Loganair’s chief executive has weighed in on the future of the airline industry, suggesting that Covid-caused changes to business and holiday travel will shift demand to smaller planes flying shorter distances – something which the business is well prepared for.
Speaking to the Aviation Club of the UK, Jonathan Hinkles began by eschewing any mention of Air Passenger Duty, traffic rights after Brexit, or lockdown restrictions, noting that “I suspect many people are bored of listening to airline bosses’ relentless calls for government action and support”.
He did however have one plea to those at all levels of government, to stop using the phrase that ‘we’re working at pace’, adding that it would definitely be top of a video call bingo card.
“As a business, our key for the next 12 to 24 months will be to differentiate between those strands of work which will naturally fall away as we move into the re-building phase, and those which will continue with us as part of a re-cast long-term future,” Hinkles stated.
He explained that regional air services offering onward connectivity at Heathrow – linking points such as the Isle of Man and Teesside, which Logainair will begin to link with Heathrow on 8 March – will be very much part of that future.
“Much is said of the staycation effect, pent-up demand for leisure travel and how UK domestic tourism will lead the recovery from the pandemic,” commented Hinkles. “At present, there’s no clear sign of that happening, despite what look to me to be some fairly optimistic headlines – it’s just too early to tell.”
He went on to say that what is noticeable by its absence is talk of the future size and shape of the business travel market – which is, of course, hugely important to so many airlines.
“Our view is that this will be changed for good,” said Hinkles, noting that the Aviation Club meeting he was adressing was via Zoom.
“This means that we’ll see a smaller market for business travel in future, but the need for frequency, connectivity and day return capability will be just as important.
“And probably more important, to be honest – the changes to work-life balance and the hotel sector facing a customer confidence crisis of Covid safety just as the airline sector has – will lead to reticence about those long trips away from home that had become a way of life for so many before this virus emerged.”
But while the business travel market will be smaller in future, “you can’t build a submarine from home, and industries like construction, healthcare and manufacturing industry must still depend on hands-on capability that will drive travel patterns”.
Hinkles conceded that for the likes of consultancy, audit and accountancy, IT, retail and insurance, a significant portion of business has shifted to on-line platforms – and is going to stay there.
“These signals should be a wake-up call to anyone seeking to pile capacity into the UK regional market.”
Loganair’s plan to focus on regional aircraft with 70 seats probably as an upper-most limit, in order to maintain the span and frequency of the current route network.
“We’re continuing to work to renew simplify our fleet – around ATRs and Embraer 145s as our larger aircraft – but firmly staying within a space which allows us to provide solid frequency of service in our chosen markets with the right size of aircraft, and also to serve the growing cargo market in which we see potential,” Hinkles explained.
He also predicted a step-change in supplier relationships, noting the importance of loyalty.
“There are some who have abjectly not risen to the challenge, and have tried to turn their own problems into their customers’ problems – you can’t take that approach; a relationship on that basis will not last.
“Those suppliers who treat their customers as a cash machine will not see our working relationships continue beyond the point where we can find any alternative.”
Hinkles also spoke of supporting Loganair’s staff through the last 12 months,
“Even where redundancies have sadly become necessary – and we were the last major UK airline to start such a programme only when we saw no other option – our people have tackled this in the best of faith,” he said.
“There is a further moral duty which the chief executive of the day of Loganair must carry – almost a burden of history and as guardian keeper of certain social obligations.”
With the airline’s 60th anniversary coming next February, this belies a sense of service to the communities which rely on the firm for air links.
“We cannot forego that corporate DNA, but must, at the same time, keep looking to the future too.”
Hinkles cited the decision in late 2016 to move away from a franchise relationship with Flybe and plough a path as an independent airline, working with key partners like British Airways.
“With hindsight, we’re heartily glad we did what we did, when we did,” he said. “The months that followed proved Bob Crandall’s maxim that this is a ‘nasty, rotten business’, but even so, I can’t begin to imagine what would have happened if we hadn’t.”
He added that investment in systems, networks and brand identity have proved invaluable to survival right now.
“Our work in recent years to diversify Loganair’s business, not only geographically but also in terms of cargo versus passenger or charter versus scheduled has also proven crucial.”
Hinkles said that Loganair will be moulding together the former Flybe routes which are now part of its network to shape a “sustainable, defensible” post-Covid business.
“Across the market as a whole, we rapidly expect to see far fewer big aeroplanes flying UK domestic routes, particularly between the regions – they simply won’t be able to do this at the frequency levels needed to sustain the markets.”
The environment will be a key social responsibility factor for the airline too.
“Loganair is participating in no fewer than three key future flight projects, and our inter-isles engineering base at Kirkwall in the Orkney Islands will be playing host to both electrical and hydrogen-powered flight tests in the coming weeks after lockdown,” he added.