Logo
  Monday, November 28, 2022
Sign-In  |  Sign-Up  |  Contact Us  |  Bookmark 

A series of bankruptcies that have hit some leading air carriers
A series of bankruptcies that have hit some leading air carriers and tour operators in the past month suggest that a serious crisis is brewing in global civilian aviation. Over the last half-year about three dozen very solid players have stopped or suspended operations: Russia's AiRUnion, Britain's XL Airways UK and Italy's Alitalia ... Who is next?

The latest report by the International Air Transport Association (IATA), issued early in September, is pessimistic: before the year is out, it says, air carriers will suffer a total loss of $5.2 billion, or twice as much as was supposed earlier. The reasons, the report believes, lie in "a poisonous combination of high prices and falling demand." The dependence here is simple: the costlier the jet fuel, the higher the fares and the fewer air travelers.

Four years ago, when the price of jet fuel rose by half, the number of passengers dropped by 1%. This year, fuel prices have shot up by 70%, and statistics already show a fall of 1.9% in traffic - a five-year high. This means tens of millions of people have decided against flying. Carriers cannot help recalling the "black year 2001" when the September 11 terror attacks brought a fall in flights and caused civil aviation across the world to lose approximately $12 billion.

Unlike the rest of the world, Russian airlines are not seeing a shortage of passengers. Although fares, like tour prices, keep growing month in and month out, the numbers of would-be buyers are not falling. Experts believe, however, there is a ceiling to this process which cannot be exceeded, for otherwise there would be a stampede away from trips. But it does not yet seem to have been reached: last year, Russian companies carried 45 million people, while this year the figure is expected to rise by 20% or even more. The question is rather if Russian carriers will be able to cope with this flow of passengers.

The financial situation of many Russian air companies, especially smaller and medium companies with one to ten airliners each, is far from dazzling. But even some larger fish are not immune from bankruptcy, as the case of AiRUnion shows. And it is not the only company with a debt to settle; there is, according to Rosaviatsia chief Yevgeny Bachurin, yet another Russian carrier - the low-budgeted company Sky Express - which is now facing the prospect of losing its license. The near runaway growth of fuel prices may send many Russian companies to the wall and have a negative effect on tourism, which is heavily dependent on air services.

The bankruptcy of XL Leisure Group shows what Russia can expect in the near future. With jet fuel prices pushing up, economic growth slowing and the financial crisis deepening, this tourist holding, one of the largest in Britain, failed to drum up financing to continue operations. Its debts this year overshot 250 million euros. The result was that on September 12 none of the airliners owned by its subsidiary XL Airways UK took to the air, leaving nearly 90,000 travelers stranded at foreign resorts and another 200,000 unable to go on prepaid vacations.

A similar fate can befall Alitalia. Its debts today stand at 1.2 billion euros, and it is losing almost two million each day. In the face of union opposition, the government's bailout plan, which provides for massive layoffs, is hanging in the air. Talks stalled while fuel suppliers threatened to pull the plug on credit for Alitalia this week. Acting company manager Augusto Fantozzi even pleaded with Pope Benedict XVI, who always flies Alitalia, to offer a prayer to the Lord for its sake.

What helped, however, was not the pontific's prayer, but the personal intervention by Prime Minister Silvio Berlusconi. A compromise reached on his advice with the trade unions put the bankruptcy issue on the back burner, but for how long? Alone, Alitalia will never survive, it needs a dependable partner to handle its logistic needs. There was a plan, for example, to merge it with Italy's second largest company Air One, and overtures were made to foreign candidates - Germany's Lufthansa, and Russia's Aeroflot - but no marriage followed.

As we see, every unhappy air family is unhappy in its own way, although the underlying causes are everywhere the same. And any change for the better is unlikely. On the contrary, judging from forecasts, the price of the fuel will go on climbing, and one need not enthuse over a recent cut in Russian prices - it appears to be nothing more than a political ploy by the Russian oil producing companies to set the government at ease. Airports, which have recently driven up the costs of their services, are not going to curb their appetites either.

It follows then that air fares will continue rising, and so will the price of tours, which have already grown 30% to 50% compared with last year. Now it is a real brain teaser to decide where to go on vacation next year.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


Print A series of bankruptcies that have hit some leading air carriers Bookmark A series of bankruptcies that have hit some leading air carriers

Related News   
AugSeptember 2008Oct
MoTuWeThFrSaSu
25262728293031
1234567
891011121314
15161718192021
22232425262728
293012345