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States-owned airline plots 'path to profitability’

States-owned airline plots 'path to profitability’

Tuesday 14 September 2021

States-owned airline plots 'path to profitability’


Aurigny’s management have announced a three-pronged approach to breaking even by 2023, with the airline currently needing to be recapitalised to the tune of £46.8m.

The announcement comes as the States-owned airline's shareholder - the States Trading Supervisory Board - yesterday published a policy letter to 'recapitalise' Aurigny's debt.

Aurigny’s accumulated losses between 2015 and 2020 and its projected loss for 2021 total £72.6m, of which nearly half – £30.6m – has arisen due to the impact of Covid-19 on travel.

Another £16.3m is attributed to the operation of Alderney’s lifeline services, and a further £5.3m is due to ‘writing down’ the value of its aircraft, mostly as a result of the pandemic.

To avoid any further government loans and to "turn debt into equity”, CEO Nico Bezuidenhout has announced Aurigny’s first "path to profit", a strategy to tackle unnecessary costs and ultimately break-even.

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Pictured: Mr Bezuidenhout’s media presentation included a look back to when Aurigny was last profitable in 2007.

Aurigny will aim to provide better travel options through partnerships and codeshares, boost tourism through Visit Guernsey, and work to simplify a mixed fleet of aircraft.

“I have never in my life seen an airline that is this small with so many aircraft types,” said Mr Bezuidenhout, citing the three different types of aircraft currently in operation.

He alluded to selling the Embraer jet from and having all the airline’s routes operated by four ATR 72s. 

It was also revealed that Alderney’s runway, as part of a major refurbishment, could be extended to allow for the ATRs to operate the lifeline service there. This would see the Dorniers discontinued: “all indications are that it is in the financial interest of both Alderney and Guernsey," said Mr Bezuidenhout. 

The expense of running a complex fleet comes from having to hire a different crew for each plane. When asked if reshuffling could lead to job losses, Mr Bezuidenhout said: “further reduction of fleet is unlikely to make an impact on staff because we’ve taken the pain already.” 

He was referring to the 18% loss of Aurigny staff since the beginning of the pandemic, and argued that crew would be offered the chance to jump to a different aircraft if the Dorniers were removed.

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Pictured: “The overarching strategy is about doing more with less, through simplification and leverage. With a simplified fleet not only is cost reduced, reliability and dependability are improved,” said Mr Bezuidenhout.

Reduction of fleet aside, the strategy focuses heavily on increasing passenger numbers and offering more destination choice.

One action is already underway, with Aurigny increasing its partnerships with other airlines to offer more routes. Recently Aurigny announced a codeshare with Blue Islands to support its Guernsey, Jersey, Birmingham and Exeter routes, but additionally, Aurigny has partnered with Eastern Airways for its Southampton route and will soon be announcing a partnership with Logan Air too. 

“The purpose is to increase overall air connectivity for Guernsey. The partnership approach will complement Aurigny’s own route initiatives, which includes the addition of the Birmingham and Exeter routes in 2021 and Dublin in 2022,” said Mr Bezuidenhout.

“We are aiming to strike the appropriate balance between the high-frequency London-focused schedule needs of Guernsey’s Finance Sector, the medical travel needs of Islanders and the desire for varied travel destinations of outbound leisure travellers.”

Mr Bezuidenhout said he hopes that the Guernsey public will start benefiting from the LoganAir partnership at the beginning of 2022.

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Pictured: Aurigny currently has two Dornier 228s that support Alderney’s lifeline route in and out of the island.

It’s hoped that more routes and fuller flights will increase profit, which in turn could allow for the airline to reduce flight costs and get more people flying.

“The pecking order is such that first and foremost any cost savings that we generate goes to making sure there are no more losses,” said Mr Bezuidenhout.

“The moment you reach a financial break-even and you now start getting marginal profit, what we will then do is reduce average fares,” he said.

These partnerships will work in tandem with the local tourism industry, to offer reduced flights and hotel rooms through the shoulder seasons, increasing tourist numbers and filling empty seats. 

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Pictured: “The new air policy reaffirms Aurigny’s role in safeguarding the Bailiwick’s essential air links, which has enabled STSB to clearly set out to the company’s board what the States as shareholder expects of the airline,” said the President of STSB, Deputy Peter Roffey.

To best place the States-owned airline as it embarks on this new ‘path to profitability’ its governing body is asking the States Assembly to undertake a recapitalisation - essentially taking on and paying off the airline's debts. 

The States make provisions in its annual accounts to cover the airline’s losses from the previous year. The Assembly will be asked to ringfence this money to pay off Aurigny’s losses up until the end of 2020.

“The formal transfer of funding set aside to cover Aurigny’s trading losses will put the airline on a sound financial footing as it looks to recover from the Covid-19 pandemic,” said Deputy Roffey.

“Aurigny’s business strategy is now looking to return the company to profitability within the next two years, which is very welcome.”

With all this in mind, Mr Bezuidenhout said the forecast for 2022 is a loss of £1.4m, followed by a marginal profit of £0.3m in 2023.

“There is no intention to ask for any more capital from the States of Guernsey and these steps support our business to achieve financial sustainability,” he said.

“Our business will achieve a break-even by 2023.”

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Posted by Vincent Cockett on
Waken up and smell the coffee. This is all a spin to get extra money and there will be another next year and the year after and ...........Householders would be brought to Court for non payment, if they managed their bills like that.
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