With domestic air traffic expected to recover from the COVID crisis first, regional airlines are having to think carefully about which routes they will operate. Today, in a webinar interview, CEO of Scotland’s airline Loganair, Jonathan Hinkles, spoke about how his airline chooses its routes, and why 30% of them fail.
Regional will return first
For a disparate nation like the United Kingdom, regional connectivity is crucial, particularly to those communities in very rural or island locations. However, due to the impact of COVID, airlines serving these routes have had to make some tough business decisions about their networks, leaving some communities feeling rather stranded.
With domestic and regional traffic projected to return much faster than international demand, all eyes are on the local airlines who provide this much-needed capacity. In a webinar hosted by Anna.aero today, CEO of Loganair, Jonathan Hinkles, gave us some insight into how he makes his route plans. He said,
“I think we’ve learned, over the last couple of years, where our brand, where our presence actually works sustainably, and we’ve done that through a process of trial and error, to some extent.”
Trial and error sounds worryingly haphazard. With all the expense and effort that goes into setting up a route, shouldn’t the airline have a measured approach? Hinkles was quick to reassure that, despite a ‘suck it and see’ approach, it was a well thought out process.
“It’s been controlled. It certainly hasn’t been haphazard. We’ve got into it with our eyes open, but in terms of the markets we started over the last couple of years, we got a success rate of around 70%.
“That means 7 out of 10 of what we do works and three out of 10 that we do doesn’t work, and you deal with that quickly. If something’s not working, you cannot afford to sit there nowadays, incurring losses for a period of time to prove what you probably in your heart know anyway, that this isn’t going to work out.”
While it’s never good to see an airline pulling out of any route, it’s worse to see an airline go under. With the UK’s regional market still reeling from the exit of Flybe, it’s refreshing to know that Loganair is not prepared to start losing money.
Why do routes get canceled?
The CEO went into further detail about Loganair’s withdrawal from some markets, as well as its decision not to take up some of Flybe’s former routes. It seems there’s a lot in the mix that decides whether a route is viable or not.
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For example, Loganair exited Manchester to Edinburgh, a former Flybe route that it had planned to operate as much as four times a day. Hinkles explained that, despite the figures looking good on paper, the reality was that much of that traffic was connecting to flights in Manchester. With services from Manchester massively reduced, the traffic just fell off a cliff.
Manchester Glasgow was a different story. Although the demand hasn’t been affected so much by COVID, the fast train service was a strong competitor, and ultimately put the airline under too much pressure.
Another market that is seeing a lack of Loganair is that between Cardiff, Edinburgh and Glasgow. Hinkles said that demand on these routes was down 85 – 90% and that the service just couldn’t be sustained. Added to this, easyJet placed a large amount of capacity on Bristol to Glasgow and Edinburgh; its proximity to Cardiff has served to draw even more of Loganair’s traffic away.
Need to act fast
Although there are clearly a plethora of reasons that a route might not work out. Hinkles was clear on one detail. The financial pressures on the industry overall mean that unprofitable routes need to be acted upon, and fast. He said,
“The margins in the business have become so thin over the last few years, you can’t expect the core of your business to keep funding something that’s loss-making for really any appreciable period of time. I think that’s pretty much the same across the whole industry now.
“Gone are the days when you could say, over here we’re making so much money, it’s all right, we don’t need to deal with the problem over there just yet. You do have to act quickly.”
Despite having to make some tough business decisions to cope with the COVID crisis, Hinkles was positive about the future of Scotland’s airline. He was upbeat when talking about the future fleet renewal and says that the airline is already making plans for a better summer 2021 season.
Have you flown Loganair? Which routes should it focus on next? Let us know in the comments.