Will my airline go bust?
As the credit crunch continues to affect all aspects of our daily lives, it appears that ‘dozens’ of airlines will go bust over the next 12 months, the boss of British Airways has predicted. Outlining his reasons for the 4billion pound merger with Spanish airline Iberia, BA chief executive Willie Walsh stated that "many airlines are going to find themselves in real trouble and that is why with our planned merger with Iberia that we are confident of creating a much stronger airline and one of the real winners to emerge from these the current problems,"
Walsh refused to directly blame the current economic crisis directly, as fuel costs soar and consumer confidence weakens, but warned that European airline carriers are facing their worst crisis.
The impact upon BA has been revealed when they announced pre-tax profits had plunged 88% to 37million. This was announced after the Spring trading quarter as well, which is traditionally one of the strongest periods. "This is the toughest trading we have ever seen - worse than 9/11," said Walsh. The effects of 9/11 were a very severe shock to the system but it was against a background of generally strong economic conditions.
"That was a severe hit but the recovery was relatively quick.
"This time it is different and so to record a profit in the quarter we believe is a very good performance."
BA also said the spectre of an oil bill totalling £3 billion for the year and wiping out full profits completely is behind the decision to raise air fares, said Walsh.
Dismissing the headline-grabbing Ryanair ploy of announcing price cuts, Walsh said: "This industry has got to reflect high oil prices.
"The fact is this used to be an industry with high fixed costs and low variable costs. Now it is the variable costs like fuel that are high."
Unlike other airlines which have gone as far as announcing the grounding of several aircraft over the winter, Walsh said BA will keep all its planes flying but will cut the frequencies, around 25 flights a week, to reduce fuel consumption.
According to the betting firm Paddy Power, which enterprisingly has opened a book on the next airline to go bust, Alitalia is the clear favourite (odds of 5-4) followed by SpanAir at 3-1. Other firms on the receiving end of bets are Skyeurope and FlyGlobespan - both 5-1. AirBerlin is currently 7-1 and Wizz Air is 14-1. Just because an airline is on this list, it does not mean it is in trouble - check out Paddypower.com. If you are booked with an at-risk airline, make sure you are covered - particularly if you booked using a debit card.
*Source-Evening Standard Business
**Source-The Guardian September 20th 2008