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Low-budget airlines are nearly bankrupt

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Travel Articles >> Avia Travel Travel Articles >> Economics

A huge amount of the low-budget European airlines are experiencing hard times now: because of the constant growth of prices for energy sources they are at the edge. Most of the experts note that if the oil prices won't get lower in the nearest time, these airlines will be history.

Moreover, according to the participants of the market, they have only one solution: cancel the non-profit directions and leave only those that bring income. The experts add that the local flights will be particularly shortened.

In the meanwhile, according to the International Air Transport Association (IATA), 24 airlines became bankrupt during the last year and a half of them are European. Not the best times are for those companies, who deal only with transatlantic business class flights. For example the British Silverjet, MAXjet and Eos Airlines had already to stop the flights because of the financial reasons. The experts of the European Regions Airline Association (ERA) tell that most of the airlines are almost collapsed. They are in a really hard situation right now and we can expect soon lots of bankruptcies.

The low-budget airlines became simply unable to compete: their profit gets lower and the expenses grow. According to the experts, the current crisis will leave on the market either very large companies, like British Airways, Air France and Lufthansa, or such low-budget airlines like the Irish Ryanair and the British easyJet. Other analytics tell that only those companies will survive, which will change their business strategy. They mean that only those airlines will make it through, that will cut their productive expenses.

So, the Ryanair Holdings Plc, the largest low-budget European airline has announced that in the upcoming winter they will stop the usage of 10% of their aircrafts to keep the company profitable. And the general executive director of the airline Michael O'Leary told that the airline will have to raise the ticket costs by 5% next year. This will help to compensate the record high oil prices. Nevertheless, the head of the company has confirmed that unlike the other airlines, Ryanair will not introduce fuel fees.

Moreover, some experts assure that even British Airways can suffer losses if the prices for the black gold will remain at such high values.

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Article Submitted On: June 10, 2008