Loganair chief warns of more airline failures

The cost of fuel has surged on the back of the recovery in crude prices and the “catastrophic” weakness of sterling since the Brexit vote two years ago, which for UK carriers has pushed up the cost of fuel and other services because they are paid for in dollars. At the same time, compensation pay-outs to passengers for issues such as late departures and a pilot shortage are contributing to the malaise.

The challenges are underlined by events at Flybe, until last year a franchise partner for Loganair. Exeter-based Flybe confirmed last week it has been holding takeover talks with Virgin Atlantic after putting itself up for sale, following a profit warning in October.

The latest developments at Flybe came after Copenhagen-based Primera Airlines, which operated low-cost long-haul flights to destinations around the world, ceased trading in October.

Mr Hinkles, who noted around one-third of Loganair’s outgoings, including fuel, maintenance, spare parts and insurance, are paid for in dollars, said: “We have seen in the month of October an airline collapse every week… and I don’t think it is unduly apocalyptic to suggest that might continue through into the winter. Our objective is very much to make sure we stay strong.

“We have got a plan to get through it and I have said to our team, you have got to really focus on the next six to nine months because it is going to be really bumpy ride out there, with all these problems that the industry has got.”

Brexit has also been adding to the concerns of airlines.

However, Mr Hinkles does not subscribe to the view that flights could be grounded if the UK leaves the EU without a trade deal, as widely reported. He said that airlines which stop flying would find themselves in breach of the ICAO (International Civil Aviation Organisation) treaty, which came into effect after the Second World War. All European states are signed up to the treaty, which he said pre-dates the EU.

However, Mr Hinkles warned that UK carriers’ ability to fly between countries within the EU “would certainly be in doubt with a no-deal Brexit”.

While stating that would not affect Loganair, Mr Hinkles said this scenario is likely to bring with it extra bureaucracy in terms of getting the necessary permits to fly into the EU. “They can’t be refused, but we still have to go through the process of getting them,” he said.

During a recent Civil Aviation Authority briefing on Brexit, Mr Hinkles said it became “increasingly clear that the people who have got a bigger problem with Brexit are actually the European carriers, who maybe have pilots with UK licences, or have spare parts and things like wheels and engines overhauled in the UK.”

Mr Hinkles, now in his second spell with Loganair after re-joining from Virgin Atlantic in 2016, added: “If there is no-deal, then they will not be able to fit those components to an aeroplane after the end of March.

“From our point of view, the UK carriers have probably got more clarity than European carriers have.”

He suggested practical solutions will be found to warnings being issued, such as the claims European carriers will not be allowed to fly over UK airspace.

He said: “There is always the Armageddon scenario, and people saying you can’t fly. Well, KLM will find it is an awfully long way from Amsterdam to New York without being able to fly over UK airspace. There is an awful lot of this threatening stuff going on, and actually none of it has a basis in law.”

Mr Hinkles’ comments come around a year on from its exit from Loganair’s long-running franchise deal with Flybe. The split led to Loganair flying under its own livery for the first time in decades, with Mr Hinkles noting that the termination of the deal had brought greater flexibility to the Scottish firm.

Flybe has now withdrawn from serving the Highlands and Islands after a spell competing directly with Loganair.