UK airline industry should pull out of evasive manoeuvres

Only one of three airline chief executives turned up to be quizzed by MPs on the business select committee on Tuesday, which we can chalk up as the industry’s latest scheduling failure. It was also a shame because one of the absentees, Johan Lundgren of easyJet, who had the legitimate excuse of illness, could have been asked if he stood by this statement he made four weeks ago.

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

Ho, ho. That self-assessment now reads as spectacularly hubristic. In the cancellation stakes, easyJet seems to have been outstripped only by British Airways (BA), but the budget airline gets a special demerit mention for scrapping so many flights at short notice. BA, at least, seems to have cancelled weeks, and sometimes months, in advance.

Nobody, of course, should pretend there is a single cause for the messy revival of flying. There is blame to go around – and much of it falls away from the airlines. Some airports and ground-handling agents have been shocked to discover that the low-paid staff they laid off in the pandemic are not available for rehire – some have found jobs in supermarkets or Amazon warehouses.

There is also, possibly, a Brexit angle as the pool of migrant workers has shrunk. Admin hassles shouldn’t be ignored either. Lundgren’s stand-in, Sophie Dekker, said easyJet had a small army of staffers chasing the past-employment references required to get airside passes for new recruits, a process that used to take 10 weeks but now lasts up to 14. Throw in understaffing among air traffic controllers and one can see how problems compound.

The airlines could help themselves, though, by being more straightforward. BA’s corporate chief, Lisa Tremble, deputising for the chief executive, Sean Doyle (too busy, apparently), tied herself in knots to avoid saying that laying off 10,000 staff during the pandemic hadn’t helped the recovery process. “I’m not saying there is not a connection,” she said at one point. Come on, the “rightsizing” may have been commercially sensible – BA was leaking cash at rate of £20m a day at the low point, and the UK withdrew furlough support earlier than some other European countries – but one can still join the dots.

The need for plain-dealing, however, is most apparent in communication with the travelling public. Operational upsets happen, but clunky compensation procedures and flouting of consumer rights, as alleged by the consumer body Which?, are inexcusable. That part ought to be the simplest to fix.

Here’s a sight FirstGroup’s shareholders haven’t seen for 10 years: a dividend. At £8m, it’s not huge, but it has arrived about six months earlier than the bus and rail firm had previously hinted. The timing is also good in that a would-be bidder, the Miami-based fund I Squared Capital, is still lingering in the wings with unclear intentions after seeing its offer of up to £1.23bn rejected last week.

There’s a price for everything, but FirstGroup’s case for independence ought to be boosted by a financial report that suggested long-desired stability was finally in view. Profits were marginally exceeding expectations last year and post-Covid recovery is happening. Passenger volumes at First Bus are back at 76% of pre-pandemic levels. Meanwhile, the Great Western rail franchise has been converted to one of those new-fangled, and lower-risk, management contracts.

Cue, also, a chorus of “modal shift”, the transport sector’s favourite refrain about how public transport in the UK is at “an inflection point”. There is something in the idea. Rail contracts are a better way to run the system than the rotten bid-and-hope-for-the-best franchise setup. And the government has directed £1bn of funding towards its national bus strategy.

As ever with the transport sector, the gap between hope and reality can be wide (especially when the current government sits at the centre), but there’s a fair case that FirstGroup, after its dividend-less decade of crises and strife, deserves to be viewed with fresh eyes. All the US operations have been sold, which has removed complexity and cleaned up the balance sheet. There is scope for growth after the reset. The services of a US private equity fund are not required.

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