Issue No. 738

The Avionic Plague

Alright, so the global economy is slowing. But it’s still growing. Oil prices are down by roughly a fifth from levels last autumn. Many short-haul markets are seeing a reprieve from overcapacity due to aircraft shortages. Air traffic continues to grow at a healthy pace. Load factors are at record highs. So why in the names of Orville and Wilbur are so many airlines sick and dying?

Among the industry’s dead and buried in 2019: Germania, Flybmi, Wow Air, Insel Air, XL Airways, Aigle Azur, and Adria Airways. All were relatively small airlines. Not so Jet Airways, Thomas Cook, and Avianca Brasil, all major players in major markets. Include the last few months of 2018, and the airline cemetery looks even more crowded, with the corpses of Europe’s Primera, Kuwait’s Wataniya, Pakistan’s Shaheen Airlines, LC Perú, and Cobalt Air of Cyprus. Flybe, a deeply distressed British carrier, seemed headed for the grave itself earlier this year, before Virgin Atlantic and others stepped in to buy it.

Norwegian is alive today only thanks to accommodating bondholders and a Norwegian billionaire willing to buy its stock. The situation is similar for Colombia’s Avianca, also on the precipice of bankruptcy and currently working to secure a bondholder reprieve to go along with emergency financial help from key shareholders including United. Elsewhere in Latin America, Mexico’s Interjet faces severe financial duress. Africa’s Fastjet is hanging by a thread. Things aren’t quite that bad for Icelandair but bad enough for management to press for labor concessions. Alitalia can’t find its way out of bankruptcy. TAP Air Portugal disclosed heavy first-half losses. The president of Emirates said on Bloomberg Television last month: “We’re not in a good place at the moment.” Never mind the monstrously large losses its neighbor Qatar Airways reported.

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