Three high profile airline failures in just 50 days has raised questions about the strength of Europe’s aviation industry, which has been buffeted by fierce competition and shifting business models.
Analysts say that more losers could emerge in the coming months as smaller, weaker airlines come under intensifying pressure.
Budget airlines led by Ryanair and EasyJet have captured huge amounts of the European market by offering flights for as little as £10 ($13.30), a model that keeps their seats full and leaves competitors scrambling.
According to independent industry analyst Louise Cooper, when the industry sees that supply of seats is increasing faster than demand, they all cut prices and that’s when the “bloodbath” of red ink begins.
Smaller competitors can’t keep up with the top budget carriers because they lack the required scale to negotiate discounts on pricey items like jet fuel.
National carriers, meanwhile, are saddled with legacy costs and expectations that prevent them from adopting the tactics of cheaper upstarts.
There are other issues dogging the industry, including a pilot shortage and deadly terror attacks that forced airlines like Monarch to avoid popular holiday destinations like Tunisia and Egypt.
Deirdre Hutton, chair of the U.K.’s Civil Aviation Authority (CAA), said that she’s not concerned about other British airlines folding.
Meanwhile, Hutton’s CAA is responsible for bringing back Monarch’s stranded customers to the U.K. over the next two weeks.
The biggest airline collapse in U.K. history also affects 750,000 people who had booked future flights and packaged tours.