In for the long-haul
Europe’s long-haul budget airline sector has had its issues this year, but the potential has yet to be realised elsewhere, writes Gary Noakes
I
t was a bold move, but Primera Air’s venture into low-cost long-haul will surely be recorded as the shortest- lived attempt to break into the market. rom waving off the first transatlantic flight in May, it took just six months for the iga-based carrier to file for bankruptcy and prompted many in the industry to question whether Primera’s demise signalled the end of the budget long-haul boom. As 2018 draws to a close and the airline world looks nervously ahead to next year, the industry as a whole has less of a bullish outlook, with fuel costs rising by a third in the past 12 months and some saying the expansion phase of the past few years is coming to a close. Was Primera the start of this trend? t first glance, no, as its demise was due to late delivery of aircraft that meant it ran up a charter, delay and cancellation bill of €20 million. Despite attempts to boost cash flow by announcing new bases in Brussels, rankfurt, Madrid and Berlin from summer 2019, the debts grew too large for the regulators. Primera arguably had a run of bad luck, but others have found their corporate flight paths buffeted by headwinds.
Warning signs
WTM ondon attendees in ovember found themselves reading about Icelandair’s proposed take over of WOW air, which lost £34 million in the year to June 2018. WOW had been showing classic warning signs: big losses but rapid expansion a 9 increase in passenger numbers to 2.8 million last year. A hurried bond issue to fund further growth raised million, but at a 9 interest rate, and the airline’s talk of a flotation in 2020 fooled few commentators. Another sign was WOW air’s skittish expansion it launched services to
32 wtm insights winter 2018
etroit, incinnati, leveland, t ouis, JFK, Dallas/Fort Worth and Pittsburgh this spring, but swiftly axed incinnati and Cleveland in October and will do the same to t ouis in anuary. hoenix-based private equity firm Indigo Partners came to the rescue when Icelandair pulled out over worries about debt and future losses. Indigo’s involvement is a vote of confidence in the sector; it already has stakes in four budget carriers ungary’s Wizz Air, Denver’s Frontier Airlines, Chile’s JetSmart and Mexico’s olaris so WOW looks in safe hands. Moreover, Indigo has 430 aircraft on order that it will supply to these airlines. WOW air is expected to lose money again this year, but Icelandair Group may yet regret its decision not to go ahead with the deal. The Centre for Aviation
(Capa) estimates Icelandair’s 2017 operating margin fell to . from 9.2 in 201 and 11.9 in 2015, when it had been one of Europe’s most profitable airlines. A great deal of this is due to WOW air, and Icelandair may rue the day its shareholders stopped it from taking out its key competitor.
orwegian ir huttle also wobbled in 201. This summer saw it reject a hostile bid from IAG during a period when many questioned its ability to manage its rapid growth, having lost 1 million in 201. The warning bells a new share issue raising 121 million in March, negotiations
wtm.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60
