A bad flight plan for the airlines! After the receivership of Aigle Azur on 16 September, it is now XL Airways’ turn to declare itself insolvent. When we remember that a few months ago, Primera Air – October 2018 – and Wow Air – April 2019 – also went bankrupt, we wonder about the causes of this carnage. Poor management or deregulation of a market left to its own devices?
A fragile balance
The air transport market is unstable. The emergence and proliferation of low-cost airlines has made it even more fragile. This new model, based on low prices thanks to reduced costs, has profoundly changed a business with low margins. By attracting new customers and democratising the market, new airlines have arrived on the scene, with very aggressive strategies for winning over new customers.
The limits of economic liberalism
There’s no one more liberal than a Revenue Manager! We defend entrepreneurial freedom and the benefits of competition, which have enabled everyone to travel more and more cheaply. We believe that the market regulates itself better than a proliferation of rules that could hamper it. Unfortunately, the news tells us that corpses are piling up in airport terminals. The airlines’ cemeteries are being enriched by planes that have been shot down in mid-flight. Stop the massacre!
Beneficiary, rewarded and grounded
XL Airways, for example, made a million euros in profits in 2016 before being voted « best leisure airline in France » by Skytrax in 2018. On the strength of a responsible strategy based on reduced and controlled costs, validated by its employees – no strikes in 15 years – the airline is now threatened with extinction.
How did we get here?
In 2015, Norwegian Airlines positioned itself on the very buoyant market of the United States and the West Indies. It operates three routes from Roissy CDG, increasing the number of tickets and selling them like hotcakes at low prices. The aim of this two-stage strategy is to eliminate the competition by attracting their customers, and then to raise prices once they have got rid of their rivals. It’s hard to imagine that these « sale » prices aren’t made at a loss, a rather vague notion that turns the market into a flea market.
This is the Wild West!
Norwegian Airlines has launched the big manoeuvres without anyone being able to stop it. Neither a record and irrational debt of 350 million euros « invested » by unscrupulous shareholders, nor any regulation on dumping, nor any authority to ensure the proper functioning of its own market.
Today, the company has had to guarantee its own slots in its Gatwick stronghold, and is now facing bankruptcy.
Flight 717 to nowhere
We are calling for regulation of the business to stop the proliferation of loss-making flights on the pretext that the market is « promising ». Because while Uber’s model is based on investment in marketing and technology to develop their applications, the proliferation of tickets that don’t cover their cost price is a form of suicide that is leading all the players involved to crash.
Who will be the Sheriff of Airtown?
There is no shortage of regulatory bodies. IATA, which standardises a certain number of information flows, COHOR, which allocates the famous « slots » at Paris airports, the World Trade Organisation, the European Commission, the States that guarantee anti-dumping practices… Who will establish the right law and enforce it?
Who will check the viability of projects, practices and risks that are destabilising the entire sector? Who will set up a real supervisory authority, which is sorely lacking?
Yes to low cost, yes to yield, but no to the gangsters who are putting the airline industry to the sword.
Keywords: Airlines, XL Airways, Revenue Manager, Norwegian Airlines, low cost
