There seem to be fluctuating fortunes, for airlines in particular at the moment, who are being challenged by a variety of issues.
Flybe don’t have their problems to seek; Norwegian are looking for a cash input; Ryanair, by their standards, posted poor results, and even on the charter side Thomas Cook looks as though they want to rid themselves of their whole fleet of aircraft.
Virgin Atlantic plans for Flybe have hit a stumbling block with a challenge from shareholders who feel aggrieved at the minimal return they’ll get for their original investment. However, Flybe was in bigger trouble than most people thought. Virgin and Stobart, in their formal documents, show that they believed Flybe could not even continue under administration, so deep are the problems. If they can fend off the challenge by shareholders, who must by now feel the fight is a lost cause, then both Stobart and VS will be intent on making a lot of changes to the Flybe structure. Don’t expect to see all Flybe flights under VS colours. That won’t happen, although we may possibly see a return of Virgin Red on appropriate routes. However, do expect to see wholesale schedule changes, reduction in flights and getting rid of aircraft as well - and soon.
Norwegian reported their second successive yearly loss; however it’s not their losses that is their main problem. It’s their debt pile, which is enormous - somewhere in the region of NK20bn - with little sign of how they can reduce it. BA has lost interest in buying them, as have others. Announcing they want to concentrate on profit rather than growth, Norwegian now seems to realise that without profit there can be no growth.
Ryanair had to reduce fares over the winter, and has felt the effects of that quite sharply, with losses of £19 million for the last quarter. Last year they made £98m over the same period, so the airline will be feeling the effects. However since Mr O’Leary has signed a new contract until 2024, despite expectations he might step down, we can look forward to more fun times from the Irish carrier.
In the holiday business, Thomas Cook not only want to get rid of their fleet; it looks like they most certainly have to. Challenges over Condor flying within Europe are mounting and whilst vertically integrated companies can reap the benefits in the good times, when there is a downturn - however small in percentage terms - filling all your seats, hotels and package holidays is a real challenge. However they will need to sell their fleet with contracts that allow them to continue to use the capacity to fly their clients, so - not just a simple fire-sale. Again, the massive debt that Thomas Cook is carrying is also weighing them down in challenging times.
Could it be that accountants don’t truly understand the travel business quite as well as travel people understand the financial realities? Applying the normal strategies of other industries has normally never applied to the way the travel industry works.
However, the recent good news for Scotland is the announcement of Qatar’s double daily flight schedule out of Edinburgh for the Spring and Summer seasons, so we will now see an amazing five direct daily flights, on certain days of the week, through Middle East hubs.
Who’d have thought………...