30 airlines will go bust this year: BA’s Willie Walsh
13 Sep 2008
Around another 30 airlines will go under before Christmas in 2008, according to British Airways chief executive Willie Walsh has said.
Willie Walsh has said the impending bankruptcies of these 30 airlines will replay the chaotic scenario whten XL, Britan's third largest holiday company, collapsed, stranding 85,000 passengers around the globe. He said the cause of this misery in the travel industry are soaring fuel costs and the effects of the global economic downturn.
Walsh called the present time ''the worst trading environment the industry has ever seen", with 30-odd airlines having gone bust already this year, and a similar number expect to ffollow suit over the next three or four months. The British Airway's CEO also announced around 1,400 redundancies at his own company.
Travel industry experts say smaller airlines and tour operators were most at risk. They warn passengers to book in a way that ensured money back in case an airline went bankrupt.
Industry analysts say that a number of smaller tour operators have started to hit financial difficulties, and carriers in the UK that do not have deep pockets like British Airways or Ryanair would fail in coming months. They add to the list carriers who have been unable to hedge their oil costs.
This time of the year is particularly risky as most non-business travel happens during this time of the year. This is also the time of the year when operators have started paying suppliers such as hoteliers at a time when booking are starting to dry up. What makes the season more uphill in the UK is the economic slowdown that has started to impact sales, while airline and travel costs stay high on account of the sustained high price of jet fuel, which has doubled in just a year.
Some of the UK's larger travel operators such as TUI Travel and Thomas Cook have announced eight per cent cuts in the number of holidays on offer for next summer, with a view to buck the trend of falling demand. BA and Ryanair, amongst other airlines, have announced capacity reductions, specially during the winter months.
Analysts predict that palyers with not-so-strong balance sheets and startups will join the likes of Zoom, Silverjet and XL who have gone under. They also warn of a wave of consolidation. They point out that companies that have thus far gone under in the UK have been younger and smaller. The larger corporations have deeper pockets, and are better-heeled in the industry, over a long time.
Alitalia is expected to be the next European airline to fold. The Italian national airline is presently trying to extract itself from its woes, and is in talks with the government and a consortium of investors and its trades unions on a rescue plan.
Earlier this week, Fantozzi warned union representatives that he would not hesitate to terminate labour contracts and shut down Alitalia if talks fail.
Fantozzi's message was echoed by Italian welfare minister Maurizio Sacconi, when he expressed hope in reaching an agreement, saying that ''everyone is well aware that the only alternative is the failure of the company with all the consequences for the workers and the country in general."
