Turbulent times for airlines -  Take your bets for the next failure

Profit is a matter of opinion, cash is a matter of fact.

Willie Walsh, CEO of British Airways has warned that up to thirty airlines could go bust by the end of 2008 as the industry continues to battle the most difficult trading conditions in a generation. This week XL collapsed and left thousands of passengers stranded. It is fast becoming a familiar story - in this case an integrated travel company and airline struggling to cope with the impact of rising fuel costs and the squeeze on demand caused by the credit crunch which has a decimating effect on their cash-flow. Paddy Power has been taking bets on the next airline or travel operator to fail!

As today’s Independent reports:

“The travel sector is particularly vulnerable at this time of year because operators have to begin paying suppliers, such as hoteliers just as the number of bookings begins to dwindle. This year, however, is especially difficult because the UK’s economic slowdown has begun to damage sales. At the same time, the costs of airlines and other travel companies remain high, primarily because of the hugely inflated price of jet fuel, which has doubled in a year.”

BA’s own fuel costs have risen by nearly £1bn this year and the business has not been slow in introducing cost-saving measures. The company will cut scheduled flights during the winter, raise air fares, reduce capital spending on new aircraft and cut the payroll by not replacing staff who retire. Yesterday they announced too that they have decided to give managers and senior managers the option to apply for voluntary severance.

Desperate times call for decisive action. No airline is safe. Alitalia looks to be the next in line - the airline has been on the ‘condition critical list’ for some time it has said that it is running of the bare cash needed to guarantee the fuel needed to pay for flights in the next few days.