Two national flag carriers on the brink of collapse

[red750]

From Monday's Herald-Sun:

 

Two of the world’s major national airlines have hurtled closer to the possibility of going bust after a difficult weekend that’s left both with even more uncertain futures.

Italy’s flag carrier Alitalia and South African Airways, which flies to Perth, have been haemorrhaging money for years but a series of fresh blows have raised concerns of collapse for both.

 

On Friday, the South African arm of Flight Centre announced it would no longer sell tickets for South African Airways flights due a lack of faith in its future, while Alitalia, which has struggled for years with money woes, is in limbo again this week after a rescue plan fell through.

 

Now the airlines, both former symbols of national pride for both their respective countries, may be the latest flag carriers to crumble in the wake of low-cost competition, rising fuel prices and global economic uncertainty.

 

And they risk joining a long list of airlines that went belly-up in 2019, including the UK’s Thomas Cook and Flybmi, Iceland’s WOW and India’s Jet Airways.

 

 

[yampy]

You may want to include Air India on that list . 

 

 

 

[facthunter]

Unrealistically low airfares will inevitably take their toll, with airfares lower than trains or buses. People buy just on price without considering much else. and many state airlines are subsidised but continuing subsidies can't be assured. Airlines  heave always been risky with high cashflows and low profit margins on capital placing tight conditions for profitability on operations.  Nev

 

 

[Yenn]

Ryanair seems to survive. I have just compared prices for getting from the UK to SW France and Ryanair are far cheaper than bus or rail.

 

 

[Downunder]

There maybe some pressure from budget airlines but my bet is on entrenched systems and cultures that are unable or unwilling to change and adapt to new business enviroments.

 

Look at the taxi industry. Once a price gouging monopoly.

 

Now being cut down by various "ride sharing" services.

 

 

[mnewbery]

Thomas Cook in particular came into question over its late and poorly executed digital transformation. It wasn't the package holidays they were selling as much as the desire by the client to move away from bricks-and-mortar trade to a web presence. This meant a lot fewer travel agents (who knew the package holidays well) and a lot more "men in grey cardigans". I doubt TC senior management were capable of the change in thinking required to survive.

 

On the other hand ... [one airline with a frequent flyer program] Is in its fifth year of a project to deliver discretionary pricing on airfares. That means two people can go to the booking website and if [airline] figures out who one person is, the price will be adjusted to take advantage of their known preferences. The other person will get a different airfare. The longer they browse the more likely the airfares are to be adjusted up.

 

I'm not 100% certain all of the features are turned on yet but it was designed to be very powerful and dynamic. The yield management component used by AA and United is just one feature. They adjust fares in real time as people make enquiries about city pairs ... For example once the teams in the Super Bowl are known.

 

Budget airlines just don't have the money for these sorts of things, or access to the more profitable city pairs. In th case of TC, they never made a return on the cost of their back end system transformation 

 

 

[onetrack]

This is where the personal data companies and tracking sites are making a massive killing - and where we, personally, are being shafted.

 

The tracking and data companies can supply everything the airline booking programme requires to figure out what your preferences are, how many airline booking websites you've looked at recently (and what destinations you've been looking at), and the fare can be adjusted accordingly, usually upwards, to incur a sense of panic and FOMO in the person booking.

 

Meantimes, we get nothing for handing over all our 'net data and history, and providing reviews - except maybe something virtually worthless, like Google points.

 

 

[mnewbery]

RyanAir stays profitable by using a well-understood bait-and-switch marketing method. Examples include using the phrase "London Luton" in its communication. If I was a German pilot in WW2 and I got told to go photo London  but I came back with a photo of Luton I think people would get upset with me.

 

Londo and Luton airports are an hour apart by train.

 

Then there is Avalon (friends don't let friends fly DeathStar) 

 

Another example RyanAir is famous for is their bag check policy which changes every 7 weeks in order to keep catching people out. Many complaints have arisen where UK travellers have bought an airfare under one checked bag policy and had it changed (then brutally enforced) on the return leg of their trip. Plus the complaints feed the news cycle invariably. This is just free advertising for Mister O'Leary.

 

If this is what it takes to keep an airline in business, thanks but no. Leisure travel was never risk free. Remember the cheap seats on the Titanic. 

 

 

[Jerry_Atrick]

I have flown Ryanscare once - to Dublin - and it was actually OK. We actually went to Dublin, rather than Cork airport. Yes, Ryanscare had a policy of taking people to destinations that were hardly in the same country, let alone the same city as advertised, but Luton has been considered one of the London airports at least as long as I have been here ('96), and longer. London airports include Stansted and Gatwick - both hardly that close to London.

 

Ryanscare's revenue model is not the airfares - it is the extras (such as luggage), and the retailing they do in the air. It is darned expensive, and for some reason, people need to have a £1 drop of soft drink and £3 heated chips (of which there are about 10 chips included).. In addition, they had installed gambling machines where the seat-back monitors should be and that has apparently been a roaring success for them. Also duty free (oddly, even within the EU) is a big hit with them I hear. I have also heard that the pilots have to pay for their own type rating and refresher training - I would believe the first but not necessarily the second.

 

And O'Leary - love him or hate him - is a master of public relations; he turns every complaint into an opportunity to state that there is a reason they are the cheapest.. And those that complain still flock back... So he is (or was) doing something right.

 

 

[facthunter]

Putting gambling machines in is a no brainer. The clients have already proven gambling is OK by them. People pay extra for shoes but won't for a flight (fright) to Europe and be treated like a peasant for the privilege. . Nev

 

 

[derekliston]

I (we) have flown Ryanair a couple of times down to Dordogne when holidaying in the UK. I actually don’t mind them and personally rate them higher than Jetstar. Yes it is like an airborne shop but you don’t have to buy anything. I don’t like that you can pay extra to jump the queue, but they do that at the London Eye also. Interesting that they had us lined up to board before the plane had even arrived. Also amusing is the trumpet fanfare and announcement “ Another on time arrival by Ryanair” which I figure must activate together with the thrust reverser and sounds even if it is late!!!!

 

 

[facthunter]

 Not related to Arthur DALEY is he?  Nev

 

 

[Jerry_Atrick]

I wont necessarily avoid Ryanscare if they fly my route and offer a competitive fare. I have flown EasyJet and TUI as well, and they are pretty much the same. They used to call them bucket shop airlines (and this included chartered aircraft as well) as it was like being loaded into a bucket and thrown to one's destination. Has been a model since I arrived in the UK. And collectively, their safety record seems to be in good shape - no worse than the supposed full-service airlines (which, by the way, I have been looking at fliughts to Cyprus and even BA now charge for checked in luggage - and a whack more than the bucket-shops...)

 

 

[facthunter]

Any charter has far less stringent conditions for compliance than RPT  Nev

 

 

[Downunder]

BA now charge for checked in luggage

 

To me, full service airlines are becoming more and more like budget airlines in service but not price.

 

I hadn't flown Qantas for 10 yrs or so, but an employer flew me around Australia to various places recently.

 

About 7 or 8 flights in a month.

 

I was pretty shocked at the level of service and food quality. Not to mention the poor leg room and uncomfortable seating.

 

The aircraft (mainly 737's) seemed quite old and run down too.

 

The only redeeming features were a large baggage allowance and the safety reputation.....and the fact I wasn't paying.

 

Having completed those flights, I'm not sure I would pay the asking price myself.......

 

Edit. Perhaps Qantas take more pride in their international flights and reputation?

 

 

[Jerry_Atrick]

In December, 2018, I flew back to Melbourne for a whole 3 days for my mother's 80th. It was an A380 economy class.

 

Bearing in mind I didn't go for he cheapest, but as Qantas was competitve (within reason), I decided that national pride would win this day.. .They were about £250 more than Singapore Airlines (from memory)... They were quite a bit more than the middle east airlines, but as I much prefer the routing either through HK or Singas, I don't include them in the count (most ME routes will add 10 hours to the travel time).

 

I have to admit, I was looking forward to being able to have a couple of VBs on the flight. Yes, compared to the beers here, VB is just a slight notch above Coors Light, but I have a penchant for it (as it was the beer I grew up on - when I finally started partaking in a tipple; Also, a ritual for me when I arrive in Aus is to go to the local Coles Express and get a Four'n'Twenty pie - love them; it is a flaw in my personality).

 

Well, getting onto the behemoth the A380 is required me to take a short stroll through business class before being herded through the gates into Cattle class. While strolling through business class I couldn't help but notice that the pods where fastidious and the flight attendants there were a) pretty cute (the girl ones) and b) actually smiled. But the gates through the cattle class run were opened, and things looked decidely.. <snip, as I don't want to have to be hassled with corporate stuff> .

 

Suffice to say, I don't think, at least in economy, they care much more for their reputation, which is odd, as they are rarely even close to being price competitve with others that I think have, of late, provided much better service and amenity with similar routing. However, the route fronm London to HK/SG is in such demand, they seem to fill those searts anyway. And I guess they optimise the schedule to ensure their planes are at good capacity from these hubs to whatever Aus city they fly to.

 

Contrasting this to when my father became very ill about 15 years ago and I needed a mercy dash to see him before the inevitable and Qantas, although not prepared to discount for short notice, which is completely understandable, managed to get me to see my father via a somewhat convaluted route (it was within the peak period) and their cattle class would have made the most prized bull very comfortable. I stuck with them until things seemed to move well onto the wrong side of the equation for me.

 

I read an article in the Aussie FInancial Review (I think) and they may be better on the North American routes as I think that is the market they prefer to target - which seems strange asm although the same population as Europe, far fewer people per capita even leave their state let alone the country.

 

Also of interest, I read in the US Flyer Magazine many years ago that an airline asked their flight staff for ideas about how to get passenger numbers up  - i.e. what can they improve on. The usual better service, better food/drink and better in flight entertainment was put in place but the marketing team decided this would take too long to see a brand improvement; they finally implemented painting whacky art on the aricraft tails; apparently a 25% increase in bookings started about a week later.

 

 

[old man emu]

I had a look at the public transport times to go from the four London airports to Marble Bar station (close to Buck House). The trip from Luton was one hour, which was the quickest trip. From Sydney International to Sydney CBD (St James) takes 38 minutes by train, but the frequency of trains is not as great as I expect it would be using London's Underground.

 

 

[Jerry_Atrick]

I am not sure where Buk House is in London or Marble Bar (are you thinking Marble Arch?), but getting a train from Luton Airport Parkway to BlackFriars via St. Pancras (i.e. both ends of centra Lonfon) is around 40 mins (https://www.london-luton.co.uk/to-and-from-lla/going-south-beyond-london). Note, Luton is probably worse than Proserpine as an airport and I don't know too many people who are prepared to go there.

 

The main London airports are Heathrow, Stanstead, London City, Luton, Gatwick. Of recent addition us Southend (considered a London airport for some reason despite it being closer to France than London) and Oxford! Next it will be London Birmingham! Airports are entirely privately operated here (many privately owned) and having "London" in front of them is considered to add to their marketability.

 

 

[lee-wave]

Sadly Flybe has gone...Norwegian are precarious. This Spanish beer thingy virus is going to cripple many more airlines and take them to edge of the cliff. Some airlines are flying virtually empty aircraft to retain their airport slots...this is such a ridiculous situation...similar to when fishermen threw fish away when they had exceeded their quota...

[onetrack]

Going to be interesting to see now, what the $24M man does to keep the Red Rat out of the reams of red ink, and to keep it solvent.

As with all airlines, they run a fine line between bankruptcy and profitability, and it only takes an upset from out of left field to make them nose-dive.

Some airlines will only survive this crisis with Govt input, or Govt backed debt guarantees.

I trust the $24M man doesn't pack his suitcase, and do a "runner" as the ordure hits the fan, and he cheerfully leaves the problems to someone else. This is fairly typical corporate CEO behaviour.

I wouldn't be surprised to see the big V go under if the crisis continues, they are already in talks with bondholders, who are getting very nervous and ready to bail.

The big V were already in deep red ink long before this crisis, and this is probably all it needs to tip it over the edge.

 

https://www.abc.net.au/news/2019-08-29/virgin-australia-route-review-likely-casualties/11459666

 

https://fntalk.com/companies/virgin-australia-among-debt-bloated-companies-the-virus-threatens-to-drag-down/

Edited March 8, 2020 by onetrack

[Guest Machtuk]

Going to be interesting to see now, what the $24M man does to keep the Red Rat out of the reams of red ink, and to keep it solvent.

As with all airlines, they run a fine line between bankruptcy and profitability, and it only takes an upset from out of left field to make them nose-dive.

Some airlines will only survive this crisis with Govt input, or Govt backed debt guarantees.

I trust the $24M man doesn't pack his suitcase, and do a "runner" as the ordure hits the fan, and he cheerfully leaves the problems to someone else. This is fairly typical corporate CEO behaviour.

I wouldn't be surprised to see the big V go under if the crisis continues, they are already in talks with bondholders, who are getting very nervous and ready to bail.

The big V were already in deep red ink long before this crisis, and this is probably all it needs to tip it over the edge.

 

https://www.abc.net.au/news/2019-08-29/virgin-australia-route-review-likely-casualties/11459666

 

https://fntalk.com/companies/virgin-australia-among-debt-bloated-companies-the-virus-threatens-to-drag-down/

 

The little Leprechaun will have a few tricks up his sleeve, he won't want his cash cow giving up the cream just yet! Virgin however are in BIG trouble! Tigers are clinging by a thread due multiple miss management at all levels, plenty of jobs being cut lose there!

Interesting times ahead, time to buy more toilet paper!??

[Bruce Tuncks]

Jerry, the real Marble Bar is a town in the north-west of western Australia. It wins the gong for being the hottest place in Australia.

[Jerry_Atrick]

I am echoing what people are saying as I am in a position of ignorance, but Flybe are claimed to have succumbed more to mismanagement than anything else. There were already in crisis talks and looking for relief on passenger duties to keep it afloat. The drop in bookings seems to have merely brought forward what appeared to be the inevitable. It seemed strange to me that it was backed/rescured by three (or thereabouts) billionaires who appealed direct to the giovernment to provide relief on £100m of passenger duty rather than simply kick it in themselves if they thought it was merely a blip. These people don't generally throw good money after bad.

 

My concern (apart from the employees) is the regional airports they operate from. Exeter - my closest (though Bristol is not too far away) has 80% of their movements attributed to Flybe. No doubt, another operator (most likely Logan Air at this stage) will partially fill the gap, but the question remains - is there enough demand to cover the loss enough for Exeter to say, well, time's up and its far more profitable to turn the thing into a housing estate, despite clean-up costs. The UK already loses airfields - many historic WWI and WWII - to the developer... Exeter without a decent amoutn of airline traffic will also go under as GA does not pay the exhorbitant costs of running a licensed field like that.

[Bruce Tuncks]

On another note, any tourism type jobs, including airlines, are surviving on surplus dollars in the average persons budget. They are ephemeral jobs.

I feel sorry for the tourism workers in Bali who will lose their jobs if Australians feel less wealthy.

[Downunder]

Jerry, the real Marble Bar is a town in the north-west of western Australia. It wins the gong for being the hottest place in Australia.

Well, I was there last week (actually nearby) and can attest to the heat.?