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Loganair: Scotland's airline should attract buyer interest after strong recovery

Analysis

The UK regional airline Loganair is thought to be interested in acquiring slots at London Heathrow Airport from the bankrupt Flybe. Loganair currently operates just one route from the UK's biggest airport, to Isle of Man Ronaldsway Airport. The airline launched that route in late 2020.

Founded 61 years ago, on 1-Feb-1962, Loganair spent much of its more recent history as a franchise operator - until the end of an agreement with Flybe led to its launch of operations under its own brand in 2017. It grew rapidly until the COVID-19 crisis, when it showed resilience during the pandemic.

Loganair's capacity has recovered strongly, reaching a projected 188% of 1H2019 seat numbers in 1H2023. With the largest fleet among UK regional airlines, more than three quarters of the seat capacity of the self-styled 'Scotland's Airline' touch Scotland at one or both ends of the route.

Its owners have been looking to sell the airline since Oct-2022, and should have little trouble in attracting potential buyers.

Summary

  • Loganair began operating under its own brand in Sep-2017.
  • The airline grew rapidly until the COVID-19 pandemic; nevertheless it showed resilience in the pandemic and has recovered strongly.
  • Loganair is predominantly a domestic operator.
  • It is the third biggest domestic UK airline by seats, and has the largest fleet among UK regional airlines.
  • Airports in Scotland are the origin and/or destination for 77.5% of its seat capacity.
  • Loganair returned to profit in the year to Mar-2022.

Loganair began operating under its own brand in Sep-2017

Loganair has flown under its own brand since Sep-2017, having previously flown as a Flybe franchise operator.

The airline codeshares with British Airways, carrying the BA code on several routes to the Scottish islands, and with KLM and the Jersey-based regional airline Blue Islands.

Loganair grew rapidly until COVID-19…

Loganair pursued an aggressive expansion strategy after launching operations under its own brand.

It increased annual seat capacity from 1.2 million in its first full year, 2018, to 1.6 million in 2019 (an increase of 29.5% year-on-year), according to data from OAG/CAPA.

In the winter 2019/2020 season its seat count grew by more than 65% year-on-year and it scheduled growth for summer 2020 of more than 30%.

The COVID-19 pandemic dramatically altered those plans.

…yet showed resilience in the pandemic

Nevertheless, the 38.7% drop in Loganair's annual seat capacity in 2020 was considerably less dramatic than the 57.9% collapse in capacity for all of Europe.

Loganair benefited from Flybe's demise in Mar-2020, which provided an opportunity to take on some of its routes.

In addition, domestic regional routes typically performed better than other routes in the pandemic, since aviation is often the only viable mode of transport to maintain connectivity in remote areas.

The airline's capacity has recovered strongly

Not only did Loganair suffer less of a capacity decline in 2020, also its capacity has recovered impressively from the pandemic.

Loganair grew capacity by 54.8% in 2021 and by 51.3% in 2022.

Its 2022 seat numbers were 143% of their 2019 level, compared with 82.1% for all Europe capacity.

For 1H2023, Loganair's capacity is currently scheduled to be 20.7% higher than in 1H2022.

This is 87.6% higher than in the equivalent period of 2019, while all Europe 1H2023 capacity is projected at 9.1% below 1H2019.

Loganair: annual seat capacity/growth, 2013 to 2023* (projected)

Loganair is predominantly a domestic operator

Loganair is predominantly a domestic operator, with 79.2% of its seat capacity flying within the UK in the week of 6-Feb-2023.

This percentage is projected to rise to 81.0% in the week of 3-Jul-2023, when 86 of its scheduled 116 routes will be domestic (note that both directions of a route are counted in these totals).

Among the 86 domestic UK routes this summer, 36 are wholly within Scotland, 38 are between Scotland and the rest of the UK, and 12 are between airports that are both located in the rest of the UK.

Among Loganair's 30 international routes this summer, 16 are to/from Scotland and 14 start/end in the rest of the UK.

The airline operates 12 of the international routes to/from Isle of Man Ronaldsway Airport, those accounting for 12.2% of Loganair seats in the week of 3-Jul-2023.

As a Crown Dependency, the Isle of Man is closely associated with the UK and would further increase Loganair's dependence on the domestic market if these routes were not classified as international.

Other international destinations, all within a fairly short distance of Scotland/northern England, are Dublin, Oslo, Esbjerg, Stavanger and Bergen.

Loganair: network by region, week of 3-Jul-2023

Region

Routes

Seats

Percentage of seat capacity

Intra-Scotland

36

19,860

33.4%

Scotland-rest of UK

38

22,350

37.6%

Rest of UK-rest of UK

12

5,904

9.9%

Total domestic

86

48,114

81.0%

International from rest of UK

14

7,434

12.5%

International from Scotland

16

3,852

6.5%

Total international

30

11,286

19.0%

Total touching Scotland

90

46,062

77.5%

Total

116

59,400

100.0%

Loganair is the third biggest domestic UK airline by seats

Loganair ranks as only the 21st largest airline by total seats operating to/from/in the UK

However, it ranks third in the UK domestic market (rankings based on schedules filed for the week of 3-Jul-2023).

Its 11.2% share of UK domestic seats is some way short of easyJet's 48.1% and British Airways' 26.6%, but its network focuses much more on smaller regional routes.

UK domestic market: airlines ranked by seats, week of 3-Jul-2023

Rank

Airline

Seats

Seat share

1

easyJet

206,868

48.10%

2

British Airways

114,330

26.60%

3

Loganair

48,114

11.20%

4

Ryanair UK

27,972

6.50%

5

Aer Lingus

24,220

5.60%

6

Eastern Airways

8,220

1.90%

It has the largest fleet among UK regional airlines

Loganair's fleet is the sixth largest among UK airlines by number of aircraft in service, according to the CAPA Fleet Database.

It is the largest among UK regional airlines.

UK regional airlines, ranked by number of aircraft

Rank

Airline

Widebody

Narrowbody

Other

Total

1

Loganair

0

0

37

37

2

BA CityFlyer

0

0

20

20

3

Eastern Airways

0

0

10

10

4

Isles Of Scilly Skybus

0

0

7

7

5

Blue Islands

0

0

5

5

6

BA Euroflyer

0

3

0

3

7

Aer Lingus UK

1

1

0

2

8

Hebridean Air Services

0

0

1

1

Loganair's average fleet age is 22.4 years

As at 6-Feb-2023, Loganair's fleet totals 40 aircraft (37 in service), consisting of 15 Embraer regional jets, 15 ATR turboprops (seven ATR-42s, eight ATR72s), five Saab 340 turboprops, three DHC small turboprops and two Britten-Norman piston engine aircraft.

The (mainly leased) fleet has an average age of 22.4 years, with the Britten-Normans more than 35 years old and the Saabs more than 30 years old.

Loganair plans to replace the Saabs with ATRs.

According to the CAPA Fleet Database, Loganair has no aircraft on order.

Of Loganair's seat capacity, 77.5% touches Scotland

Loganair styles itself as Scotland's Airline, and more than three quarters (77.5%) of its seat capacity is scheduled to operate to/from/within Scotland in the week commencing 3-Jul-2023.

Its most important airport by seat numbers in early Jul-2023 is Aberdeen, accounting for 13.5% of its seats, followed by Glasgow (9.9%) and Edinburgh (8.8%), although Southampton (6.3%) is fourth.

Its claim to be Scotland's airline is perhaps most justified by its importance in providing connectivity to many of the country's more remote areas, particularly the islands, where it serves airports such as Stornoway, Barra, Tiree, Benbecula, Kirkwall and Sumburgh.

Loganair returned to profit in FY2022

According to its accounts filed at the UK's Companies House, Loganair made a pre-tax loss of GBP5.6 million in the year to Mar-2021, but it returned to a positive result in the year to Mar-2022, with a profit of GBP5.0 million.

In addition to its scheduled passenger operations, Loganair has expanded its charter and contract services since the COVID-19 pandemic.

These activities, which provided 20% of its turnover in the year to Mar-2022, include providing air service to Royal Mail and carrying sports teams to away matches.

The airline should attract interest from potential buyers

Loganair's owners, Stephen and Peter Bond, said in Oct-2022 that they were looking for a buyer for the airline.

Any new owner would likely look to bring in a younger fleet, but Loganair's growth and position in the UK regional market should be generating significant interest among potential buyers.

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