The aviation industry is something of a hot topic lately, with many airlines filing for administration. In the same month that news breaks of yet another airline going bust, there is a headline counteracting this, with a different airline soaring in seat sales and reporting strong profit margins.
So what’s going on in the dog-eat-dog world of flights? Are there too many budget airlines to compete and emerge with a profit? Or is it more a case of bad business models? Other factors to consider in such fluctuating times are increasing fuel prices and, of course, the “B” word.
Let’s take a look at the airlines that are thriving, surviving or sinking.
Leading the airlines that are soaring high financially is Wizz Air, who has gone against the odds in the current aviation climate. Predicting a gigantic full-year net profit.
Although Virgin Atlantic is still set to report a loss when it publishes its 2018 accounts this week, it is a marked improvement on its 2017 report, which saw the airline lose a huge £28M. Hopeful that a well-organised Brexit will help to turn their luck around, Virgin Atlantic Chief Executive predicts that the airline will be making a profit again by 2021.
A budding new partnership with Air France and KLM is also expected to line Virgin Atlanticís pockets, with the Franco-Dutch airlines partnership coughing up £220M for a 31% stake into the airline in 2018.
Tellingly, that’s the end of our list of airlines navigating these testing times well! Now on to the rest…
Tui profits have also decreased, but for a different reason. The international banning of Boeing 737 MAX fleets is predicted to negatively impact annual profits by 26%.
Having to draft in additional aircraft is proving to be very costly; TUI admitted Assuming 737 Max flight resumption latest by mid-July, the group currently expects to see a one off impact on underlying EBITA [earnings] of approximately €200 million in connection with the 737 Max grounding.
“This impact is especially attributable to costs related to the replacement of aircraft, higher fuel costs, other disruption costs, and the anticipated impact on trading.”
In April, FlyBe cancelled dozens of flights over redundancy worries. In a bid to reduce costs, FlyBe has withdrawn all of its flights from four airports: Cardiff, Doncaster, Exeter and Norwich.
Hinting at the fragile state the airline is currently struggling in, Cardiff Airport Boss Deb Barber said, “FlyBe’s plan to restructure and reduce its jet operations across many bases is part of the company’s long-standing objective to stabilise the business.”
The airline hasn’t been spared its own share of controversy, facing accusations of not letting passengers know about their right to flight delay compensation under EU Regulation 261/2004.
The 2,000+ passengers that were affected by the flight cancellations were not told of their consumer rights, and instead simply instructed to book onto an alternative flight or apply for a refund. The scenario sounds like a lesson in “know your rights.”
Only time will tell whether FlyBe can come back from the brink, recover their street credit, and not join the airlines that have already collapsed.
Falling victim to the current political landscape, Brexit has certainly done easyJet no favours. “Weak” summer sales have contradicted the usual frenzy amongst Brits excitedly booking for some sun over the peak holiday season, with a loss of roughly £275M reported for January-June alone.
The airline’s Chief Executive said it is seeing “softness” in the UK and Europe, as a result of “macroeconomic uncertainty and many unanswered questions surrounding Brexit, which are together driving weaker customer demand.”
As of last month, Wow Air is no more, with thousands of passengers left stranded. The Icelandic carrier found itself alone after Iceland Air revoked their offer to help rescue the struggling airline for a second time. This no doubt rubbed salt into the wound for Wow Air, as US Indigo Partners had already cancelled their planned $90M investment in Wow Air just one week earlier.
Not only had the airline’s finances been a sorry affair, but their reputation has been left in tatters too. Wow Air has been heavily criticised for still accepting bookings during their crisis, with Which? Travel Editor Rory Boland tweeting: “Despite Wow Air cancelling all flights today… incredibly it’s still selling tickets on some routes, and appears on flight booking sites. If it can’t currently afford to fly its planes it shouldn’t be flogging tickets to passengers.”
Sounds like a PR disaster all round…
Small Planet Lithuania
Despite having recorded Small Planet Lithuania was another airline to shut up shop. It seems that the airline’s subsidiaries in Germany and Poland were facing a considerable struggle to make a profit, which resulted in Small Planet Lithuania following suit in a “vital step to protect its business”. It remains to be seen whether the airline will take off again…
March 2019 saw India’s Jet Airways in dire straits: many of its aircraft were grounded, bills were unpaid, and pilots, engineers and other crew hadn’t received their wage in months. Startling figures emerged; the airline was in the red by £750m. It looked almost certain that the airline would have no choice but resort to insolvency. The airline had been passed from pillar to post, Indian government had begged for state-run banks to save Jet Airways, and Prime Minister Narendra Modi was keen to save the airline for the sake of the 23,000 jobs at stake.
The former Executive Director of competitor Air India, Jitender Bhargava, said: “Who will be ready to put in money when profitability is not on the horizon? You cannot put in money to sink it.”
Right at the last moment a consortium of lenders swooped in, led by the State Bank of India, and founder Naresh Goyal stepped down, it looked like the long-term history and legacy of India’s oldest private airline was to live on.
But it wasn’t to be; all flights were grounded 17th April 2019 when lenders wouldn’t extend an emergency loan.
Danish Primera Air bid farewell to the skies in October 2018, and as the airline wasn’t covered by the Civil Aviation Authority’s Atol protection scheme, thousands of passengers were left high and dry abroad, having to make their own arrangements to get home. Even the airline’s own cabin crew were stuck!
Turbulent times indeed…