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The boss of the Scottish airline talks to Gary Noakes about Loganair’s prospects and challenges
One person who knows how difficult it can be to run an airline is Jonathan Hinkles, managing director of Glasgow-based Loganair, which revealed a loss of £8.93 million in June, its first loss in 17 years.
Loganair is at pains to point out that last year was an anomaly – a franchise agreement with Flybe ended in September 2017, after which Flybe launched services on six of Loganair’s biggest routes. Flybe lost its shirt, abandoning the fight in March, but not before costing its former partner £6.8 million.
Loganair, now flying under its own tartan livery, has renewed its codeshare with British Airways and will launch seven new routes in 2018. It expects a return to profit in 2019, but as Hinkles explains, the outlook generally is not all rosy.
“We are back on top of it this year, albeit that the world is not without its challenges”, he says. “It’s certainly getting tougher and tougher in the industry as a whole.”
He points to downward pressure on yields as customers expect cheaper fares against a background of currency movements that do not favour an industry that purchases in dollars.
“A third of our cost base suddenly became one-third more expensive after (the vote for) Brexit, it equates to 10 per cent increase in overall costs. It’s challenging to be able to withhold that – the trading environment is such that you can’t pass that directly onto customers.”
In addition, airlines are increasingly being hit by delay claims under EU 261, he says. Hinkles blames the compensation culture of ‘no win, no fee’ lawyers. “They are trying to push that even to include weather delays,” he adds.
Another burden for the industry is the rise in airport charges, often to fund major infrastructure projects. “They are rising at six, seven, eight per cent this year. There’s no way we can recover that through ticket prices.”
The industry will also have to cope with the oil price rise this year. “It will have an impact for us on the portion we have not hedged, but if the price stays there, the whole industry will run out of hedging. We have hedging in place for fuel and currency, but no-one has that in place for the end of time.”
Hinkles mentions another, less obvious burden for the industry, namely regulation; but not perhaps in its most obvious form. “We are having to deal with things like gender pay reporting and modern slavery. It’s indisputable in its aims, but the amount of stuff you have to do is just going up.”
More positively, Loganair is taking more steps to enhance its appeal to the business traveller. Four jet aircraft from sister company bmi will be stationed at Glasgow and Norwich this year and more ticket flexibility added to mid-range fares.
Loganair also now offers TMCs and buyers a direct portal to avoid GDS charges. Hinkles says “20-plus” customers are already signed to this.
He is also awaiting the start of Loganair’s first scheduled flights from Carlisle airport in 2019 and believes the services, from Belfast, Dublin and particularly Southend, will attract some business travellers.
“There’s the nuclear industry and some top-end food brands, plus it’s where Stobart Group (Carlisle and Southend airports’ owners) itself is based,” adds Hinkles.