Part 3 Teesside Airport: Airline competition?

Tees Valley Mayor, Ben Houchen on Loganair ad
From youtube

The airport announces that Loganair will be returning to Teesside in the spring of 2021, offering flights to Belfast, Aberdeen, Dublin, Newquay, Jersey.  Local Radio advertising announces these as new ‘staycation’ destinations. An ad appears online.  The video features the chief exec of Loganair, Jonathan Hinkle, introduced and concluded by Ben Houchen. 

Nothing wrong with that, because it’s sort of promoting the airport, isn’t it?  Except that it promotes Loganair at the expense of Eastern.

So who pays for the ads? Teesside International Airport Ltd?  Ben Houchen? Or Loganair? The ad is out in three formats with each of their names on it. So we can’t be sure.

If Loganair paid for it, the question is, how much do you have to pay an elected mayor to promote your product?

If Houchen paid, the question is, has promoting this airline become part of your public service remit? Was it paid for out of your campaign funds or the TVCA?

If TIAL paid, the question is, why is a company that is in public ownership, paying for ads for an airline?

And if TIAL paid for it, when three of the advertised routes are also being served by Eastern Airlines, why doesn’t the advert mention that airline as well?  Does Loganair have some priority over Eastern?

Industry insiders have said that the Aberdeen and Belfast routes are the ones that are most commercially viable. But it is far from certain that there is sufficient demand for two airlines to compete for the business.  Given the promotion that Loganair is getting, it looks as if Eastern is on its way out of Teesside. But are they being forced out, or are they trying to find an excuse to leave?

Tees Valley Monitor suspects it is the latter, and would be interested to hear from anyone with knowledge of the industry who might be able to confirm or refute our suspicions.  One thing is key here:

If the main regional carrier at Teesside switches from Eastern to Loganair, the net benefit to the public is at best marginal, but probably nil. This is a lot of hype for little dividend.

The suspicion is that part of the problem is the Heathrow route, which Eastern took on in September. For the public, having the connection to Heathrow is a major improvement in service from Teesside Airport.  And, to the outsider, it may appear as a major prize for the airline that gets the contract.

The truth is more complicated.  It’s complicated by what is known as ‘codeshare’. If a regional airline has codeshare, being connected to a hub airport, like Heathrow, should be commercially viable.  It means that a passenger can buy a ticket from, say Teesside to New York, and the regional airline gets a share of the price paid, while the customer gets the benefit of onward flight without a second check in. Loganair has codeshare with BA and KLM, Eastern doesn’t have codeshare at all.  So, for Eastern, running the Heathrow service, despite its high profile, is probably not hugely profitable. 

So why did Eastern take it on at all?  Possibly because they were pressurised.  And it was introduced in the middle of September with no prior waring that the route would be switched from London City to Heathrow.  The Heathrow route is part of the government’s aviation strategy to better connect regional airports to the hub.  When it happened, the CEO of Heathrow, John Holland-Kaye said “Adding the UK’s hub airport to Teesside’s network demonstrates the growth ambitions of the Tees Valley region, and will provide a vital levelling-up boost”. There’s not much detail out, but it may be that Heathrow has opened this slot up as a Public Service Obligation (there’s a lot in the government’s aviation strategy that’s not being put into the public domain), but you get the feeling from Holland-Kaye’s comment that he sees his as some sort of charity work for the benefit of the Tees Valley (and we are left wondering whether Eastern was presented with increased costs as a result of the switch).

Now that Loganair is about to go into competition for its most profitable routes, the chances are that Eastern may withdraw altogether. But it remains a huge gamble for Loganair to set up at Teesside, and we have to question whether they have been incentivised to come here, as some industry insiders have speculated. It would be nice to know how our money is being spent.

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