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.
“We have seen 30 airlines fail already, including four or five this summer. That’s something I’ve never seen before – a failure in the summer.â€
He said airlines which were promising capacity cuts were “bluffing and double bluffing†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.
“In 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,†he said.
He said some of the low-cost airlines are in “real distressâ€, particularly those which are over dependent on leisure traffic and which have significant aircraft orders in place.
“The low-cost model is not a sufficient condition for an airline to survive,†he said.
“All 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,†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.
“Go grab market share,†she said. “When airlines are reducing capacity, this is the time when people need to come to you to find the fares. They won’t be able to get those fares online.â€
She urged agents to diversify their clients and products and to work more closely with suppliers.
“This is the time to do some marketing and expand what you’re doing. If you see softening of the marketplace, it’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.â€
By Bev Fearis
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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