Saturday Interview: Loganair chief happy with trip after airline goes it alone

WHEN the time comes to write the definitive story of Loganair, the events leading up to and the immediate aftermath of September 2017 will arguably merit a chapter in their own right.
For almost half of its history, the Glasgow-based airline had served airports across the Highlands and Islands as a franchise partner of larger airlines. 
But in November 2016 the company was forced to contemplate a very different outlook. That arose because Loganair and long-standing partner Flybe decided to go their separate ways, having failed to agree on a contract renewal that would bring satisfaction to both parties. 
It was a seismic moment for Loganair, but it was also a window of opportunity.
By the time the Flybe deal had run its course in August 31, 2017, Loganair had regrouped and was ready to fly again under its own livery for the first time in decades. But it did not have the Scottish skies to itself, at least not initially.
Loganair found itself having to reassert its independence in direct competition with Flybe – on the very same routes it had previously flown on behalf of the Exeter airline.
The change would have a bruising effect on the bottom line, in the short-term at least. Announcing its most recent results in June, Loganair said the costs incurred as a result of the severance led to its first loss in nearly two decades. 
The accounts, for the year ended March 31, revealed a pre-tax loss of nearly £9 million. The head to head with Flybe, which saw the two airlines both run flights to destinations such as Stornoway, Kirkwall and Sumburgh from Glasgow, Edinburgh and Aberdeen, sparked a brutal price war which cost Loganair £6.8m over six months.
Some £3m of costs were racked up as Loganair invested to relaunch its own brand and back office functions. And there were £2.1m of costs from the loss of bookings arising from delays in the negotiation of new codeshare arrangements with partner airlines, and travel agency bookings going live.
However, as 2018 draws to an end, it looks as if all the upheaval has been worth it. Indeed, as if to underline the fact, Loganair was recently named ERA Airline of the Year, one of the biggest awards in regional aviation, and has just added its first jet to its fleet.
For managing director Jonathan Hinkles, the award was a sweet moment for all the staff “who put the effort in over the last year to get us there”.
He said: “Over the course of the last year we have been driving an awful lot of change in the business as well, whether it be new technology for our pilots, for our customers and the not insignificant issue of getting over last winter’s commercial battle with Flybe on the Highlands and Islands routes, which is long behind us now. But it was clearly a big pre-occupation for the first six months of that period.”
Mr Hinkles, now in his second spell at Loganair after re-joining from Virgin Atlantic in 2016, said severing links with Flybe has given Loganair the freedom to do things differently. For example, the Scottish airline has now dropped the charges it felt were not appropriate for smaller aircraft, such as fees for checking in bags. 
Loganair is also now putting its flights on sale much further in advance, which Mr Hinkles said is helping people planning long-haul flights out of the Highlands and Islands. Other changes to customer service policies mean people can now spread baggage allowances over two bags, and to check in online four days in advance of flights, instead of 24 hours.
Loganair has also dropped the insistence of requiring travellers to produce formal identification at boarding gates, which Mr Hinkles said had slowed boarding down even though there was no regulatory reason to insist on the policy.
“Now boarding our aircraft is much quicker,” he said.
As the airline fates would have it, life would appear to have been kinder to Loganair than Flybe since the two went their separate ways. After warning over profits earlier in the year, Flybe hoisted the for sale sign in November, citing challenges such as weak demand and rising fuel prices. It has subsequently held talks with Virgin Atlantic over a possible takeover.
Not only that, but Flybe is no longer a direct competitor of Loganair in Scotland. After initially going head to head with Loganair in a franchise deal with Eastern Airways, it withdrew from those contested routes early this year after it became apparent that the market could not sustain two operators.
Asked whether he feels a sense of schadenfreude over the travails at his former partner, Mr Hinkles said: “No, not really to be honest. If you look at the underlying reasons why they are where they are, they are the same [as those] hitting the whole sector.”
Mr Hinkles said a major internal focus is on ensuring Loganair is “for the future”, be it finding ways to “work smarter” or cut costs where possible.
But so acute are the challenges facing regional airlines across Europe, from factors such as rising fuel prices (partly because of sterling’s protracted weakness), carbon emission charges, and pilot shortages, that he believes there is a risk more airlines will go out of business.
Noting that the month of October had seen almost one airline go bust every week, Mr Hinkles said: “I don’t think it unduly apocalyptic to suggest that might continue through the winter. Our objective is very much to make sure we stay strong.”
Of course, Brexit is bringing uncertainty to the aviation sector too. Mr Hinkles gives fairly short shrift to the argument that a no-deal Brexit could lead to flights between the UK and EU destinations being grounded. He said that any airline which stops flying would find themselves in breach of ICAO (International Civil Aviation Organisation) rules, which all European states are signed up to and pre-date the formation of the EU.
But there are complications Brexit could bring. He said the ability of UK airlines to fly between countries within the “EU would certainly be in doubt”, and cited potential difficulties for EU-based carriers, which have pilots with UK licences and carry out aircraft repairs and maintenance in the UK.
“From our point of view, the UK carriers have probably got more clarity than European carriers have,” Mr Hinkles said.
“Of course things are going to change, but do I foresee a problem with us being able to fly to Bergen, or Inverness to Dublin? No I don’t. Do we have as much certainty as we would have done pre-Brexit? No. But we still have enough certainty to press on with our planning.”
So much so that Loganair has been steadily adding to its services. A flurry of tie-ups have been sealed with bigger partners, such as Turkish Airlines, KLM, Air France and Emirates, meaning those planning journeys that start within its network can effectively get to destinations around the world on a single ticket.
Mr Hinkles said the service gives “certainty” to travellers on all parts of their journeys, adding: “The other thing it does for the Islands is that they get the full benefit of the Air Passenger Duty exemption. It basically pays for a large part of your connecting flight through the tax saving you get.”
At the same time Loganair, which is ultimately owned by the same company as BMI, has been expanding its own route network. It recently added four new routes out of Edinburgh Airport, including year-round services to Bergen and Stavanger, and the Glasgow to Derry service it first flew back in 1980. It has also secured its first ever route to Germany, with flights from Glasgow to Dusseldorf beginning in March.
All things considered, Mr Hinkles gives the air of a man who is quietly satisfied with life after Flybe. “Just over a year has gone [since the Flybe deal ended], and it seems like a much shorter period than that,” he said. “But we have managed to get a tremendous amount done.”