LOGANAIR has slumped to its first loss in nearly two decades as costs spiralled after its long-standing franchise agreement with Flybe came to an end, leading it relaunch itself as a carrier in its own right.
The Glasgow-based airline racked up a pre-tax loss of nearly £9 million after seeing its Flybe deal dissolve and its former partner launch in direct competition on key Scottish routes. It ended a run of 17 consecutive years of profits at the firm, which made a £3.1m profit last time.
Loganair and Flybe went head to head on six routes on the day the Scottish firm began flying again under its own brand for the first time in 25 years, on September 1. It sparked a price war on flights connecting Glasgow, Edinburgh and Aberdeen with destinations such as Stornoway, Kirkwall and Sumburgh, which Loganair said cost it £6.8m over a six-month period.
However, by early 2018 Flybe, which had operated the routes under an alliance with Eastern Airways, scrapped its services, initially stopping its Shetland route in January before going on to axe its flights to Orkney and Stornoway in February.
Chairman David Harrison said it had always been Loganair’s view that demand was not sufficient on the routes to support two carriers.
Mr Harrison said: “We can’t speak for Flybe and why they did what they did, but we were clear from the start that, while these are important air routes, demand is much smaller than you get in most air routes. Therefore, particularly when you are trying to provide several services during the day to give people a choice of flights, there simply aren’t enough people travelling to cope with two airlines doing that.”
READ MORE: Loganair looks to the Lakes as it expands route network
As well as competition-induced losses, Loganair said it ran up costs of nearly £3m as it took steps to relaunch its own brand, including the addition of back office functions. Costs of nearly £2.1m were
also incurred from the loss of bookings arising from delays in the negotiation of
new codeshare agreements with partner airlines and travel agency booking channels going live.
Mr Harrison admitted it had been a turbulent year but stressed the re-establishment of its own brand had been a massive step forward for the firm.
He said: “I think the most important achievement in the year was establishing Loganair as our own brand with fully functioning systems and really becoming Scotland’s airline on our own and being away from [the] franchise with Flybe. That’s a huge achievement and a big thing to do, particularly to get the brand established.
“That builds for the future. Clearly there has been turbulence to get there, and the period of competition I think was most unfortunate. But it is behind us.
“Going forward, we are pleased with where we now are in terms of being master of our own destiny and having our own brand in the marketplace.”
Loganair said that, excluding one-off, non-recurring costs, underlying pre-tax profits came in at £2.95m for the year. Turnover climbed by seven per cent to a record £110.7m, which came as passenger numbers increased by 6.2% to 812,541 – an all-time high for the company.
However, the load factor, the percentage of seats filled on scheduled flights, dipped to 59.8% from 62.8%. This was attributed to over-capacity on the routes it competed on with Flybe.
The company said it added four new routes over the year, followed by a further seven so far this year. These include the first-ever non-step services from Manchester to Shetland, Orkney and the Western Isles, and routes from Glasgow to Derry and Donegal. Loganair services are to be introduced from the re-opened Carlisle Lake District Airport to London Southend, Dublin and Belfast.
Asked if Loganair was now in a better place as a result of striking out on its own, despite the initial costs, Mr Harrison said: “Absolutely, the franchise arrangement we had with Flybe suited us well for a period. But ultimately we were always aspiring at some point that Loganair should be big enough to stand on our own.”
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