XL airlines?

[pip 40]

Whats everyone think about XL airlines going bust? and dose anyone think other airlines will go the same way?

[Buenchico]

Worldwide, there have been about two dozen airlines go bust so far this year. Most business aviation experts (e.g. those people who've been interviewed on BBC World Service and on the BBC News Channel) estimate that there are about another 30 airlines who'll fail within the next year or so.

Generally, the media refrain from mentioning specific names of the most vulnerable airlines, for fear of being accused of pushing them over the brink. However, the problems of some airlines are well-known. (I was cautioning people about buying tickets with Alitalia, here on AB, many months ago because it was clear that they were about to go bust. It's been announced today that they've no fuel to fly after tomorrow and no money to buy any more).

A BBC News Channel report yesterday cited BA and Ryanair as examples of two airlines which are currently financially secure. (That's because BA's business model, of concentrating on business passengers, seems to be working well, and because Ryanair has simply got plenty of money in the bank).

easyJet's business model seems to meet with the approval of most aviation experts, so they're probably fairly safe at the moment. However I'd not be surprised to see smaller operators, such as FlyBe (and possibly BmiBaby) going out of business in the coming months and years. (FlyBe has seemed to have been struggling almost since the day into came into being).

Of course, the really big question mark must be over the future of ThomsonFly. Like XL, it's an airline which is part of a much bigger holiday group and therefore subject to same sort of financial pressures that resulted in the demise of XL.

Chris

[jno]

Thomas Cook airline might be in the same position for the same reason, though without looking at their balance sheet it's impossible to be sure. But yes, as Chris says, more are likely to follow.

[filthiestfis]

To add to Buenchico's brilliantly thorough response I would say that other airlines that must be in the 'high risk' list of going bust in the near future are Air Comet (operating from London Gatwick to South American destinations via Madrid), Spanair, and Germanwings (currently advertising one way taxes inclusive fares for under 20 pounds). My advice is to use a credit card if booking with them or best avoid them altogether.

[Buenchico]

It's interesting that those two posts, from Jno and Filthiestfis, should follow mine.

The major UK-based budget airline that I deliberately avoided mentioning was Thomas Cook. That's because I've not got a clue as to what their financial position might be. As the oldest travel agency in the world, everyone assumes that they must be secure. (They've certainly got 'fingers in pies' which other travel firms haven't got, e.g. their currency exchange operations). However, they're primarily a tour company running their own airline (in the same way that XL did), so I certainly wouldn't rule out the possibility of them experiencing financial difficulties at some time in the future.

I also considered referring to foreign-based airlines in my post. (Yes, I know that Ryanair is technically 'foreign-based', because it's an Irish company, but the centre of its operations is Stansted). I decided not to, partly because I know little about about overseas operators and partly because the list could go on for ages. However, top of my list of 'foreign-based' budget operators, serving the UK, who might experience financial difficulties was going to GermanWings.

Chris

[Andyvon]

I agree with Chris here. I think EasyJet and RyanAir are safe for the time being as their business models are good and they are currently providing customers with what they want.

Obviously, the worsening global economy is affecting the travel companies as well as so many other sectors around the world. The main problem for travel companies are fuel costs and those are not likely to go down in the near future - if at all. National Geographic stated this year that many oil experts now regard the world's accessible oil reserves as having peaked in 2004 (although the US won't accept that). That means that half the accessible reserves have now been recovered and oil will now become harder and more expensive to find. There's also the fact that more and more leisure travellers are holidaying at home and business travel is being cut too.

Many other travel companies will move closer to the wall over the next year. EasyJet and RyanAir should be OK for a while but they can't be too complacent. People will only pay so much.

[kira000]

The current odds on faves to go bust are Spanair, SAS and Alitalia. BMI has problems but due to their valuable slots at heathrow, are much more likely to survive by being bought out or merged with.