Aurigny returns first spring profit in decade
GUERNSEY’S airline has posted its first spring profit for more than a decade, after reducing its costs by 14.5% over the first six months of the year.
Aurigny managed to turn a profit in all three months of the second quarter, as it reduced headcount and renegotiated contracts with suppliers.
Chief executive Nico Bezuidenhout said the steep rises in global fuel prices since the Russian invasion of Ukraine had been mitigated by agreeing the price of half the airline’s fuel 12 months in advance.
‘It’s our first quarter two profit for more than a decade,’ Mr Bezuidenhout said.
‘We are proud of this achievement but the work isn’t done. We’ll only be happy when we’re fully in profit.’
Aurigny has committed to turning an annual profit from 2023 onwards and does not expect to do so in 2022, despite the recent results.
The first quarter of the year saw 18.5% fewer passengers and 13.2% fewer flights than the same period in 2019 – the last year in which operations were not affected by the Covid pandemic.
However, the recent upturn has meant the airline halved its January to June losses in 2022 compared to 2019.
All of the routes operated by Aurigny contributed positively to the company’s overheads, he said, and 10% of passengers travelled on its new routes.
Mr Bezuidenhout said one of its key initiatives was an interlining agreement with British Airways, which is now live and which the company will soon be marketing.
Another interlining agreement has been completed with Emirates, which he described as being ‘in the testing phase’.
The advantages of these arrangements included lower flight costs and passengers effectively being insured against missing connecting flights due to local delays.
‘It’s also useful to have Guernsey’s brand featuring on the drop down lists of British Airways’ and Emirates’ websites,’ he said.
Another measure which has reduced costs – and the airline’s carbon footprint – has been to fly a full ATR aircraft rather than a half-full Embraer, when bookings have allowed.
Aurigny is ‘evaluating the business case and assessing the right option’ in regard to whether to keep the jet as part of its fleet, he said.
‘If the business case supports a replacement of the jet – with ATRs, for example – then we would sell the Embraer in the market. That business case will come to a conclusion in the next two months, at which time we will present it to the shareholder [the States’ Trading Supervisory Board] and it will be made public.’
He said costs and passenger needs would be factors in that decision, but the ability to accommodate affected staff was also an important consideration, in light of significant headcount reductions already having taken place.
‘We wouldn’t necessarily want to cause more heartache and pain to employees going forward,’ he said.
What would a ;longer runway achieve?'
AURIGNY’S management have questioned the benefits of extending the runway.
Chief executive Nico Bezuidenhout warned that attracting a low-cost carrier into the market would not necessarily reduce ticket prices.
‘It doesn’t follow necessarily that a low-cost carrier charges lower fares,’ he said.
‘It depends what competition that low-cost carrier is facing. We would then have to decide how we would respond to it and how that affects the island’s overall connectivity.’
However, he also questioned whether a runway extension would attract such a competitor in the first place.
‘Is it the absence or presence of a longer runway that fundamentally determines whether or not a low-cost carrier will operate into this market?’ he said.
He gave the example of the Isle of Man – also a Crown Dependency with a population similar to Guernsey’s – where the runway was extended in 2009, attracting one low-cost carrier.
‘However, that has not had the desired effect,’ Mr Bezuidenhout said.
Between January 2008 and May 2022, air travel costs in the Isle of Man increased by 3.3% per year, over and above inflation. The equivalent figure in Guernsey was 3.1%, he said.
Aurigny chairman Kevin George also questioned the value of Guernsey investing in such a capital project.
‘What are we trying to solve by extending the runway?’ he said. ‘Is it lower fares? Is it more connectivity?
‘Because there may be other solutions that are less expensive to the States than paying for a runway extension here. For me, it’s a solution looking for a question.’