The year 2017 may have been one that saw the sad financial demise of three legacy airlines in Europe, but the new generation of low-fare airlines clearly aren’t feeling very sympathetic.
Air Berlin, Monarch Airlines and Alitalia all collapsed into insolvency last year, but according to several airlines and aircraft leasing companies, speaking at a Dublin commercial aviation event, the failure of the three carriers are more a reflection of the strength and efficiency of the industry overall rather than an indication of a troubled sector.
According to Wizz Air’s chief financial officer, Iain Wetherall: “It’s all about costs. Costs are absolutely paramount. If you look at about 99% of the air traffic, it’s all about price. The only way you can do that is low-cost.” That includes implementing standardisation, efficiency, the same aircraft type and so on, he said. “Our cost base is probably today one of the lowest in Europe. So competing legacy carriers cannot compete with us.”
Speaking at the 20th Annual Global Airfinance Conference in Dublin, Ireland, he added that higher fuel prices were not such a bad thing: “There’s a lot of inefficient airlines out there.” He concluded bluntly: “Hopefully we will start to see some of the inefficient airlines disappear off the face of the planet.”
From a lessor’s perspective, an airline or two failing is not such a problem in the current market either. Firoz Tarapore, CEO of Dubai Aerospace Enterprise (DAE), pointed out at the same conference that when Air Berlin went to the wall, “No lessor had any trouble moving these aircraft to new clients.”
Peter Barrett, CEO of SMBC Aviation, added that despite Air Berlin’s significant fleet, “the market incorporated these aircraft pretty quickly.” He continued: “I actually take some comfort from it. It’s reflecting the strength and efficiency of the industry.”
