The CILT(UK) Scottish Region Annual Aviation Event:
"Loganair - Scotland's Airline" by Scott Grier, OBE, Chairman, Loganair. Glasgow meeting of 28th March 2006

Mr. Grier began his talk on Loganair with a very brief history of the company from its inception in the early 1960's when it pioneered air services to many of the Scottish Islands.

In 1967 the air ambulance services began and the following year the company was acquired by the Royal Bank of Scotland. During the late 1970's the company expanded with the transfer of some routes from British Airways and larger aircraft were acquired. In 1983 British Midland acquired a controlling interest and further expansion followed.

However, during the 1990's reorganisation of British Midland's services saw the transfer of Loganair's cross border routes to other airlines within the group. In 1994, Loganair became a franchise operator and aircraft were finished in the British Airways livery. In 1996, a further transfer of internal Scottish services took place, and in 1997 Scott Grier led a management buyout of the remaining operations and six aircraft, the new company focusing on services to Orkney and Shetland as well as the West Coast of Scotland.

Mr. Grier then looked at the current operations of the company. On 31st March 2006, after 39 years of providing the air ambulance service, the company ceased to operate these services as the contract was awarded to a different airline. This has meant that some changes to operation have had to be implemented. The air ambulance service was initially provided using Britten Norman Islander aircraft and later a helicopter service was added. During the time Loganair has operated the air ambulance service, 21 babies have been born on aircraft and they have provided 24-hour cover, 365 days a year continuously.

With the loss of the air ambulance contract, there is an impact of the Orkney and Shetland services as the air ambulance service underpinned the passenger service and without the economies of scale thus achieved, the cost of passenger services has increased significantly. The company has been operating to many small island communities and providing a lifeline service and although the population of some islands as declined over the years, the fact that there is a service has kept many of these communities alive by providing regular links.

Mr. Grier pointed out that Public Service Obligation contracts have to go through a tendering process and the company is presently awaiting the outcome of the tendering process for the Glasgow - Barra and the Glasgow - Campbeltown and Tiree services. Loganair has been operating to Barra since 1975 and Campbeltown since 1977 and are hopeful that they will be successful in their bids for these services.

The Barra service in particular presents a particularly unique operational challenge in that the island's airstrip is in fact the beach and services operate "subject to the tide". As planes land on the beach, specialist aircraft are needed and Loganair has two De Havilland Twin otter aircraft to provide the service. These are the only aircraft certified in the UK for such operations and have been heavily modified and rebuilt to meet the required CAA requirements.

The tendering process can be a "bit of a lottery" in the context that operating air services in Scotland requires airlines to cope with often adverse weather conditions and operate from basic airstrips. These aspects make the true costs difficult to calculate for operators other than the incumbent airline and this could lead to a situation whereby the existing operator loses the contract to an airline that has under estimated the costs.

An interesting development is the Scottish Executive's recently announced initiative to provide "aid of a social nature". Loganair has developed a comprehensive scheduled network and timetable serving the Highlands and Islands, but high cost has been a concern. Loganair has worked to get costs down and has passed cost reductions on to passengers in the form of discount fares. However, the travelling public still believes that fares are unacceptably high compared with Ryanair or Easyjet, but this is an unrealistic comparison in that Loganair's aircraft have a much shorter flying day due to the nature of the operation than the larger companies with large aircraft on relatively lengthy routes.

The fares reflect the costs and high fares can inhibit passenger growth, but to reduce fares in the Highlands and islands requires government intervention. In 2003 agreement was reached between the Finance Minister, the various political parties and Jim Wallace, the MSP for Orkney that fares should be reduced in the Highlands and Islands and some £12 million was allocated for this. However, a Hitrans report suggested that all air services in the Highlands and Islands should be operated under a Public service obligation contract, but the costs of doing so had been underestimated.

Earlier this year, Tavish Scott, the Scottish Minister for Transport and Telecommunications proposed an "aid of a social nature" subsidy whereby qualifying passengers would receive a 40% discount on their air fares on designated routes. This scheme covers the residents of Orkney, Shetland, the Western Isles and remote parts of the Scottish mainland. By giving the subsidy to the passengers, rather than an airline, passenger demand will increase and new business generated. Additionally, passengers can choose which airline to travel with and this may lead to increased competition on the qualifying routes. Mr. Grier said that Loganair "will have to be on it's toes" as there will be opportunities for competing airlines.

Historically, Scotland has not been a good area for small airlines as over the last 30 years between 40 and 50 have come and gone and British Airways has admitted that it has lost money on some of their Scottish routes. However, Loganair has over the last 9 years been in profit and has seen turnover increase from around £5 million to £50 million and has had an increase in annual passenger traffic from 50,000 to 500,000 over the same period. Loganair has been a British Airways franchise partner during this time and this enables the company to take advantage of the support a large airline can offer.

Looking at the aircraft operated, the company currently has a fleet of 20 aircraft comprising 5 Britten Norman Islander's, two De Havilland Twin Otters, and 13 Saab 340's of which 4 are owned, the remainder being leased. By purchasing four Saab 340's, the company took advantage of favourable exchange rates and this has enabled costs to be kept down. Negotiating leases in Sterling instead of the more usual Dollar has also contributed to cost reductions and these measures have helped to reduce the fleet costs.

Mr. Grier finished his presentation by summarising the position Loganair is in and looking forward to a positive future. The company has experienced growth on routes it has taken over from British Airways and has improved service frequencies. It has invested in crew training and in aircraft and has introduced new services. An advantage of being a small company is that it can react quickly to market needs and can quickly take the decisions needed to grow the business and generate new traffic.

A lively question and answer session followed and many diverse questions were put to Mr. Grier who ably answered them all. The Scottish Region would like to thank Mr. Grier for addressing the meeting. Full details of Loganair's services can be found on their website (www.loganair.co.uk) along with details of the aircraft operated and a brief history of the company.

Report by John Fender.