LOGANAIR has warned that it expects to make a loss in the current financial year due to its recent rebranding and the “unsustainable” competition with Flybe on routes to and from Shetland.
The airline hopes to make an announcement next week on a new fare structure for flights to the isles after Flybe withdraws from the routes from Monday.
Loganair said it has taken an advance loan of £3 million from shareholders in addition to renewing bank facilities to counter its financial pressure.
In September the airline broke away from franchise partner Flybe to ‘fly solo’ for the first time in 25 years – but its former colleague joined forces with Eastern Airways to go into direct competition on routes connecting Shetland with Aberdeen, Edinburgh and Glasgow.
Loganair rebranded at the same time and invested in a customer contact centre in Glasgow.
But despite cheaper fares being offered on the Shetland routes, low demand meant that many Loganair and Flybe flights were departing with few passengers on board – leading to the latter deciding in December to cut its losses and pull out.
“As a result of the rebranding, start-up costs of new contracts and the advent of competition on a number of routes from September 2017, Loganair expects to be loss-making in the 2017/18 financial year,” chairman David Harrison told shareholders.
“To safeguard our ongoing programme of investment, existing facilities with Clydesdale Bank have been renewed, and Loganair’s shareholders have advanced a £3m loan.”
Loganair also reported an 11 per cent decrease in pre-tax profits to £3.06 million for the year ending 31 March 2017.
There was, however, an eight per cent increase in turnover to £103 million, and an 8.6 per cent boost in passenger numbers to a record 765,091.
It also said that during the last financial year there was an increase in punctuality, with 80 per cent of flights leaving within 15 minutes of schedule to see Loganair rise nine places to No.3 on the UK airlines punctuality league table.
Managing director Jonathan Hinkles added: “We have made a successful transition from franchise partner to operating under our own brand, and we are delighted with the excellent customer reception of our new product and branding within our core markets.”
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