Aviation Tribune talks to Mark Darby, Chief Executive Officer of Aurigny Air Services, one of the longest serving regional airlines in the world.
Aurigny Air Services operates from a base in Guernsey in the British Channel Islands. The island is independently governed and the Channel Islands are closer to France than the UK. They are rugged and exposed to the elements yet in summer at times feel more like St Tropez. The old architecture is Norman French yet in modern glass offices beats the pulse of a world class offshore finance centre.
Can you briefly tell us about the past and present of Aurigny?
Aurigny was founded in 1968 by the Alderney based businessman, Sir Derrick Bailey. Aurigny is the French word for Alderney, and is pronounced “or-ree-nee.” Aurigny began operating inter-island, Alderney-Guernsey-Jersey, with Britten-Norman Islander aircraft and expanded the network to include the south coast of England and northern France. We began operating the larger, 18 seater Britten-Norman Trislander aircraft in the early 1970s and in fact still use three of these on our Guernsey to Alderney and Southampton legs, although they are due for retirement later this year. After years in private ownership, Aurigny was bought by Guernsey’s government in 2003 as a strategic investment to protect the island’s London Gatwick slots. The States of Guernsey did this after British Airways announced it was exiting the route. Aurigny flies to Gatwick six times a day on weekdays and five at weekends. To provide increased capacity on this route following Flybe’s exit, we bought a new, 122 seat Embraer 195, which entered service in July 2014. We also fly to London Stansted and London City, Manchester, Bristol, East Midlands, Alderney, Jersey (under a codeshare arrangement) Dinard in Brittany and in the ski season to Grenoble. The code share will end in March 2016 but we’ll continue to ground handle for Blue Islands. In May 2016, we will begin a new, year round service to Leeds Bradford and a seasonal Norwich service on Saturdays, from mid-May to mid-September.
Where do you see Aurigny in five years’ time?
Our shareholder, the States of Guernsey, has set us a target of breaking even by 2018 and we are gradually and successfully maximising our revenue and reducing our losses on all but our Alderney routes (which are separate from our “bottom line”). We also expect the Alderney routes, to Southampton and Guernsey, to be given PSO (Public Service Obligation) status and we will take part in the bidding process and hope to continue running them. We’ll continue to develop our route network in order to support the economic and social needs of the islands.
How would you describe your management style?
I’m results driven yet very much a people person. I’ve driven change but that’s only possible if you take the people with you. I get around the station and know my staff by name and that’s important in a place like Guernsey. Equally, so is being approachable and getting involved at the “coal face.” When aircraft have been delayed by fog and are late in, I’ve helped out on the ramp to make sure baggage is delivered to our customers as quickly as possible.
What qualities are needed in a modern airline CEO?
A good knowledge of all parts of the business and you need to be comfortable about getting into deep detail on all the technical aspects. Other qualities include: being flexible; able to seize opportunities; entrepreneurial and a good knowledge of the regulations when you’re the accountable manager.
Can you tell us some words about your staff?
Loyal, hardworking, friendly and customer focused. Many of our staff have worked for the company for decades, which demonstrates their loyalty and indeed Aurigny’s appeal as a great company to work for. We recently held an informal long service awards evening and it was great to meet and talk to staff from across the business. The maths are impressive. Between the 70 staff, out of 250, who’ve served with Aurigny for ten years or more, they’ve amassed an amazing working 1,370 years. Many of our staff go the extra mile for our passengers and work longer hours when our services are disrupted by bad weather. Fog, for example, is an issue in the Channel Islands, as are strong crosswinds.
We see that Aurigny has a wide range of destinations. What is the best performing route in terms of customer demand?
Gatwick outperforms all our other routes in terms of demand and profitability. Its popularity is understandable because it’s London’s second hub and is served by European and international carriers. It’s also a short train ride away from the capital which means it’s a popular choice with Guernsey’s large, offshore finance and business community. We are the sole operator on the route following Flybe’s exit in March 2014. Nevertheless, we offer value for money and we are mandated by our shareholder to offer 63% of our single fares to islanders at £69 or less, excluding APD.
The Channel Islands are certainly popular among the local and international travellers. Will Aurigny´s domestic and international operations continue to grow?
The market in Guernsey and Alderney is relatively small and static but of course we want more locals to fly with us. Our marketing budget and effort is principally targeted at growing our passenger base in both the UK and abroad. Our website is optimised so that when the keywords “flights” and “Guernsey” are entered, the Aurigny site is near the top of Google’s first page. This means we effectively attract overseas visitors and business people. We have an agreement with Hahn Air so that travel agents can issue Aurigny tickets. We’re beginning two new routes this year (Leeds Bradford and Norwich) and we will continue to explore expanding our route network. One idea we’re working on is using our E195 for a limited, high season, weekly Saturday service to a Spanish destination. This would be a first for Aurigny and indeed very few charter operators use Guernsey as a base for this type of service.
Are you happy with the infrastructure and infrastructure costs in the region? How would you like to see Guernsey Airport develop?
We have an enviable near 70% slice of the market share at our Guernsey airport base. The runway here was levelled and resurfaced two years ago which is helpful to all operators. At 1,463 metres, the runway is short, meaning that our E195 is the largest aircraft that can be used on it when filled to capacity with 122 passengers. Politically, calls to lengthen the runway never seem to go away, but we are happy with it as it is. Guernsey is an expensive island to operate in as staff costs, commercial rent and importing spares is expensive and this is unlikely to change, so it’s something we have to deal with.
How important is the role of Aurigny for the development of a region like the Channel Islands?
We are absolutely vital, given our sole operator status on the Gatwick and Alderney routes. We are an airline that’s technically owned by islanders and we’re here to serve them whether they be flying with us for leisure, business or for medical appointments. We are an economic enabler and in 2014 launched a new, weekday service to London City, at the request of Guernsey’s business and finance community. The route is proving popular with executives and load factors are increasing. Last year, we dry leased an ATR 42-500 and painted it in Aurigny colours, principally to serve London City.
Your current fleet consists of BN2s, Dornier 228s, ATRs and Embraer. Would any other aircraft type (like the 737 or Airbus 320) be suitable for your operation in the future?
Simply put, no, and this is because of the short length of the Guernsey airport runway. When selecting our first jet we did consider the 737 but there were payload issues operating into Guernsey. With the E195 we can operate it at its full capacity of 122 passengers, which is quite a common load factor, especially on Fridays and Sundays. The now ancient Trislanders will retire this year.
Is the Embraer 195 meeting your expectations?
Absolutely, and it also acts a great flag carrier for both the airline and the island of Guernsey. The E195 is proving incredibly reliable and popular with passengers for its cabin comfort and speed.
How is 2016 shaping up for Aurigny?
It’s early days, but we started the year strongly with our third consecutive Recommended Provider commendation from the consumer magazine Which? This means that we are independently recognised by their readers as a great sort haul/regional airline to fly with and the best in the UK and Ireland. Their feedback covers the whole customer experience from the cabin layout and seat comfort to our complimentary in-flight service and the friendliness and efficiency of our staff. Our key operational task this year is to transfer to an all Dornier fleet on our Alderney and Dinard services. We have two, used “classic” 228s and a brand new 228 NG. Reliability has been an issue with the classics but we’re getting to the stage where underlying technical issues are being sorted. Pilot training has been hampered but is steadily progressing. I’m absolutely positive the 228 will be the right aircraft for the routes it’ll serve and passengers already appreciate its speed and roomier cabin, compared with the Trislander.
Aurigny was founded in 1968. What is the key behind the success of Aurigny?
We’ve expanded extensively since 1968 but customer focus has always been a constant. In fact, one of the goals for 2016 is to improve our already personal and professional service. We’re known as “the islanders’ airline” because we always aim to get our passengers back home. Of course, we always adhere to strict operating procedures but unlike other airlines we won’t necessarily cancel a flight. Instead, we’ll delay until a “weather window” opens up and get our passengers home. This costs Aurigny in terms of paying to keep Guernsey’s airport open late but the reward is customer satisfaction and of course aircraft in the right place for the next day’s operation.
There are lots of risks in the airline business. What do you see as the biggest?
With the caveat that neither of these are likely, I’d say loss of shareholder support and a low cost carrier’s entry into the Guernsey market.
Several airlines are currently operating to Guernsey. Do you see this as a threat or rather as an opportunity for further cooperation with them?
Ironically, our first and only codeshare ends in March this year. We were competing for years on the Jersey route with Blue Islands and it was financially damaging for both. The codeshare began in March 2014 (for an initial two year period) using B.I. aircraft with both carriers having a percentage of the seat allocation and Aurigny managing the ground handling in Guernsey. Talks aimed at renewal didn’t work out, so it won’t continue. But, we always keep an open mind about future co-operation opportunities.
What about the worldwide crisis? Is it over and how is it affecting your performance and strategy?
The Guernsey economy has remained remarkably unaffected and as a result our business has remained relatively unaffected.
In the past 40 years, the industry has managed only a 0.1% margin. Does the industry structure mean it is a poor investment?
There are good and bad investment opportunities. Our shareholder, the States of Guernsey, see us as a sensible strategic investment.
With mergers and joint ventures gaining momentum, is there still a place for the small airline in the aviation market?
Absolutely. Our base, Guernsey, is a small market place that in the past has attracted larger operators but all have at some point exited that market, whether that be entirely, or on specific routes. That of course is driven by their need to generate positive returns. Aurigny’s state ownership guarantees connectivity for islanders and to an extent protects us from being acquired by a larger carrier.
Looking in the future, what do you think the market will develop like in the next years and in which ways will you have to change your business model?
It’s difficult to predict as our Guernsey and Alderney markets are stable. Operating Alderney as PSO route (Public Service Obligation) is clearly the future for the airline and the island. It will set out agreed service level terms and offer the funding required to operate the service. We fly very frequently between Guernsey and Alderney and the same applies to the Alderney – Southampton route. I don’t think our model will change, rather it will continue to evolve.
To understand the market: who is the standard customer of Aurigny?
There is no such person. Guernsey is a densely populated island with around 65,000 inhabitants and it’s made up of all sorts of people. Our customers fly with us for business, leisure and for off island medical appointments.
Looking at your competitors, how do you differ in services and rates?
We operate in a unique environment because we’re state owned and really don’t compete on any of our key routes. We did, but competitors exited the Gatwick and Alderney routes of their own accord. This means we need to be very careful with our image and our customer service and prices, as we effectively operate a monopoly on the routes we serve. We are the islanders’ airline and we offer some low cost fares but equally we’re here to break even and eventually turn a modest profit so that means we also have a market for late availability, full price fares. It’s a fairly standard airline model but it can irk customers as we provide only one class of cabin.
Why should our readers fly with Aurigny?
Because we’re a great airline operating high frequency flights on some key lifeline and strategic routes that keep Guernsey and Alderney connected with England and northern France. We offer a generous free hold baggage allowance of 20kg, complimentary soft drinks (or a tea or coffee) plus the local newspaper. These “frills” are very rare these days. They have cost implications, but equally they “reward” every Aurigny customer. Two of our routes, from Guernsey to Alderney, and London City, were rated recently in the top five of most exciting British routes to fly.
Is the environment a commercial or a political problem?
Both. Commercial operators must abide by laws set by governments but equally the private sector is often the innovator because as well as its corporate social responsibility, less environmentally costly practises are often cheaper and that’s to everyone’s benefit.
Do customers want to see airlines being environmentally friendly?
Of course they do and from our perspective we’re keen to minimise our carbon footprint and not be unnecessarily wasteful. Fuel efficiency is, and will remain a key industry technology driver and the current ultra-low fuel prices won’t last forever. The bigger aircraft manufacturers are investing heavily in carbon and composites to make lighter aircraft and engine manufacturers are doing the same. There’ll be trickle down technology to the kind of aircraft we operate. For a small island operator, keeping noise to a minimum is also important and our E jet is quiet.
We thank Aurigny Air Services, Mr. Euan Mahy and Mr. Mark Darby for their help in facilitating this interview. If you want to know more about Aurigny, please visit www.aurigny.com