Willie walsh expects more Mergers and Liquidation/Bankruptcies!

[HeathrowAirport]

By Bill Rigby Reuters - Monday, May 19 11:24 pmNEW YORK (Reuters) - British Airways' chief executive expects more failures and more mergers in the air industry this year as carriers face the challenges of soaring oil prices and a weak U.S. economy.
http://row.bc.yahoo.com/b?P=aJP1.1f4aiv9rKHpR.QZ6wGmUhjL7kgzS6EABVQF&T=1456gkcnt%2fX%3d1211321249%2fE%3d2022425142%2fR%3dukie_new s%2fK%3d5%2fV%3d2.1%2fW%3dHR%2fY%3dUKIE%2fF%3d1650258203%2fQ %3d-1%2fS%3d1%2fJ%3d6F060CD9&U=13oj7fapv%2fN%3dTtzkHFf4aho-%2fC%3d200101456.201663715.202894854.200222684%2fD%3dLREC%2f B%3d200784479%2fV%3d1
"I suspect that many airlines out there that struggled when fuel was less than $100 a barrel are not going to be able to take the required actions and we will see further failures," said Willie Walsh, speaking at an investor presentation in New York on Monday.
With crude oil cresting $127 a barrel, roughly twice its price a year ago, and the U.S. economy dangerously close.............

http://uk.news.yahoo.com/rtrs/20080519/tts-uk-britishairways-ceo-ca02f96.html


I do say that the economy is falling apart and that the next airline may be a big one, Alitalia in mind. Is this all to do with Global warming or Aftermath of 9/11 being shown?


Regards,


Robbie

[biddedout]

This period of mergers and consolidation was all predicted and explained in the book The Airline Business in the 21st Century by Professor Rigas Doganis about seven years ago. Apart from the fuel price, no surprises so far.

[kotakota]

Dear Robbie / Heathrow -whatever..

ALITALIA ?? Naive boy .....they will still be going when the dust of the current recession settles , mark my words.
Take a tip , if you work for a private / equity owned /shareholder - owned airline , the recession will make you wish for a State / Government-owned airline to be your employer.
Does anybody have a firm date of when we all started predicting the demise of Alitalia ?
I am off to the Gulf , see you all in a few years.

[barry lloyd]

ALITALIA ?? Naive boy .....they will still be going when the dust of the current recession settles , mark my words.

...and Olympic - for the same reasons. Both countries' governments are experts in manipulating European law, and have a pride in their national airline.

[Ian Brooks]

I think the big one will be an American Airline, which one I am not sure but my reasoning is that the dollar is weak against most currencies and many of the US airlines are already in a weak position.

The strong airlines of Europe and Asia/Mid East could well gain a strangle hold on Trans Atlantic flights and it may well have a very large effect on Open Skies

Going off to work now so look forward to reading this thread when I get home

Ian

[fendant]

Do not forget AUA of Austria. They need 40 years to pay back debt out of with their current free cash flow.

Too much intervention from politicians. Recently Gusenbauer the Austrian chancellor declared that they will remain Austrian. Sure he is waiting for the illegal tricks Berlusconi will surely apply to keep Alitalia in Italian ownership. Both companies will definitely increase their losses in Q2 08.

Olympic??? They still exist ?

[The SSK]

Lots Of threads all running along similar lines – fuel price – BA grounding aircraft – consolidation and bankruptcy.

Amidst all this, one thing is being overlooked. By the end of this summer, political decisions will have been taken about applying an Emissions Trading Scheme to aviation in Europe, probably from 2012.

Now there’s no point in bleating that this is some madcap and wholly misdirected scheme dreamed up by Brussels, because that isn’t going to stop the process. It is going to happen and airlines which are in denial about it will be worse off than those which prepare for it.

So what is an emissions trading scheme? Purely and simply, it is fuel rationing. Airline x is allocated permits to emit y% of the CO2 that it emitted in base year z. Since a given amount of kerosene produces a given amount of CO2, that is equivalent to supplying airlines with a stock of fuel coupons. When they run out, you have to hunt around for another airline which has some to spare, and will sell them to you.

The details will be thrashed out this summer between the European Commission, which is broadly sympathetic to the airlines, the Parliament, which wants to squeeze the industry until the pips squeak, and the EU States, some of whom see an opportunity to raise cash by selling, rather than giving, the airlines their ration coupons.

Make no mistake: the amount of permits in circulation will be lower than current fuel burn and if the radicals get their way, a lot lower. And will reduce every year after the scheme kicks off. So our industry WILL shrink, unless it can come up with year-on-year CO2 efficiencies which outstrip the reduction in permits, in which case it might manage a very small growth rate, much lower than it has enjoyed in the past.

How will it shrink? Some airlines will quit the industry, either driven into bankruptcy by the extra costs of ETS or they will discover their permits are worth more on the open market than being used to continue operations, and go into voluntary liquidation. Other airlines will downsize, some in a planned process like BA is proposing, some in a panic process like Alitalia (assuming it is a survivor). Some will merge and rationalise their networks. Those which still have gas-guzzlers will replace them as best they can (where is the new generation of efficient shorthaul aircraft?).

All this doesn’t make a lot of sense if Chinese, Indian and Gulf carriers continue to grow and grow – but that is very unlikely to stop the process in Europe, it is far too far advanced for that. Instead there will be a major effort to spread the ETS gospel worldwide at ICAO level in 2009. When it was discussed there last year the European position attracted virtually no support. Things might be different next year.

Whatever. Believe this, though: business as usual, in Europe at least, is no longer an option.

[airfoilmod]

When us colonials got fed up with HRH George III taxing our stuff when we had no say in it, well, you know the rest. One of our Founding Lads defined our upset as caused by "Taxation Without Representation". Do you "elect" the wigs in Belgium? Thought not. Keep track of the money, when enough citizens wise up to the scam, and the rascals are in retreat, you can try to recoup some of your "losses". Carbon Dioxide? Global "Warming"? If you see Al Gore, tell him to phone home, we'd like a chat.

England, dear England, you drink poison expecting someone else to Die.

Airfoil

[The SSK]

Do you "elect" the wigs in Belgium? Thought not.

Ah, that old mantra. Did you see the word 'Parliament' above? They are elected. The most persuasive voice on this issue (in the anti-airline lobby) was elected by English voters, in the South-East England constituency, to be precise.

The European Commission are civil servants. Like civil servants everywhere, they are not elected. They have come up with a policy on ETS which is broadly acceptable to the airlines. It is the elected Parliament which is distorting this policy for political rather than environmental motives - to raise tax revenue, to favour the railways, to divert attention away from motorists or simply to burnish their green credentials, whatever.

[840]

The European Commission is selected by the national parliaments. If you have direct elections, some people get upset about federalism. If you don't, some people get upset about a lack of democracy. It's a no-win situation.

Anyway, taxation is set by the national governments, not Brussels.

[LGS6753]

Under the emissions trading scheme, indeed one has to purchase credits if one uses one's own allocation. But will the scheme be restricted to airlines (as is suggested above) or will airlines join the existing ETS? If the latter, initial allocations were very generous and airlines would have the opportunity to trade with industrial users. After all, one is trading the right to emit CO2, with no stipulation as to what creates the emission.

[pee]

It's VERY FAR from the bankruptcy or any serious troubles - but look, even FINNAIR warns of tougher times ahead...Finnair Oyj Company Announcement
EXPENSIVE OIL AND SLOWER GROWTH IN DEMAND WILL WEAKEN FINNAIR'S RESULT

22 MAY 2008 AT 13:30

The price of fuel, continually rising to new record levels, as well as slower
growth in demand for air travel during the spring have weakened Finnair's
earnings prospects.
Factors troubling the entire sector - rapidly rising oil prices and a sharp
fall in passenger load factors - are also clearly weakening Finnair's
profit-making capacity. With the current outlook, we can assume that the
operational result for January-June and therefore the full year will fall short
of last year's levels, says Finnair President & CEO Jukka Hienonen.

At the beginning of the year, jet fuel cost 850 dollars per tonne. Now the
price is clearly above 1,300 dollars. For the whole year, fuel costs are
expected to rise, despite price hedging, to more than 600 million dollars,
which is more than a quarter of estimated turnover. Last year Finnair's fuel
bill was around 440 million euros. Fuel is the company's largest single cost
item.

Finnair scheduled traffic's passenger load factor in April was six percentage
points below last year's level. In May, traffic is expected to grow further,
but capacity will grow greater than demand, so passenger load factor continue
to fall.
The effects of the world economy on air transport are already evident as a
trend that will decrease passenger demand. We are now planning to reduce
capacity, particularly in Europe. Due to the short advance booking horizon, it
is difficult to make forecasts far into the future, says Hienonen.