Auditor flags 'material uncertainty' over Glasgow-based airline after profits tumble

Accounts newly filed at Companies House lay bare the impact of the pandemic on the finances of the Glasgow-based airline, which provides lifeline services to the Scottish Highlands and Islands.

The accounts show Loganair made a pre-tax loss of £12.7 million for the year ended March 31, 2020, after a range of one-off items. These included operating losses of £1.9m following a “sudden and dramatic reduction in passenger demand” last March as the pandemic took hold, and £1m of hedging losses on fuel and currency contracts for the year to March 31, 2021.

The accounts show Loganair booked fleet restructuring costs of nearly £7.5m, which came as it completed the introduction of the Embraer Regional Jet (E135 and E145) to its fleet and retired the Dornier 328 and Saab 2000 turboprops from service.

A one-off charge of £2.1m was booked as a result of industrial action taken by air traffic controllers at Highlands & Islands Airports in a “work to rule” dispute which ran from April 2019 until January 2020. Loganair writes in the accounts that the action had caused “serious delays and cancellations of flights.”

Looking ahead, Loganair expects to report a “significantly narrowed loss” for the current year, citing income from contract and charter flying alongside a “rigorous focus on costs”.

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But directors note in the accounts that “there exists significant uncertainty as a consequence of Covid-19 and the actual trading experience moving forwards may be materially different to that forecast.”

The company's auditor states: “Whilst the directors have instigated a number of measures to mitigate these potential risks, there remains a material uncertainty which may cast significant doubt on the entity’s ability to continue as a going concern, due to the impact of future events not yet being known.”

Loganair chiefs have taken a series of steps to offset the impact of the pandemic on the business since the crisis took hold. The airline, which operates 70 domestic flights and services to Ireland, Norway and Denmark, has used the furlough scheme to manage the downturn in demand, and agreed an £25m loan facility with Clydesdale Bank as it refinanced in July. Owners Stephen and Peter Bond provided support of up to £11m for two years.

However, the company notes “regrettably” that redundancies became “necessary” in light of the second wave of coronavirus infections, which saw demand for air travel fall quickly from September.

Thirty members of staff left through voluntary redundancy and early retirement, while 58 departed via involuntary redundancy. The airline currently has a headcount of 746, with roughly 140 of that number supported by the furlough scheme.

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Chief executive Jonathan Hinkles said: “The last 12 months have placed an extraordinary burden on everyone, yet we are incredibly proud of the efforts which Loganair’s team has made to continue delivering for the communities that we serve.

"In addition to our long-standing duties and responsibilities in the Highlands and Islands, we’ve also added new contracts in the oil and gas industry, and stepped in to safeguard 16 routes following the collapse of Flybe. We’ve flown record volumes of mail and cargo through our route network as well, highlighting the increased capacity of our new ATR72 freighter aircraft.”

Mr Hinkles said the refinancing completed last summer allows the airline to “look to the future with confidence.”

He added: “As the UK’s vaccine programme continues apace, we are already seeing modest signs of a recovery in bookings on domestic routes for the year ahead.”

“Although we have a long way ahead of us on the path to recovery, the support of our team, our shareholders and our lenders is truly appreciated and integral to our future success.”