Managing director of Loganair Jonathan Hinkles
After 25 years operating as a franchisee for first British Airways and then Flybe, Loganair is once again taking off as a standalone airline. Managing director Jonathan Hinkles tells Peter Ranscombe about the carrier’s lifeline services to the islands and its expansion into other markets.
It’s the calm before the storm at Loganair. The remnants of Hurricane Ophelia, the first major storm of the winter, are battering the Republic of Ireland and are due to start hitting Scotland later in the day.
Sitting in his office just yards from Glasgow airport, managing director Jonathan Hinkles looks like calmness personified. Sipping from a bottle of Diet Coke and appearing relaxed in his open-necked shirt, it’s hard to believe that a storm with the potential to ground aircraft is only hours away.
“We’re as ready as we can be,” Hinkles nods. “All the hard work was done on Saturday and we have plans in place. All we can do now is wait.”
Further down the corridor, the airline’s customer contact centre has been busy fielding calls from passengers and has been taking proactive steps to deal with questions on social media. Under the dim lights in the airline’s operations room, members of staff are tracking the movements not only of their own aeroplanes but also of the approaching storm.
Ophelia isn’t the only turbulence that Hinkles has had to face as the boss at Loganair. He’s currently enjoying his second spell with the airline, having joined in 2008 as commercial director before becoming chief operating officer.
He left in 2012 to join Virgin Atlantic and then returned in June 2016 as chief executive. Hinkles was in for a bumpy ride though as he slid into the pilot’s seat.
Loganair had come in for criticism over the reliability of the lifeline services it provides to communities in its heartland across the Highlands and islands and over the cost of its short-haul flights. “You know you’ve got a problem when your company is appearing in First Minister’s questions,” Hinkles says.
“Fortunately, Loganair had started to take steps to address those issues even before I was appointed. Maurice Boyle, our operations director, had already begun to turn things round.
“A large part of my job after I arrived back was to adopt a ‘Reagan-esque’ approach and get people to have confidence in their own abilities again. I also wanted to get people to look forwards instead of backwards – we’d become very good at reporting on yesterday’s problem instead of dealing with today’s situation so it didn’t turn into tomorrow’s problem.”
Hinkles also set about tackling a shortage of engineers in the company. He has reinstated an apprenticeship scheme that was axed three years ago as a cost-cutting measure.
“It’s a three-year scheme,” he explains. “It takes longer to train an engineer than a pilot. At Kirkwall, we tried recruiting engineers to go and work on Orkney, but we’ve found it better to recruit people from the local community who have experience in related areas, such as cars.”
Charting a smoother course for Loganair hasn’t been without its challenges though. Less than six months after Hinkles took the top job, Loganair’s spell as a franchisee for Flybe came to an end.
“There were a lot of factors at play,” he explains. “I felt we had solved the issues before we started renegotiating the franchise agreement.
“Flybe proposed new terms that would have involved us paying millions of pounds more each year. It just made no economic sense for us.
“Over a period of six-to-nine months, we reached the decision not to renew the agreement. I think it’s fair to say the board was split on the decision when we began discussing it, but by the end of the negotiations with Flybe it was clear to all of us and we were in agreement.
“I was one of the last people to come around to the point of view that we couldn’t renew. We made the announcement in November 2016 and we began flying again under our own banner on 1 September.”
The decision marks the first time in 25 years that Loganair’s passenger services would all run under its own brand instead of other airlines’ livery. Although Loganair traces its roots back to 1962 – when it was founded as an air taxi service run by the Logan Construction Company – the business as it is known today began to take shape in 1967 when it launched an inter-island service around Orkney, adding a similar network around Shetland in 1970.
Services between the Western Isles and the mainland had begun in 1964 and growth accelerated following British Airways’ rationalisation in 1975, with the flag carrier handing marginal routes over to Loganair.
In 1994, Loganair signed a franchise agreement with British Airways, dressing its planes in the larger company’s livery. That agreement was replaced in 2008 with a similar deal with Flybe, although Loganair continued as a “codeshare” partner for British Airways, allowing customers from around the world to book flights into the Highlands and islands, and allowing Highlanders and islanders to do the same in reverse, gaining access to the flag carrier’s global network.
“I think people forget that our relationship with British Airways began before our dealings with Flybe and that it continues today with our codeshare agreement,” Hinkles points out. “It’s a really important relationship for our passengers in the Highlands and islands.”
As the franchise agreement with Flybe drew to a close, Hinkles had to put all the pieces in place to allow Loganair to operate as a standalone airline again. Some changes were cosmetic – a red, black and white tartan was created to adorn the tailfins of the planes and the uniforms of their crews, while nine Harris tweed patterns were selected for the headrests on the seats.
Other changes involved operational considerations. Around 20 jobs were created, swelling the workforce to about 650 people. Ten of those jobs came in the customer contact centre in Glasgow, with a further five roles created in the commercial and marketing departments and four in the finance team, all functions previously carried out by either Flybe or its subcontractors.
“The Flybe call centre was in Serbia and, while it did a good job, it didn’t feel like the right thing to do if we were creating ‘Scotland’s airline’,” says Hinkles. “We looked at outsourcing the contact centre – and Scotland is a good place to outsource those types of functions – but we felt that even a few miles away instead of a few feet away was too far. I think we’ve proved that this weekend with the preparations for Ophelia – if customers have phoned us then we’ve had all the details here to hand.”
In total, between £3.5m and £4m has been spent putting Loganair on a standalone footing, with all the investment coming from the business’s existing cash reserves.
While Loganair was preparing to fly solo, Flybe unveiled a contract with Eastern Airways, which has seen the old and new franchise partners going head-to-head on some routes. Figures released in September by Loganair showed that two-thirds of the customers flying from Sumburgh on Shetland to Aberdeen, Edinburgh and Glasgow were using Loganair, with the remainder opting for the rival Eastern Airways-Flybe service.
Hinkles remains tight-lipped on the figures for similar services to Orkney and the Western Isles. Loganair provides ground-handling services for the Eastern Airways-Flybe partnership in Kirkwall and Stornoway and so he feels it would be “bad form” to discuss such things.
Creating an airline from scratch sounds like a tall order, but Hinkles has previous form in this area. He always had a passion for aviation and joined the industry in 1993 fresh from school; his plan was to work for two years before going to university. “But that never happened and never will,” he laughs.
Instead, he spent eight years at City Flyer, which became part of British Airways, before he and five colleagues set up Astraeus Airlines, which was backed by French venture capitalists, in 2001. The business was sold to Icelandic group Eignarhaldsfelagid Fengur, at which point Hinkles left to join John and Hugh Boyle in setting up the UK operations of Zoom Airlines.
“We had an aborted initial public offering in late 2007,” he remembers. “As we were going around the City doing the roadshow for potential investors, I kept seeing long queues forming outside branches of Northern Rock and wondered what was going on.”
Working with three start-ups clearly gave Hinkles the experience he needed to chart a course towards independence for Loganair. Now several weeks into the airline’s reincarnation, it looks like he’s steered a smooth course.
“The airline will remain profitable this year, although it won’t reach the levels of profit we hit two or three years ago,” he predicts. “That’s due to the investment that was made to solve the issues we faced, but also the weakness of the pound against the dollar, which pushed our costs up by 10%.
“Turnover last year broke through the £100m barrier and this year it will be closer to £120m. That’s thanks to a doubling of our work for Royal Mail, running two planes instead of four – we call the service to Orkney the ‘Amazon express’ because of all the online packages it carries – and because we’re running shuttle services for three oil companies from Aberdeen to Shetland.
“We’ve had some teething issues since September – like the long queues at Glasgow airport – but I think we’ve tackled those now,” adds Hinkley. “A lot of our staff live in the communities they serve in the Highlands and islands – so if we do anything wrong then we hear about it very quickly.”
Although Loganair may have branded itself as “Scotland’s airline” for several years, it feels like the newly-independent carrier is now growing into its slogan.