Airlines put on bankruptcy alert as winter looms

Sep 11 – Airlines face a dark winter after government support ended, a summer of cancellations and rising costs, analysts have warned.

Businesses struggling with staff shortages and soaring fuel prices have struggled to meet increased demand during the peak holiday season. Now, the next three months will be a fragile time that could usher in a string of failures if travelers facing higher domestic bills cut flights.

Autumn is traditionally the toughest season for airlines, when they have to pay bills and invest in the year ahead even as demand declines. Monarch collapsed in October 2017 and Thomas Cook followed in September 2019.

City broker Bernstein said in a report: “The pandemic has resulted in few airline failures in Europe, with state support and furlough schemes preventing many from collapsing.” That may be about to change.

Jet fuel costs nearly double what it cost before the pandemic, while nearly all major airlines have been forced to raise wages to tackle staff shortages.

“Winter 2022-23 is expected to be one of the worst in memory,” the report said. ‘September heralds the start of bankruptcy season.

“After the summer ends, airlines often enter a period of losses and limited cash flow as demand wanes over time and children return to school.”

Bernstein said Central and Eastern European airlines were most at risk.

The report says Irish low-cost airline Ryanair and Wizz Air could be among the biggest beneficiaries of a fallout.

Ryanair was also among the best-prepared European carriers for the crisis, followed by easyJet, Jet2, British Airways owner IAG and – the lowest ranked of London-listed stocks – travel company TUI. But even Ryanair recently warned of an “extremely difficult” winter when it pulled planes from a Brussels airport.

Bernstein gave the airlines a “survival score”, although there was no suggestion that any UK companies were in financial trouble. Bernstein’s score ranges from zero to 100. Ryanair received 92 while Tui received 60.

However, FTSE 250-listed Tui ranked above many of the other smaller airlines that serve the UK, including Finnair, Norwegian and Blue Air. The lowest was France’s ASL with a score of zero.

The recovery has been chaotic for travel agencies since Covid restrictions were eased earlier this year.

Cancellations and queues have littered airports across Europe, with Heathrow among the hardest hit.

Last week, Gatwick chief financial officer Jim Butler said he was “cautious about what we might see this winter or next year”.

He said economic uncertainty could “impact the overall propensity to travel” as the industry faces staff shortages and rising fuel costs.

Heathrow has recently been criticized for trying to introduce a new fee for airlines. The International Air Transport Association (IATA), which represents the biggest airlines, has accused the airport of trying to “squeeze more money” from companies already struggling with exorbitant costs.

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