‘Serious risk’ of more airline failures following Primera Air collapse

‘Serious risk’ of more airline failures following Primera Air collapse

Tuesday, October 2, 2018

There is a “serious risk” that more airlines will go bust following the demise of Primera Air, an industry expert has warned.

Aviation analyst John Strickland said it is “very tricky” for carriers to make money from low-cost long-haul routes, and it has not been proven that the business model can produce “sustainable amounts of profitability”.

He told the Press Association: "I think there is a serious risk there will be other collapses in the sector. I wouldn't want to name names.

"It's an environment where there's a lot of capacity on offer. Fuel prices are going up - not all airlines are hedged against that.

"The 12 months ahead could lead to some changes or buy-outs of these airlines."

Norwegian has struggled to contain costs amid its rapid expansion, and had around £2 billion of net debt at the end of last year.

Ryanair boss Michael O'Leary recently predicted it would "go bust this winter", but the Scandinavian carrier insisted his comment has "no root in reality".

 

‘doesn’t work in winter’

In April, British Airways owner IAG acquired a 5% stake in Norwegian with a view to starting takeover discussions.

Icelandic operator Wow - which operates low-cost flights to North America via its Reykjavik hub - told the Financial Times last month that it is aiming to raise up to 300 million US dollars by selling "less than half" of the loss-making company through an initial public offering.

Mr Strickland said the model of offering low fares to attract price-sensitive passengers is "fine in the middle of summer when you can pack your planes but it doesn't necessarily work in the winter when traffic is much lighter".