By Sikha Thakur
Recent report reveals that airline industry is facing failures due to constant rise in oil prices and consumer compensation payouts.
Danish low cost carrier (LCC), Primera, Cyprus-based, Cobalt Air and Switzerland’s SkyWork Airlines are the airlines which has shown constant downfall in this sector in recent months.
In WTM London, from JLS Consulting Aviation consultant John Strickland expressed his view about aviation industry. He informed about an Industry Outlook session, quoting more failures in coming years. The major reason behind the continuous fall of airline business is dramatically rise in the price of the fuel for last 12 to 18 months.
Strickland further added the big deal to watch is Norwegian undertaken by IAG (International Airlines Group). Due to any circumstances if this deal fails it will create even greater challenges for Norwegian. But if situation favours Norwegian and the deal is sealed then they will emerge as more powerful low-cost-long-haul airline.
In past 12 months the price of per barrel has risen 40 per cent estimating US$70 to US$80 per barrel while two years before, price of aviation fuel per barrel was US$30. Low price offerings and simplified services with passengers buying the extras they need is the flavor of the month. While these business tricks have not done much giving limited profit to Air Asia.
Norwegian has improved Q3 profits because of peak summer months though they had faced large losses in 2017. Norwegian is increasing its capacity with planned 20 per cent rise during 2019 despite facing financial crisis. European airlines is also struggling to survive the higher fuel costs with VLM another carrier to shut down this year said Strickland.
European Union law also known as EU261 is creating another problem for airline industry which states to pay high level compensation if the flight is delayed or cancelled. This law leads airline to decide not to operate on certain routes. The law EU261 has to be changed, expressed an airline if they want to operate more airlines in this route.
Strickland said in the Middle East region Emirates is the leading airline far more ahead of rivals Etihad Airways and Qatar Airways. Strong Airline adds to the economic advantage for the governments. “Second tier” are facing more difficulties in comparison to the big three of Emirates, Qatar Airways and Etihad. Governments are also recognizing the need to have efficiency in their airlines. Some hard realities are yet to come for the airline industry.