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Dieuwer
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European Aviation Market: Total Disaster

Thu Mar 28, 2019 4:52 pm

Considering the recent bust of WOW, I start to wonder there must be something seriously wrong in the European Aviation Market (including Transatlantic). Before WOW, we had Primera and Monarch Airlines go bust in 2018. However, it is not just these medium-sized airline go bust. We also had in no particular order: Skyworks, VLM, Small Planet, Germania, Cobalt, Privat Air, Air Berlin, etc.
I cannot be that it is simply related to ULCC, as there are several of those flying in the USA and Asia. And most if not all of them seem to be doing OK. So what's the deal with Europe??
 
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Polot
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:12 pm

Just the European market correcting itself. It has been over served with too many carriers going for the same passengers.
 
LSZH34
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:14 pm

The LCC business in Europe is extremely dominated by FR and U2. LH Group, IAG, AF-KLM are other big players on the market. Europe is the most competitive market I would imagine. Simply too much competition paired with bad management makes it hard to survive here.

Why others are not doing as bad:

The US as a single country is somewhat protected from foreign competition.
Asia does not have well established national carriers in countries where the local LCCs originate.
 
eicvd
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:14 pm

Ryanair are still there at the top, all seems fine with me
COYBIB
 
mjoelnir
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:16 pm

Dieuwer wrote:
Considering the recent bust of WOW, I start to wonder there must be something seriously wrong in the European Aviation Market (including Transatlantic). Before WOW, we had Primera and Monarch Airlines go bust in 2018. However, it is not just these medium-sized airline go bust. We also had in no particular order: Skyworks, VLM, Small Planet, Germania, Cobalt, Privat Air, Air Berlin, etc.
I cannot be that it is simply related to ULCC, as there are several of those flying in the USA and Asia. And most if not all of them seem to be doing OK. So what's the deal with Europe??


Capitalism working as it should? Fierce competition?
 
MIflyer12
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:31 pm

LSZH34 wrote:
The US as a single country is somewhat protected from foreign competition.


How is the U.S. different from the EU's single market in aviation?
 
SCQ83
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:39 pm

There is too much competition and not enough of a market.

Most airlines (specially large low-costs like Ryanair or easyJet) have unrealistic yearly growth expectations (like 10% or 15%). There is simply not enough market for that. So those big fishes (Ryanair, easyJet, Wizzair, EU3) increasingly eat the market of the small players (BMI, Germania, etc.)

With the overall European economy cooling down and too much offer, the weakest links are starting to fall apart.
 
zakuivcustom
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:41 pm

Dieuwer wrote:
I cannot be that it is simply related to ULCC, as there are several of those flying in the USA and Asia. And most if not all of them seem to be doing OK. So what's the deal with Europe??


You simply cannot compare European market to Asia one. Distances is a LOT greater even if you just count East/SE Asia (Just for an example, LHR-IST is nearly the same distance as HKG-SIN, and is shorter than HKG-TYO). Plus the flag carriers of SE Asia (TG, MH, PR, and GA) are not exactly doing all that great themselves.

US Market had been heavily consolidated. You basically have 4 large carriers (DL, AA, UA, WN), 2 Mid-Size player (B6, AS), a "regional" (In geographic sense) player in HA, then you got F9 (Which is not even doing that great), NK, and G4 filling in the ULCC sector. The Europe situation right now is more similar to US air market in 1970s-1980s anyway (When you still have AirCal, Texas Int'l Airlines, Western, Eastern, etc.), all have 1 or maybe 2 hub in the entire US. US is also much more spread out geographically and has zero competitions from things like HSRs outside of NE Corridor.

Lastly, even if you just look at the list of carriers that went out of business. There are those small, regional operators with like 10 planes (Skyworks, VLM, and might as well throw in Cobalt Air and Privatair in there). Then there are the old holiday carriers with an outdated business model (Small Planets, Monarch). After that it's mismanaged airlines (Air Berlin, Germania). Lastly, Primera and WOW, both of whom simply have a bad business model and overexpand.
 
jomur
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:41 pm

Dieuwer wrote:
Considering the recent bust of WOW, I start to wonder there must be something seriously wrong in the European Aviation Market (including Transatlantic). Before WOW, we had Primera and Monarch Airlines go bust in 2018. However, it is not just these medium-sized airline go bust. We also had in no particular order: Skyworks, VLM, Small Planet, Germania, Cobalt, Privat Air, Air Berlin, etc.
I cannot be that it is simply related to ULCC, as there are several of those flying in the USA and Asia. And most if not all of them seem to be doing OK. So what's the deal with Europe??


Chapter 11 protection.... There is no such thing in Europe. If it didn't exist in the US how many of the big 3 would still be around now?
 
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Polot
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:44 pm

jomur wrote:
Dieuwer wrote:
Considering the recent bust of WOW, I start to wonder there must be something seriously wrong in the European Aviation Market (including Transatlantic). Before WOW, we had Primera and Monarch Airlines go bust in 2018. However, it is not just these medium-sized airline go bust. We also had in no particular order: Skyworks, VLM, Small Planet, Germania, Cobalt, Privat Air, Air Berlin, etc.
I cannot be that it is simply related to ULCC, as there are several of those flying in the USA and Asia. And most if not all of them seem to be doing OK. So what's the deal with Europe??


Chapter 11 protection.... There is no such thing in Europe. If it didn't exist in the US how many of the big 3 would still be around now?

Eh, Europe has its mechanisms to keep airlines “too big to fail” around. See Alitalia. And some have been outright bailed out in the past but that is now ancient history. Chapter 11 is not a get out of jail free card. Look at 2008 when you had Skybus, Champion, and ATA all cease ops within weeks of each other.
Last edited by Polot on Thu Mar 28, 2019 5:47 pm, edited 1 time in total.
 
cdin844
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 5:47 pm

I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.
 
Dieuwer
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:03 pm

SCQ83 wrote:
There is too much competition and not enough of a market.

Most airlines (specially large low-costs like Ryanair or easyJet) have unrealistic yearly growth expectations (like 10% or 15%). There is simply not enough market for that. So those big fishes (Ryanair, easyJet, Wizzair, EU3) increasingly eat the market of the small players (BMI, Germania, etc.)

With the overall European economy cooling down and too much offer, the weakest links are starting to fall apart.


cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


Primera was founded in 2003. WOW in 2011. Rail competition is around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?
 
zakuivcustom
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:10 pm

Polot wrote:
Eh, Europe has its mechanisms to keep airlines “too big to fail” around. See Alitalia. And some have been outright bailed out in the past but that is now ancient history. Chapter 11 is not a get out of jail free card. Look at 2008 when you had Skybus, Champion, and ATA all cease ops within weeks of each other.


You forgot Aloha.

And it's the same week...
Aloha: March 30, 2008 (Sunday)
Champion: March 31, 2008 (Monday)
ATA: April 3, 2008 (Thursday)
Skybus: April 5, 2008 (Saturday)
 
SCQ83
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:12 pm

Dieuwer wrote:
Primera was founded in 2003. WOW in 2011. Rail competition was around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?


Ryanair, easyJet or Wizzair are much bigger now than in 2011, not to mention 2003. For instance the demise of Germania and Air Berlin will certainly have partially to do with Ryanair and easyJet growing in Germany like crazy. Today Berlin is almost a FR/U2 duopoly.

As for WOW, that is a different model. TATL low-cost has also way more non-stop competition, notably Norwegian and Level.

Ryanair, easyJet and Wizzair keep growing and growing and the only way to grow is to get into niche markets and kill the smaller players in those places.
 
tonystan
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:14 pm

The only difference in Europe is that there seems to be too many stupid rich people willing to part with their fortunes by throwing it into an airline!
My views are my own and do not reflect any other person or organisation.
 
Dieuwer
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:17 pm

tonystan wrote:
The only difference in Europe is that there seems to be too many stupid rich people willing to part with their fortunes by throwing it into an airline!


Count pension funds too. Although they got the memo eventually and ditched Ryanair stock in 2017... https://www.ft.com/content/8196a46e-317 ... ef563ecf9a
 
talonone
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:37 pm

Let me put a simple example. In 2007, MAD-BCN-MAD was the city pair with the most traffic between a pair of cities. And the arrived the HSR..
MAD-BCN by train - 2h
By plain 1h. But.... from airport to city, after disembarking, another 30- 40' By rail, you reach the heart of the city.
Today, I believe, you have1/× of the flights that where available in 2007.
Can count the HSR as one of the nails...
The space and human stupidity are endless. Maybe the space is not... but the human stupidity for sure!
 
Elementalism
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 6:49 pm

cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


I really doubt regional rail service in Europe is causing entire airlines to fail. China has a well developed HSR and air service expansion still cant keep up.
 
mutu
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 8:47 pm

Typical air fares charged in Europe for short haul.arei imagine meaningfully lower than in the US.

Whilst not all fares are rock bottom the FR model has lead in fares consistently available at as low as £19 including fees and taxes. So if you want to go head to head you have to be able to match. Most new entrants underestimate the competition in that space. And some underestimate how many viable point to point NEW routings there are.

Against that the LCCs have undoubtedly created new market with more people flying more frequently due to.low fares. But inevitably they have cannibalised the legacies too to a degree and they have responded by unbundling fares and offering HBO fares etc such that the proce differential between say a KL or BA and FR is much more modest than it was which squeezes the less established players further.

A final point of note. The statutory compensation scheme for delays etc in Europe hurts the LCCs particularly relative to the fare paid. Often your compensation for a 3 hour delay can be more than the fare you paid.

And as an afterthought ATCin Europe is not seamless with multiple agencies handing a single flight across very crowded airspace. Delays can be substantial in the ordinary course due to weather etc. Yes I know this applies in US too but as an example imagine all flights from UK to say Spain having to fly around say France periodically. Adding fuel cost and delay

Oh and I suppose I will throw in the strong dollar means any airline outside the US has had a local currency increase in fuel above and beyond the commodity price itself (the legacies less so if they have material $ revenues to hedge against)
 
factsonly
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 8:59 pm

zakuivcustom wrote:

You forgot Aloha.

And it's the same week...
Aloha: March 30, 2008 (Sunday)
Champion: March 31, 2008 (Monday)
ATA: April 3, 2008 (Thursday)
Skybus: April 5, 2008 (Saturday)


There is a simple explanation for the correlation in timing of these airline failures.

Companies often fail at the end of winter, that is after an extended period of low passenger volumes, plus low yields.....they simply run out of cash.

There are many great examples:

- Laker Airways - February, 5 1982
- Eastern Airlines - January 19, 1991
- WOW Air - March 28, 2019
 
stylo777
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 9:09 pm

it's simply a market adjustment of bigger scale with the weakest links falling apart.
I expect this to continue until we reach a point when only big players and their subsidiaries are around. this will also set the crucial milestone for price increases! nowadays, it's just too cheap to fly - from every standpoint. yes, I'm a great aviation enthusiast and love to spend as much time on a plane and at the airport as possible; however, selling tickets for as low as 1 EUR is poison for the airline, the airport, the environment and many more. it's surely against the ULCC model, but I'm in favor of a minima-regulation based on miles flown and would certrainly support this sustainable approach.
 
mjoelnir
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 9:23 pm

Dieuwer wrote:
SCQ83 wrote:
There is too much competition and not enough of a market.

Most airlines (specially large low-costs like Ryanair or easyJet) have unrealistic yearly growth expectations (like 10% or 15%). There is simply not enough market for that. So those big fishes (Ryanair, easyJet, Wizzair, EU3) increasingly eat the market of the small players (BMI, Germania, etc.)

With the overall European economy cooling down and too much offer, the weakest links are starting to fall apart.


cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


Primera was founded in 2003. WOW in 2011. Rail competition is around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?


Who should ban them to start flying?
 
SpaceshipDC10
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 9:29 pm

Dieuwer wrote:
So what's the deal with Europe??


How many airlines attempted to serve various markets in the U.S. since 1979 and failed? ProAir, EastWind, Skybus, Midway 1, Midway 2, Midwest Express, Pan Am, Pan Am 2, Pan Am 3, Eastern, Braniff, Braniff 2, Braniff 3, Muse Air, Hooters Air, Kiwi International, Miami Air, Laker Airways, Sun Country (failed and relaunched), Presidential Air, Win Air, Air South, etc, etc, etc.
 
Kilopond
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 9:59 pm

Some of the dwarf airlines in Europe might be linked to money laundring/organized crime/mafia. OLT/Golden Amber had been operating as a Ponzi scheme. Even mid-sized players had been linked to very dark channels at the end of their lives. Cimber Sterling, Malév, anyone?
 
Prost
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 10:07 pm

After the US deregulated there were a lot of startup airlines that didn’t make it. Europe is a little later than the US in deregulation, so my guess is we’ll see similar market reaction.
 
Waterbomber2
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 10:54 pm

Dieuwer wrote:
SCQ83 wrote:
There is too much competition and not enough of a market.

Most airlines (specially large low-costs like Ryanair or easyJet) have unrealistic yearly growth expectations (like 10% or 15%). There is simply not enough market for that. So those big fishes (Ryanair, easyJet, Wizzair, EU3) increasingly eat the market of the small players (BMI, Germania, etc.)

With the overall European economy cooling down and too much offer, the weakest links are starting to fall apart.


cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


Primera was founded in 2003. WOW in 2011. Rail competition is around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?


I agree that it's a total disaster but I think that in most cases, it's a matter of proper management.
Also, I think that the European market is much more mature compared to the U.S., as Europe has a heavily served airport every less than 200 km.
Rail competition has little to do with what's going on.

Airlines like LH and BA are also relatively poorly managed but they get away with it thanks to shear market strength. This part of the market is very similar to the U.S. where the majors get away with poor management thanks to shear purchasing power and high incomes.
Where Europe is different from the U.S. is the LCC arena, the European market is much more mature and diverse.

Airlines have always come and gone in Europe and it will stay that way.

Yes, Ryanair may also disappear some day, don't take anything for granted.
 
SpaceshipDC10
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 11:02 pm

Waterbomber2 wrote:
Yes, Ryanair may also disappear some day, don't take anything for granted.


Indeed. There used to be a "Flying Bank" on the old continent that was perceived as being there forever. Well, it's gone bust almost 20 years ago, already. And no, it can be compared to the present incumbent.
 
Northpole
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Re: European Aviation Market: Total Disaster

Thu Mar 28, 2019 11:49 pm

MIflyer12 wrote:
LSZH34 wrote:
The US as a single country is somewhat protected from foreign competition.


How is the U.S. different from the EU's single market in aviation?


Europe > No Chapter 11 , you can not file for bankruptcy and still operate your airline( or business ), mergers are often not approved by authorities due to restricted competition etc. so a free competition
with the customer in focus means some companies goes out of business.
 
Someone83
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 5:41 am

The aviation market in Europe works fine, and is far from any disaster. There will always be exceptions, but well run airlines that has the ability to adapt and adjust to the market conditions succeed, while those who don't will eventually go bankrupt. Don't see any issue with this
 
oOfredOo
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 5:55 am

Cost of capital too low due to a decade of zero interest rates. This fuels purchase of too much hardware based on ever increasing projections of a market that is not there. There will be blood in other sectors as well.
 
VSMUT
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 6:20 am

Dieuwer wrote:
cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


Primera was founded in 2003. WOW in 2011. Rail competition is around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?



Actually, railway networks, high speed rail and ticket options have greatly improved since 2003. It is a much, much bigger factor today.
But Primera and WOW weren't affected by that - trains didn't compete for the same market. It should also be said that Primera was a charter company for most of its lifespan, only went scheduled low-cost around 2017, which was what killed them.

IMHO, pilot shortage is becoming a factor for many of the smaller airlines. Wages and training costs are increasing as candidates now have options in the job market. Small companies cant fund the inductions with pay-to-fly any more, many airlines have even resorted to paying the type ratings themselves. There is not a shortage as in cancelled flights, but the excess is now so small that conditions are improving.
 
Blerg
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 6:45 am

I think the European market does just fine. Of course there were some bankruptcies but they were mostly caused by extremely bad management as was the case with Cobalt or WOW. Then you have airlines such as Malev who carried a lot of baggage from the Communist era. So you can't just take a massive market such as Europe and fit it all together in a single box.

Some markets have thrived as in the case with Greece. Aegean was founded in 1999 and 20 years later it has a fleet of 49 aircraft, operates profitably and it keeps on expanding. It eventually replaced Olympic which was terminally ill and was kept on life support. Another Greek airline that seems to be doing really well is Ellinair. They were founded in 2013 and they are backed by Mouzenidis Travel. They operate a great deal of summer charter flights which enables them to have a lot of revenue to support the expansion of their scheduled traffic.

Then you have Volotea, a regional European airline with 32 aircraft which has been profitable since 2014, so since year 2 of their existence.

Romania's Blue Air was founded in 2004 and it keeps on expanding, not only in its home market but elsewhere in Europe as well. They have a fleet of 26 aircraft and have 6 different hubs or focus cities.

Wizz Air was set up in 2003 and today it operates a fleet of 109 aircraft and has not only consolidated its positions across eastern Europe but now they are even expanding in the West where they will face well-established carriers.

What about charter airlines such as Enter Air which was founded in 2009 and today operates successfully a fleet of 24 aircraft?

I would also like to mention airBaltic and LOT as two airlines that struggled greatly but that have managed to turn around their business and actually become successful and profitable.

There are many more examples of such airlines which only goes to show that when it comes to competition, European consumers have nothing to worry about. Yes, some airlines have gone bankrupt but others have come along and replaced them. All the airlines I mentioned above were founded in the past 19 years. Now, tell me, the US as the single biggest market in the world, how many new carriers were successfully established since B6 was launched?
 
jcancel
Posts: 133
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 6:52 am

There were national carriers that were well established but are now faltering, like MH. TG AFAIK isnt failing but had to cut back a bit. SQ is doing ok but it has Scoot for a reason. JA and NH now have their own LCCs too...

LSZH34 wrote:
Asia does not have well established national carriers in countries where the local LCCs originate.
 
mxaxai
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 7:51 am

Blerg wrote:
Volotea, Blue Air, Enter Air

All three are relatively small, smaller than Germania. Germania had a somewhat similar business model of under-served niche routes and charters. If Ryanair, Wizz Air or any of the legacies wanted to crush them, they easily could.
Blerg wrote:
Wizz Air

Wizz Air, much like the struggling Norwegian, is expanding significantly outside its home market. There are huge risks that come with that and success is far from guaranteed. I could see them fail and/or be bought within the next few years.
Blerg wrote:
I would also like to mention airBaltic and LOT

Which are legacy carriers and charge pretty high prices, especially for the low eastern european income. Great for business travellers but a poor choice for consumers overall.
So many people claim "US tickets cost more" but once you don't have direct competition on EU flights, you can easily expect to pay >300 US$ return for a 1 hour flight. For example, Stuttgart - Berlin starts at ~ 70 € (U2 & 4U) whereas Stuttgart - Hamburg starts at ~ 280 € (4U only).

(booked 1 week in advance)
 
FlapsOne
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 9:25 am

The euro aviation market is doing very well and that’s without the need for blank cheques of taxpayer money to bail them out in rough patches. A small amount of niche carriers who lacked critical mass, lacked direction and over stretched themselves have gone. Outside of those aviation is growing, airlines are making good margins.

Changing habits. People have figured they can do without ‘free’ food for a few hours and have switched down a brand, just like we did with ALDI/LIDL in the recession. Suddenly people realised they don’t need twenty types of cornflakes to choose from and the rest is history.

Consolidation, expansion and cheap money have allowed euro LCCs to dominate with their lower fares, diverse route structure and the possibility to fly non stop where the legacies will send you through a hub with all of the hassle that entails

I still remember the days of £400 day returns to London and £300 one way flights when you didn’t buy an APEX return. Now I can buy a day return, a one way or a standard return for less than a quarter and there’s no Saturday night stay required. This allows more people on all budgets to fly and see the many great places that this continent has to offer.
 
Blerg
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 9:37 am

mxaxai wrote:
Blerg wrote:
Volotea, Blue Air, Enter Air

All three are relatively small, smaller than Germania. Germania had a somewhat similar business model of under-served niche routes and charters. If Ryanair, Wizz Air or any of the legacies wanted to crush them, they easily could.
Blerg wrote:
Wizz Air

Wizz Air, much like the struggling Norwegian, is expanding significantly outside its home market. There are huge risks that come with that and success is far from guaranteed. I could see them fail and/or be bought within the next few years.
Blerg wrote:
I would also like to mention airBaltic and LOT

Which are legacy carriers and charge pretty high prices, especially for the low eastern european income. Great for business travellers but a poor choice for consumers overall.
So many people claim "US tickets cost more" but once you don't have direct competition on EU flights, you can easily expect to pay >300 US$ return for a 1 hour flight. For example, Stuttgart - Berlin starts at ~ 70 € (U2 & 4U) whereas Stuttgart - Hamburg starts at ~ 280 € (4U only).

(booked 1 week in advance)


So what if Volotea, Blue Air or Enter are smaller than Germania? Germania was founded in 1978 and they have been present on the European market for much longer than the three. Relatively speaking, these three seem to be performing well compared to Germania, that is if we compare how long they have been in existence and where they are today. Also, the three airlines are financially sound, something Germania has not been in a long time.

Wizz Air might be struggling but their struggle is completely different from the one at Norwegian. Wizz Air has not launched long-haul flights, they have not expanded rapidly in a new core business activity, they did not get expensive widebody aircraft and more importantly, their costs are much lower. Furthermore, Wizz Air can rely on their extremely strong position in eastern Europe and they dominate in a great number of markets. In what markets does DY dominate in? From what I know it's only Norway with a population of some five million people, that's roughly the size of Slovakia. Yes, sure, purchasing power is much greater in Norway but so are competition and costs. I wouldn't put Wizz Air and Norwegian in the same box.

No one is said tickets on flights without competition are lower in Europe but average fare in Europe tends to be lower than that in the US for a wide range of reasons. Also, I wouldn't say income is low in countries such as Poland, Slovakia or the Czech Republic. It might not be the same as Luxembourg or Belgium but it's also not the same as Bulgaria, Romania or Moldova.

I think you are trying to create a situation which doesn't really exist, that is that the European market is in some state of utter disaster. Reality is that the market itself is doing pretty fine.
 
Bobloblaw
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 9:50 am

It’s a market that works. No abusing Ch 11 bankruptcy laws like in the USA
 
afgeneral
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Joined: Sat Jul 02, 2016 2:43 pm

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 10:26 am

The market forces seem to be working just fine. Airlines going out of business is normal.

The US airline market is run like a cartel where airlines were allowed to merge in order to destroy competition, reduce capacity and increase prices.

Also bankruptcy laws are way too permissive in the US. They seem to treat major airlines with the same too big to fail approach which they use with banks. Whereas banks can indeed be too big to fail because their demise would cause disastrous systemic effects on the economy, we can't really say the same thing about airlines.
 
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cougar15
Posts: 1439
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 10:44 am

Hmm... I see it a bit different
- Air Berlin, a basket case for over 10 years without a clear vision or direction, it should have died years ago (as much as I miss them)
- Monarch, marginal at best, remember the fiasco the year before they died? Margins were slim , Brexit and the resulting devaluation of the pound broke the camels back.
- WOW, I don´t really know if you could consider Island as Europe propper, it is simply to far out! Overexpanded and payed the price , the EU consumer is exceptionally sensitive to failure in service delivery
- Germania, a great Airline to fly with but who/what were they? Did they really need a new fleet at the choosen timing, when there was neither vision or strategy relating to their market position?

There were others, who the hell or what was Skyworks again and we don´t need to discuss BMI Regional, or Darwin etc etc


Capitalism at it´s best, regulating itself exactly as free markets should! Nothing really to see here me thinks.....!
some you lose, others you can´t win!
 
mxaxai
Posts: 1763
Joined: Sat Jun 18, 2016 7:29 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 11:11 am

afgeneral wrote:
The market forces seem to be working just fine. Airlines going out of business is normal.

But having very few new & successful airlines, and more importantly very few routes with 2 or more carriers is not an ideal market. Many regions are dominated by one carrier. The shorthaul void a collapsing carrier leaves is often filled by Ryanair, Easyjet or Wizz Air. But the longhaul passengers are often rerouted via the existing hubs, e. g. when Airberlin or Malev left. Thin routes or smaller airports simply lose services because their volume is too low for the LCC's, so passengers are again forced to take expensive detours via legacy hubs. Ryanair is interested only as long as they get subsidies. For example, most of the minor routes offered by Germania or FlyBe would not be picked up by other airlines. This is probably one thing the italian government is afraid of if they let Alitalia fail.

Yes, the overall traffic volume is still increasing. But with each bust airline the consumer loses choices and destinations.
For example, KEF is losing a huge chunk of its destinations due to bankruptcies while only very few are being added. It will take a few years until airlines dare to touch those markets again:
SCQ83 wrote:
- Alicante (Primera Air)
- Bremen (Germania)
- Cincinnati (WOW)
- Cleveland (Icelandair)
- Cleveland (WOW)
- Cologne (Eurowings)
- Dallas (Icelandair)
- Dallas (WOW)
- Dresden (Germania)
- Düsseldorf (Eurowings)
- Düsseldorf (WOW)
- Edinburgh (WOW)
- Gran Canaria (Primera Air)
- Halifax (Icelandair)
- London Gatwick (WOW)
- Los Angeles (WOW)
- Luxembourg (Luxair)
- Málaga (Primera Air)
- New York JFK (WOW)
- Nuremberg (Germania)
- Palma de Mallorca (Primera Air)
- Pittsburgh (WOW)
- San Francisco (WOW)
- St Louis (WOW)
- Stuttgart (Eurowings)
- Tenerife Sur (Primera Air)
- Trieste (Primera Air)

New routes I can see are ARN in SAS and KRK in W6 from September.
 
WIederling
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 11:17 am

Mortyman wrote:
The US is a social welfare state for businesses rather than consumers. That is the difference ;-) :-)


The culmination of corporate "persons". nice. That is equality. And some pigs are just more equal.
Murphy is an optimist
 
senatorflyer
Posts: 325
Joined: Tue Jul 24, 2012 10:57 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 11:22 am

The three big airline groups have adjusted their fare and service structure in the recent years. There is almost no difference between a LCC and the legacies anymore. Even Swiss sells tickets out of Geneva without food on a trial basis. I will bet that at some point in future LH Group and AFKLM will ditch the free catering as well. Paired with overcapacity in general the smaller airlines simply cannot compete anymore.
 
Pyrex
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 12:04 pm

As usual, these threads bring out the Euro ignorance about the U.S... Chapter 11 is a protection for the CREDITORS, not the company. It is a realization that, in most cases, creditors of a company are much better off economically by letting the company operate in bankruptcy, even if they ultimately get a haircut, than just immediately liquidating a business. Creditors are always free to disagree, though, and can request a Chapter 7 liquidation if they believe they would ultimately be better off with it.

All other things equal, a creditor would much rather lend money to a company in a jurisdiction which has a Chapter 11 type mechanism and strong bankruptcy law jurisprudence to one that operates in a jurisdiction that does not.
Read this very carefully, I shall write this only once!
 
Bongodog49
Posts: 182
Joined: Fri Feb 08, 2019 11:35 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 12:45 pm

There seems to be a high degree of over reaction here, WOW had a fleet of 10 or 11 planes, they were literally a flea on the back of the European aviation market, they also had a business model of flying passengers to/from Iceland, I appreciate that Iceland has stunning scenery, but its never going to be a mainstream tourist destination, visitor numbers from Europe have started to fall, and the percentage year on year increase from the US is tailing off.
Then we have Monarch, they thrived when UK consumers flocked into travel agents and booked 7 or 14 day package holidays to the Med, if you wanted to fly say LTN to FAO the flight would be on the same day at the same time every week. Then along came FR and U2, offering daily or 2 x or even 3 x daily flights allowing passengers to choose the length of their holiday. Monarch then kept changing their business plan, lets go long haul, lets go Airbus, lets go short haul, lets go Boeing etc.

These failures reflect the strength of the market, not its weakness. They are caused by consumers having a greater choice.

As to everything is better in the US, the day you do not have significant numbers of people down on their luck living in trailer parks, then come back and preach. I can see the advantages of living in the US if you are middle class, earning well and in good health, if however I was down on my luck with poor health It is the last place I would want to be.
 
ewt340
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 12:48 pm

European aviation market is more Capitalist than the American one. Hence why many weak players are dying off.
 
Dieuwer
Topic Author
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 12:50 pm

Looks like Alitalia is the clever one: getting handouts to stay alive. Should WOW (and others) also have received handouts, endless amounts of "bridge loans"? Seems like there is an unfair (illegal discriminatory) treatment of airlines in Europe.
 
Bongodog49
Posts: 182
Joined: Fri Feb 08, 2019 11:35 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 1:03 pm

Dieuwer wrote:
Looks like Alitalia is the clever one: getting handouts to stay alive. Should WOW (and others) also have received handouts, endless amounts of "bridge loans"? Seems like there is an unfair (illegal discriminatory) treatment of airlines in Europe.


Its just not worth mentioning Alitalia in any serious discussion about airline finances, it doesn't matter how you look at it, be it EU competition rules, good business sense, the passengers themselves; it's an airline that should have disappeared years ago. The other factor is that you have to have a government that is prepared to not only keep writing blank cheques, but also willing to break every rule going.

Rather like the story that the only living thing that can survive nuclear armageddon is the cockroach, so is Alitalia the only airline that could
 
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kelvin933
Posts: 451
Joined: Tue Aug 19, 2014 9:20 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 1:03 pm

Dieuwer wrote:
SCQ83 wrote:
There is too much competition and not enough of a market.

Most airlines (specially large low-costs like Ryanair or easyJet) have unrealistic yearly growth expectations (like 10% or 15%). There is simply not enough market for that. So those big fishes (Ryanair, easyJet, Wizzair, EU3) increasingly eat the market of the small players (BMI, Germania, etc.)

With the overall European economy cooling down and too much offer, the weakest links are starting to fall apart.


cdin844 wrote:
I think a big difference is flights within Europe have additional competition with rail. We don't really have that in the US except in the Northeast.


Primera was founded in 2003. WOW in 2011. Rail competition is around longer than that. So why were these two airlines "given the green light" to start flying anyway while "there is too much competition already and not enough market"?? Are European investors that stupid?

You do realize that these airlines had exactly ONE investor each,
Skuli Mogensen and his companies in the case of WOW air and Andri Mar Ingolfsson and his Primera Travel Group in the case of Primera Air.
You are welcome to call them stupid though I would use the word overconfident in their ability to finance and run an airline.
“Nations have no permanent friends or allies, they only have permanent interests.”
 
OSL777FLYER
Posts: 161
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Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 1:19 pm

The U.S. has had their shares of major failures in the past as well. ATA, Skybus, Hooters, Aloha, Independence Air etc.

Recently though, Europe has been hit hard. What has been happening in Europe recently is in some case the market correcting itself. But there is an overcapacity. But other reasons have occurred Here are a few examples:

In the case of Air Berlin and Monarch, they both had "issues" with identification, In the case of Air Berlin, "who are we?" They tried to be an LCC, yet they had a business class, FFQ program. In the end, Etihad pulled the plug on the cash, and that was it. Services split between U2/EW/LH.

For Monarch, they went from being an inclusive tour operator, to both IT and seat-only, the only seat only. Simply too much competition.

Skywork and Germania were both niche carriers and very dependent on certain routes. In the case of Germania, apparently there were some shady dealings among who actually owned the airline.

Lastly, one which has not been mentioned here much was flybmi, the "leftovers" of BMI. They stated that contributing factors to their demise was rising fuel costs (as basically everyone has mentioned) BUT for them it was also the issue of Brexit.

The topic author here has made references to Alitalia. Yes, Alitalia has been given several hand-outs over the years. Although not legal to do in Europe, they found a way around it for a while. Recently, Etihad I believe has been their major benefactor.

Although hand-outs, or cash from governments or whatever you wish to call them, technically is not legal. Sometimes governments look at the bigger picture. As we do not have chapter 11, it is go or bust. In the case of a bust. Would the government be better off helping an airline or letting 15,000 employees lose their jobs and then be dependent on financial aid from the government then, which is their right. Let people lose their jobs, or giving a loan to see if other arrangements can be made? perhaps a buyout etc.
 
mxaxai
Posts: 1763
Joined: Sat Jun 18, 2016 7:29 am

Re: European Aviation Market: Total Disaster

Fri Mar 29, 2019 1:38 pm

OSL777FLYER wrote:
Although hand-outs, or cash from governments or whatever you wish to call them, technically is not legal. Sometimes governments look at the bigger picture. As we do not have chapter 11, it is go or bust. In the case of a bust. Would the government be better off helping an airline or letting 15,000 employees lose their jobs and then be dependent on financial aid from the government then, which is their right. Let people lose their jobs, or giving a loan to see if other arrangements can be made? perhaps a buyout etc.

I think the story of Swiss is one that shows how a bankrupt, state-affiliated airline can be transformed into one that offers low fares, decent service and still generates profits, but doesn't need to resort to dubious employment schemes and local subsidies (like a certain LCC).

The german government kept Airberlin alive for a few months to prevent the chaos of a sudden shutdown. They received significant flak internally because they handed money to a technically bankrupt company without any expectation of repayment, which is quite deserved IMHO.

But Airberlin, Wow Air and Germania had one major weakness: Their brand is weak. The national legacies are symbols of national pride. They already receive direct and indirect support from their governments, much more so than any post-deregulation airline. They know how and where to lobby for their interests. We all love to joke about Alitalia but I guarantee that France would not let AF fail, and Germany will do anything to ensure LH's success. Their brand is just "too big to fail". The traffic would get picked up but the lost pride is immeasurable.

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