening up these wider issues. It’s an opportunity to get people to pay attention,” said Mhairi Aitken, ethical fellow at the Alan Turing Institute, the U.K.’s national institute for data science and artificial intelligence.

Less benign images also circulated this week, including of French President Emmanuel Macron seemingly collecting garbage on the streets of Paris amid a sanitary workers’ strike and riots in the country, and incendiary pictures of former U.S. President Donald Trump appearing to be dragged away by police following his indictment.

At a conference hosted by the Alan Turing Institute this week, the images were a hot topic.

“These fake images that are coming out, there are concerns about what the long-term impacts might be. There’s excitement about the rapid advances in the technology, but at the same time, concerns around the impacts and that those might be harmful,” Aitken said. “There has been a heightened awareness of the risks around the uses of AI.”

There might be telltale signs — experts say to look at the hands, which AI hasn’t perfected yet, or the glasses — but that takes a discerning eye. “The reality is that’s not how people view images, it’s not how people consume media. If you’re just scrolling past, it looks real, it looks convincing,” she said. Plus, as the AI image generators improve, the images will become more and more sophisticated.

Fundamentally, it’s not about figuring out if an image is fake or not, it’s that the seed of disbelief is now planted in any image. Real images could be dismissed as fake if someone doesn’t like what they see and it’s inconvenient to their world view.

The speed at which AI is developing is “highly concerning” even to those that work in the field, said Alexander Loth, Microsoft senior program manager, data science and AI. He studies the use cases and benefits of the technologies at Microsoft’s AI For Good lab.

“A few weeks ago, it was not even seen as a possibility that you could enter a prompt and get a photorealistic looking pope,” he said.

He shared some slides to depict how fast AI is evolving, which show the big jumps that have taken place this year. Midjourney’s latest release can create photorealistic images like the pope’s white coat, while GPT-4, released two weeks ago, appears to understand complex logic.

Publicly available AI programs including Midjourney, ChatGPT and Dall-E have guardrails, but an open source program like Stable Diffusion could be worked around. “So it’s getting very difficult regarding misinformation and these kinds of pictures. When the next U.S. election happens, we are not very sure what we will see,” Loth said.

One proposed solution is invisible digital watermarks, similar to metadata, that could be used to authenticate real photos.

Another proposed solution is using the blockchain to verify the origin of an image. “It could be very useful in tracking fake news,” said Leonard Korkmaz, head of research at Quantlab and product manager at Ledger. He highlighted Lenster, a social network being built on the Lens Protocol, to track and verify posts on the blockchain.

“If the issuer was the Vatican posting the photos, using an NFT smart contract, people will be able to identify that it was posted by an official account. If it’s posted by someone unknown, that means it can be a fake and you need to do more investigation,” he said.

However, that requires issuing an NFT for an image, as well as verifying an account through these services with a technology the average person is unfamiliar with. The technology is “not completely mature right now,” Korkmaz noted.

Lenster is still a bit unwieldy and not user-friendly quite yet. The company has released plans on how it plans to build the protocol but “it’s basically a vision that needs to come and be revealed,” he said.

“The notion of seeing is believing is no longer true, and that’s the big shift right now,” said Poynter Institute senior faculty for broadcast and online Al Tompkins.

Brands might look to AI to cut out photographers on basic images. “The real question is going to end up being, ‘What does genuine photography do that AI doesn’t?’” He compared it to the Photoshop revolution 30 years ago, which is now widely accepted as a tool to manipulate images.

However, with Photoshop you need specific skills, training and time to work on an image. Midjourney takes a few words and mere seconds. “With AI you don’t need any skills and it’s very fast. That’s the scary thing. Every bad actor can have a huge amount of fake pictures and fake news,” said Microsoft’s Loth. The only barrier to entry is your imagination.

The AI image generators also have the ability to create something “in the style of” a specific artist, which brings in copyright issues, said Poynter’s Tompkins. Once future law catches up with technology, he imagines something that will be similar to sampling a song in music to compensate photographers and artists.

Industry organization Coordination of European Picture Agencies, which includes Getty Images and Magnum Photos among its members, issued a set of guidelines to encourage the responsible use of AI in photography, as well as address copyright and privacy issues.

“We recognize the potential of AI to transform the visual media industry, but we also acknowledge the risks associated with its use,” said CEPIC president Christina Vaughan. The organization points out that the law is “struggling to cover all possible uses and potential abuses.”

“Many companies are producing derivative products that use existing gray areas to gain a competitive advantage by avoiding remunerating the original creators, sacrificing long-term societal benefits for short-term gains,” the organization said.

Copyright is moving into uncharted territory. In the U.S., Getty Images is suing Stable Diffusion creator Stability AI for training its AI on the agency’s photography, creating derivative works and violating its copyright.

“In most countries in the world at this point, it’s been determined that authorship requires a natural person,” said Thomas Coester, principal at Thomas Coester Intellectual Property based in Los Angeles.

In other words, if an AI platform is just given prompts that generate a text or image, most people would say there’s no meaningful creative input by the person, and therefore there’s no copyright — and anybody can copy it. However, if there’s some human input, that can change things.

“But it’s indeterminate at this point how much is enough,” said Coester.

In the age of “authenticity,” brands could be seen as duping their customers by using AI models. “If they’re lying about the person, are they lying about the product?” wondered Tompkins. “You might as well put it on a Barbie doll. It’s not real. People want to know what is the real deal.”
That lack of authenticity led Levi’s to backtrack on its announcement.

“We realize there is understandable sensitivity around AI-related technologies, and we want to clarify that this pilot is something we are on track to experiment with later this year in the hopes of strengthening the consumer experience.
Today, industry standards for a photoshoot will generally be limited to one or two models per product. Lalaland.ai’s technology, and AI more broadly, can potentially assist us by allowing us to publish more images of our products on a range of body types more quickly,” the company said in a statement.

Levi’s clarified that it is not scaling back its plans for live photoshoots, adding: “Authentic storytelling has always been part of how we’ve connected with our fans, and human models and collaborators are core to that experience.”

Electrek : Tesla teases a new product, refers to ‘CyberVault’

Tesla teases a new product, refers to ‘CyberVault’

Tesla appears to be teasing a new product in a cryptic social media post on China’s Weibo in which it refers to something called “CyberVault.”

Tesla fans have been starved of new products for a while now, unless you count the Gigabier launched yesterday, but now they have some hope coming from Tesla China.

Tesla’s Chinese marketing team is fairly active on Weibo, a Chinese social media platform, and today, the company shared a post that appears to be teasing the unveiling of a new production.

The post includes a picture of something hidden under a piece of cloth and the mention of something called “CyberVault”:

The Chinese text says, “Who is the main character this time?” on top, and “Special form, super power up” below. It also includes a countdown to three days, which should mean that whatever it is, it should be unveiled this Sunday.

The “CyberVault” term is leading people to believe that it is related to the Tesla Cybertruck electric pickup truck, but that’s just speculation at this point.

The shape in the teaser certainly takes a vehicle out of the equation, but it looks to be about the size of a charging station or something similar in size.

What do you think it would be? Let us know your best guess in the comment section below.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • BB -2.8%, AEHR -2.8%, NUS -1.9% (CFO departing; reaffirms guidance), AIN -1.5% (guidance)

Other news:

  • NKLA -4.3% (prices offering of 29,910,715 shares of common stock at $1.12 per share)
  • AEHR -2.8% (provides update on at-the-market offering; issues guidance)

Analyst comments:

  • RNA -2.2% (downgraded to In-line from Outperform at Evercore ISI)
  • CTAS -1.6% (downgraded to Hold from Buy at Jefferies)

>>> USGapping up

Gapping up
In reaction to earnings/guidance:

  • RUM +15.4%, YMAB +10.9% (also files $150 mln mixed shelf), BRZE +6.3% (also acquiring North Star), IONQ +4.3%, EGY +3.3% (guidance)

Other news:

  • MCB +14.7% (remains well capitalized)
  • CABA +4.1% (receives FDA clearance of IND application for CABA-201)
  • NKTX +3.2% (CFO departing)
  • SJR +3.1% (report that a Canadian minister is expected to approve deal with Rogers (RCI))
  • TLSA +2.9% (announces anti-CD3 mAb research for the treatment of Alzheimer's Disease)
  • AMAM +2.6% (files $300 mln mixed shelf)
  • MPW +2.5% (Files Lawsuit Against Short-Seller Viceroy Research and Its Members, Sends Letter to Shareholders)
  • VIPS +2% (announces $500 million share repurchase program)
  • THCH +1.8% (acquires PLKC International Limited)
  • FRC +1.2% (MA regulator probing insiders' stock sales, according to Reuters)
  • TGB +1.2% (announces improved economics for its Florence Copper Project)
  • ABB +1.1% (launches new share buyback program of up to $1 billion)

Analyst comments:

  • HWM +1.9% (upgraded to Buy from Hold at The Benchmark Company)
  • AAP +1.2% (upgraded to Equal Weight from Underweight at Barclays)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • RUM +15.7%, MCB +13.4%, YMAB +12.5%, STAR +7.5%, BRZE +5.7%, IONQ +4.7%, PGTI +3.5%, NKTX +3.2%, MPW +2.7%, VIPS +1.8%, THCH +1.5%, ABB +1%
  • Gapping down:
    • BB -4.3%, TGB -2.5%, AEHR -1.9%, NUS -1.9%, AIN -1.5%, IGMS -1%, GATO -0.9%, RIO -0.6%

WSJ : Green Energy Is Stuck at a Financial Red Light

Green Energy Is Stuck at a Financial Red Light
Rising interest rates are just one of many factors that could throw a wrench in wind and solar developers’ plans

After years of uncertainty, last year’s Inflation Reduction Act finally gave America’s renewable-energy industry a long, green signal. Now the economy is blocking the road.

The wind and solar industries have always suffered from the short-term nature of subsidies, with federal tax credits often extended in nail-biting one-year increments. Last year’s climate bill changed that, giving the industry subsidies that last at least a decade. But just as policy winds blow in their favor, two critical growth drivers—interest rates and equipment costs—are moving in the wrong direction.

Wind and solar projects are especially sensitive to rates because debt can comprise as much as 85% to 90% of capital expenditures. Renewable developers have known only low rates for most of their history. Nearly all U.S. utility-scale solar facilities and 85% of onshore wind farms were installed since 2009, during which period the target federal-funds rate was close to 0% in eight out of 13 years. Not any more: After the most recent hike, rates are the highest since 2007.

Renewable energy projects tend to be financed with floating-rate loans that rise and fall with the benchmark interest rate. Thankfully, most of those projects are well-shielded from rate risk because lenders require them to hedge at least 75% of their loans through swaps, according to Elizabeth Waters, managing director of project finance at MUFG. Most ended up hedging 90-95% to lock in low rates, she noted. But those swaps won’t help new projects. Some new solar and wind projects facing higher borrowing costs than when they were planned might not make it off the drawing board.

Borrowing isn’t the only thing that costs more. Following years of price declines thanks to technology and economies of scale, equipment is getting more expensive too. Trade policies aimed at Chinese manufacturers have caused delays and shortages for the solar industry, which relies heavily on the country for its components. German utility RWE, an active developer in the U.S., said in its annual report released last week that imports of solar modules from Asia are now subject to “stringent checks” and said it could fall behind on its expansion plans if the U.S. continues to “impede the procurement of solar panels.”

After falling to a record low in 2020, the average price of a solar photovoltaic system rose in 2021 and then again in 2022, according to data from the Solar Energy Industries Association and Wood Mackenzie. Meanwhile, the average cost to build an onshore wind farm in the U.S. rose in 2020 and 2021 before leveling off last year, according to data from BloombergNEF. Supply-chain issues and interconnection delays already started slowing the clean power industry last year: In 2022 it installed 25.1 Gigawatts of total capacity, a 16% decline from a year earlier, according to the American Clean Power Association, which tracks solar, wind and energy storage. While that’s still enough to meet roughly half of Texas’ electricity demand, it was nonetheless below expectations–though part of the drop was driven by an preplanned phase-down for tax credits commonly used by the wind industry before the Inflation Reduction Act was passed.

Ultimately, solar and wind’s ability to absorb cost and interest-rate hikes depends on how willing utilities and corporations are to pay higher prices. Many onshore wind and solar projects have been able to renegotiate pricing on their power purchase agreements because demand is robust, according to industry executives. But cracks are showing for offshore wind, which is more exposed to rising costs and rates because it takes longer to develop. BloombergNEF estimates that the weighted average cost of capital for U.S. offshore wind projects rose to 5.25% in 2022 from 4.41% in 2020.

Developer Avangrid Renewables, for example, is trying to terminate its power purchase agreement with utilities in Massachusetts for a 1.2 Gigawatt offshore wind project after an unsuccessful attempt at renegotiating its fixed-price contract. If built, Commonwealth Wind would generate enough energy to power 700,000 homes. The company cited “historic price increases for global commodities, sharp and sudden increases in interest rates, prolonged supply chain constraints, and persistent inflation” since the project secured a contract in late 2021. Avangrid plans to bid the same project into the state’s next competitive offshore wind procurement, a spokesman said over email. Danish power company Orsted said in its annual report released February that it incurred an impairment of 2.5 billion Danish kroner, the equivalent of $369 million, on its 50% interest in the Sunrise Wind project off the coast of New York, noting that the project cost has increased substantially since its bid in 2019.

As the name implies, the Inflation Reduction Act is supposed to relieve some of these cost pressures. But it won’t feel like a bonanza without clarity on how the rules apply. Expanding the eligibility of tax credits to more technologies, for example, has spread the limited pool of tax equity investors—that is, those with both the tax burden and the know-how to use renewable tax credits—more thinly across more projects. Ironically, that has shrunk the pool of tax equity available to solar and wind in the near term. The bill tries to address this by making such tax credits transferable, but industry executives said that pool of capital will remain constrained until there is more guidance.

There are two other more recent developments worth watching: One is the plummeting cost of natural gas which, if prolonged, could impact demand for solar and wind on the margins. The U.S. benchmark Henry Hub has fallen 49% year to date. Secondly, banks’ recent turmoil could shrink their ability to lend. Ted Brandt, chief executive of clean-energy focused investment bank Marathon Capital, notes that the industry has always had cheap debt, cheap equity and “massive liquidity chasing it.” How the industry will respond to expensive capital is still an open question, he said.

It isn’t enough for policy winds to blow in the right direction for a renewable energy boom–economic headwinds need to abate too.

FT : Holidaymakers warned of disruption as Heathrow airport staff begin 10-day U

Holidaymakers warned of disruption as Heathrow airport staff begin 10-day UK strike
Industrial action starts after last-ditch talks to settle pay dispute break down

Passengers flying from London’s Heathrow airport face potential disruption over the Easter holiday after security staff began a strike in a row over pay.

More than 1,400 members of the Unite union began 10 days of industrial action on Friday after last-ditch talks to find a deal broke down. The strike will run until Easter Sunday on April 9, taking in one of the busiest travelling periods of the year.

The strike is the latest action to hit the aviation industry in recent months, and follows a series of walkouts by Border Force officials at immigration. Officials at the UK’s Passport Office have also launched a five-week strike starting on April 3.

The security staff involved work at Terminal 5, which is the home of British Airways, and in the wider airport’s cargo operations.

Unite said the walkouts would cause “severe delays”, but Heathrow said passengers would be able to travel as normal, albeit with longer queues at security.

British Airways has cancelled more than 300 short-haul flights over the 10-day period, the equivalent of 5 per cent of its flight schedule.

Heathrow also asked airlines to stop selling tickets over the strike period in order to control the number of passengers moving through the airport.

The airport is deploying an extra 1,000 staff to help passengers through departures, and will only allow travellers to take two items of hand baggage through security. It said operations were running smoothly on Friday morning.

Unite turned down an offer of a 10 per cent pay rise plus £1,150 cash payment, following a 4 per cent rise plus £2,000 one-off payment in 2022, according to Heathrow. The average starting salary for a security officer would be £27,754, including the proposed pay rise.

“We will not let these unnecessary strikes impact the hard-earned holidays of our passengers. Our contingency plans will keep the airport operating as normal throughout” the airport said.

The union said the offer represented a real terms pay cut, and that staff were “unable to make ends meet due to the low wages paid by Heathrow”. 

So far, the wave of transport strikes have not contributed to the type of disruption which hit the industry last year, when staffing shortages led to a chaotic series of queues, flight delays and cancellations.

Airport and airline executives are confident their businesses are better prepared than last year following a recruitment drive.

Heathrow has also asked airlines not to add extra flights to their schedules during the peak summer season, to try to limit possible disruption.