29 September 2008

More airlines will fail, warns aviation expert

The aviation industry is going through an unprecedented time which will inevitably lead to more airline failures.

That was the stark warning by aviation expert Chris Tarry to agents at the Advantage Conference in Sitges.

Tarry, who runs aviation research and consultancy firm CTAIRA, said the combination of high fuel prices and the economic downturn could hit smaller airlines which do not have a lot of money behind them.

ââ¬ÅâœWe have seen 30 airlines fail already, including four or five this summer. Thatââ¬â¢s something Iââ¬â¢ve never seen before ââ¬' a failure in the summer.ââ¬~

He said airlines which were promising capacity cuts were ââ¬Åâœbluffing and double bluffingââ¬~ and it would remain to be seen how many seats were taken out of the market.

Airlines today have to fill significantly more seats in order to sustain slim margins, he explained.

ââ¬ÅâœIn the 1970s, airlines had to have load factors of 55% to make a profit, and now load factors need to be at 76%-77%. The industry is so much more volatile,ââ¬~ he said.

He said some of the low-cost airlines are in ââ¬Åâœreal distressââ¬~, particularly those which are over dependent on leisure traffic and which have significant aircraft orders in place.

ââ¬ÅâœThe low-cost model is not a sufficient condition for an airline to survive,ââ¬~ he said.

ââ¬ÅâœAll indications are that 2009 will be worse as economic factors kick in against what is expected still to be a high fuel price environment. Nobody will be immune,ââ¬~ he warned.

But at the same conference session, Priscilla Alexander, founder of US business and leisure travel agency Protravel International, said the current crisis presented opportunities for agents.

ââ¬ÅâœGo grab market share,ââ¬~ she said. ââ¬ÅâœWhen airlines are reducing capacity, this is the time when people need to come to you to find the fares. They wonââ¬â¢t be able to get those fares online.ââ¬~

She urged agents to diversify their clients and products and to work more closely with suppliers.

ââ¬ÅâœThis is the time to do some marketing and expand what youââ¬â¢re doing. If you see softening of the marketplace, itââ¬â¢s a good time to partner with suppliers. Be kind to your suppliers and rely on your partnerships. Any agency that thinks it can stand alone is a fool.ââ¬~

By Bev Fearis

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