Airline bankruptcy 2019: causes and options for overcoming the crisis
Many world experts predict a new economic crisis. Complex superpowers’ relations, fluctuations in the cost of important resources and other processes increase its probability. Difficulties to touch upon most areas, including transport. A number of analysts predict that the airline will go bankrupt in 2019.
According to the IMF results, the world economy has slowed down and this trend will continue in the near future. The consequences of the downturn will affect virtually all industries, and air travel will not be an exception. There is already a crisis in the industry: many companies in various countries are closing down, while others are taking urgent measures to stabilize the situation. According to data from the International Aviation Bureau, the segment now has the highest bankruptcy rate in its history.
According to experts, such processes are always observed before a decline in economic growth and during recession. An alarming signal for analysts was the closure of such major airlines as Jet Airways from India, Brazilian Avianca, as well as travel group Thomas Cook from the UK. The dynamics will continue next year, and if the situation worsens, the industry will face a serious disaster.
In September 2019 alone, 17 airlines, including organizations from Germany, France and other developed countries, reported the bankruptcy.
Such processes are related to seasonality. The summer tourist period is over, and the entire segment is experiencing a decline in profitability and low load. In addition, global problems such as the rise in the cost of aviation fuel and currency fluctuations in the market also have an impact. These factors primarily affect vulnerable companies, which have internal difficulties.
The strengthening dollar has had a negative impact on air carriers from emerging economies. The national currency is losing ground, with rising passenger and transport costs.
The bankruptcy of some companies allows others to strengthen their position. Many try to buy planes and airport seats at reduced prices. The cost of equipment has fallen, which makes it possible to renew the fleet, providing customers with the best service.
The scandal with the Boeing 737 MAX model has become a tangible blow for airlines. Flight on these aircraft is prohibited, and a number of carriers use this very transport. Ryanair also had difficulties because of the MAX. But the solution to the situation was found after the bankruptcy of Thomas Cook. Lowcoster bought back their Airbus A-320s at a low price.
The aviation sector has been in decline since 2018, but now it is gaining global proportions. The most pessimistic forecasts show that the impending economic crisis will hit this segment the hardest, casting aside the development of the industry for several years.
