• Wed. Jun 22nd, 2022

British airline industry should back out of evasive maneuvers | Nils Pratley

ByKimberly A. Brochu

Jun 14, 2022

OOnly one of three airline chief executives turned up for questioning by MPs on the business select committee on Tuesday, in what we can consider the industry’s latest planning failure. It was also a shame because one of the absentees, easyJet’s Johan Lundgren, who had the lawful excuse of illness, might have been asked if he stood by that statement he made four weeks ago.

“We have transformed the airline during the pandemic, allowing us to emerge with renewed strength, backed by a product, network and service that customers truly value,” he trumpeted alongside the half-year results.

Whoa, whoa. This self-assessment now reads like spectacular hubris. In the cancellation stakes, easyJet appears to have been beaten only by British Airways (BA), but the low-cost airline gets a special mention for cutting so many short-term flights. BA, at least, seems to have canceled weeks, and sometimes months, in advance.

No one, of course, should claim that there is a single cause for the disorderly renaissance of aviation. There’s some blame to be had – and much of it lies with the airlines. Some airports and ground handlers have been shocked to find the poorly paid staff they laid off during the pandemic are unavailable for rehiring – some have found jobs in supermarkets or Amazon warehouses.

There is also, perhaps, a Brexit angle as the pool of migrant workers has shrunk. Administrative hassles should not be ignored either. Lundgren’s replacement, Sophie Dekker, said easyJet had a small army of employees seeking the references from old jobs needed to secure airside passes for new hires, a process that took 10 weeks but now lasts up to 14. air traffic controllers and we can see how the problems are getting worse.

Airlines could, however, help themselves by being more direct. BA business leader Lisa Tremble, replacing chief executive Sean Doyle (too busy, apparently), snuck in to avoid saying laying off 10,000 staff during the pandemic hadn’t helped the process. recovery. “I’m not saying there’s no connection,” she said at one point. Come on, the ‘adjustment’ may have been commercially sound – BA was losing money at the rate of £20m a day at the low, and the UK withdrew furlough support sooner than some others European countries – but you can always join the dots.

The need for ease of use, however, is most evident in communicating with the traveling public. Operational disruptions are occurring, but clumsy compensation procedures and failure to uphold consumer rights, as alleged by consumer association Which?, are inexcusable. This part should be the easiest to repair.

FirstGroup’s first dividend in 10 years

Here’s a sight FirstGroup shareholders haven’t seen in 10 years: a dividend. At £8m it’s not huge, but it arrived around six months earlier than the bus and rail company had previously suggested. The timing is also good as one potential bidder, Miami-based fund I Squared Capital, is still lingering behind the scenes with unclear intentions after having its offer of up to £1.23bn rejected the previous day. last week.

There’s a price for everything, but the case for FirstGroup’s independence should be bolstered by a financial report suggesting much-desired stability was finally in sight. Earnings slightly exceeded expectations last year and the post-Covid recovery is underway. Passenger volumes at First Bus have returned to 76% of pre-pandemic levels. Meanwhile, the Great Western rail franchise has been converted to one of these newer, lower-risk management contracts.

Cue, too, a chorus of “modal shift”, the transport industry’s favorite refrain about how public transport in the UK is at “an inflection point”. There is something in the idea. Railroad contracts are a better way to run the system than the rotten franchise setup of bids and hopes for the best. And the government has earmarked £1bn of funding for its national bus strategy.

As always with the transport sector, the gap between hope and reality can be wide (especially when the current government sits in the middle), but it is only right that FirstGroup, after its decade of crises and conflicts without dividends, deserves to be seen with fresh eyes. All US operations were sold, removing complexity and cleaning up the balance sheet. There are opportunities for growth after the reset. The services of a US private equity fund are not required.