Aurigny's losses reduce but turbulent times ahead

Monday 15 July 2019

Passenger numbers fell and passenger revenue rose as Aurigny operated at a £4.4 million loss last year.

Although the States-owned airline's financial performance was an £800,000 improvement on the year before, a "cautionary note" has been sounded for 2019. That is mainly due to subsidies given to the airline's competitors which Aurigny says has created an uneven playing field.

"The year showed an improved financial performance where we were approaching breakeven on our Guernsey to UK routes and showed some improvement on the Alderney losses," Aurigny said in a statement. "However, these results were set against an airline environment where routes were stable and quasi open skies had little or no impact.

"The 2018 report and accounts are not indicative of the current climate and while Aurigny are happy to operate in an Open Skies environment, the fact that this is not on a level playing field [and] heavy subsidies on competing routes sets us at a disadvantage. 

"Competition on London routes [through Flybe's States-backed Heathrow trial service] will have a negative financial impact in 2019 as is already apparent and we will be hit harder if further subsidies are given to competing airlines."

Aurigny hopes to have another opportunity to compete for slots ar London Heathrow in the future if the subsidy of that route continues. 

The States-owned airline said 2018 was a relatively stable year in terms of the competitive landscape and regulatory environment. However, during the course of the year, Aurigny said a number of policies, issues and trends had emerged which will have a significant impact on their operating environment in 2019. 

1) The adoption of an “Open Skies” policy by the States of Guernsey.

2) The provision of significant financial subsidy to our competitors, both directly by the States and indirectly through Guernsey airport’s waiver of certain charges to our competitors. 

3) Increasing financial fragility of the smaller regional airline market in the face of competition from the major players such as Easyjet.

4) The potential of a “no deal” Brexit and with it a possible period of airline disruption on the UK mainland which will impact service levels to and from Gatwick for a period of time. 

Aurigny Chairman Andrew Haining said: "All the above contrive to generate greater uncertainty in terms of our ability to deliver the level of service our customers rightly expect at the best possible price, whilst still achieving our overall financial target of breakeven."

Passenger numbers decreased by 11,428 in 2018 but revenue increased by £83,000.

"In 2018, Aurigny’s turnover was £45.5m (2017 - £44.7m) generating positive EBITDA of £2.3m (2017 - £0.8m)," said Mr Haining. "This substantial improvement in operating performance reflected continuing management focus on cost and productivity improvements. The numbers reflect a full year improvement in the contribution from our UK routes following the closure of the London City route. 

"We are always looking for ways to improve our service through innovation and we were extremely grateful to the States for its approval of our new ATR72-600 aircraft purchases. This will make our fleet one of the youngest of regional airlines in Europe. The correlation between the age of fleet and reliability in performance is clear and I hope these new aircraft, arriving later in 2019, will equip us to deliver improved reliability and better access in low visibility."

"Our reported loss for 2018 improved to £4.4m, down from £5.2m in 2017. Excluding FRS1024 adjustments, our loss this year improved to £3.6m (2017 - £6.3m). Of this loss, £2.8m was attributable to our Alderney routes and £0.4m to overdraft interest (an overdraft provided by the States of Guernsey) leaving a loss of £0.4m attributable to our Guernsey – UK routes and other activities."

Aurigny said the Alderney routes "remain a financial challenge" and, due to the delayed PSO and revised tender process, they envisage no change in 2019.