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Will more airlines will go under? Will more airlines will go under?
(21 minutes later)
ANALYSIS By Simon Atkinson Business Reporter, BBC News Oasis - which offered London to Hong Kong flights from £65 - lasted less than 18 monthsANALYSIS By Simon Atkinson Business Reporter, BBC News Oasis - which offered London to Hong Kong flights from £65 - lasted less than 18 months
It is becoming an all-too familiar tale.It is becoming an all-too familiar tale.
An airline says that it is in financial trouble. Before long its planes are grounded.An airline says that it is in financial trouble. Before long its planes are grounded.
Passengers are stranded and scramble for seats on other flights. Efforts to revive the business fail. Air crew lose their jobs.Passengers are stranded and scramble for seats on other flights. Efforts to revive the business fail. Air crew lose their jobs.
UK-Canadian carrier Zoom is just the latest to find itself facing this prospect as it suspends its flights.UK-Canadian carrier Zoom is just the latest to find itself facing this prospect as it suspends its flights.
Its co-founder admits that he "does not hold much hope" of finding the investors needed to rescue the airline.Its co-founder admits that he "does not hold much hope" of finding the investors needed to rescue the airline.
And if it does go to the wall, its name can be added to those of Silverjet, Oasis, Eos and Maxjet - carriers which have gone under in the past year.And if it does go to the wall, its name can be added to those of Silverjet, Oasis, Eos and Maxjet - carriers which have gone under in the past year.
Dangerous timesDangerous times
Some said that Zoom's apparent demise was inevitable and indicative of the times.Some said that Zoom's apparent demise was inevitable and indicative of the times.
And the aviation industry is full of speculation that other carriers are in trouble.And the aviation industry is full of speculation that other carriers are in trouble.
Experts are unwilling to name names, doubtless because this could undermine confidence in carriers.Experts are unwilling to name names, doubtless because this could undermine confidence in carriers.
Silverjet was another carrier hit by high fuel billsSilverjet was another carrier hit by high fuel bills
But there are rumours of some airlines being told they have to pay in cash, upfront, for things such as air traffic control fees and fuel - such is the lack of faith held in the soundness of the carriers.But there are rumours of some airlines being told they have to pay in cash, upfront, for things such as air traffic control fees and fuel - such is the lack of faith held in the soundness of the carriers.
And this is a dangerous time of year for the more vulnerable airlines.And this is a dangerous time of year for the more vulnerable airlines.
As businesses they rely on having a strong cash flow.As businesses they rely on having a strong cash flow.
In recent months they have been collecting ticket money from people booking their summer holidays.In recent months they have been collecting ticket money from people booking their summer holidays.
But as that peak period comes to an end, it is a less busy time with fewer passengers looking to travel and so buying tickets - a position exacerbated by the wider economic slowdown with many putting off non-essential travel. But as that peak period comes to an end, it is a less busy time with fewer passengers looking to travel - a position exacerbated by the wider economic slowdown with many putting off non-essential travel.
Meanwhile, the carriers still have their bills: staff to pay, planes to lease, airport costs to cover. Meanwhile, the carriers still have their overheads: staff to pay, planes to lease, airport costs to cover.
And then there is the biggie: the fuel bill.And then there is the biggie: the fuel bill.
Oil prices may have come down a little from their highs of close to $150 a barrel in July, but they are still about twice what they were a year ago.Oil prices may have come down a little from their highs of close to $150 a barrel in July, but they are still about twice what they were a year ago.
There is widespread agreement that the big, low-cost airlines in the UK - the likes of Ryanair, Easyjet and BMI - are well-financed and in no danger And essentially, this translates to a doubling in the price of jet fuel. There is widespread agreement that the big, low-cost airlines in the UK - the likes of Ryanair, Easyjet and BMI - are well-financed and in no danger
So when airlines have taken off on the back of business models based on fuel being half the price that it is actually costing them, well, you can see the problem. And essentially, this translates to a doubling in the price of jet fuel.
So when new airlines have taken off on the back of a business models that price fuel at half the cost you are actually facing, , well, you can see the problem.
Zoom, a relatively small carrier, says its fuel bills have increased by $50m (£27.3m) in the past year.Zoom, a relatively small carrier, says its fuel bills have increased by $50m (£27.3m) in the past year.
When you are flogging a single ticket from London to Canada at £99, covering those sort of cost increases is going to be nigh on impossible.When you are flogging a single ticket from London to Canada at £99, covering those sort of cost increases is going to be nigh on impossible.
Oasis said that a 60% rise in its fuel bill was the reason for its ultimate demise. Likewise, Oasis said that a 60% rise in its fuel bill was the reason for its ultimate demise.
Its super-cheap tickets (London Gatwick to Hong Kong for as little as 1,000 Hong Kong dollars ($128; £65) each way) meant that it spluttered badly. Its super-cheap tickets (London Gatwick to Hong Kong for as little as 1,000 Hong Kong dollars ($128; £65) each way) meant that it spluttered badly when costs surged.
Managing overheadsManaging overheads
With oil still at about $120 a barrel - and not tipped to fall dramatically anytime soon - what, or who, will be next?With oil still at about $120 a barrel - and not tipped to fall dramatically anytime soon - what, or who, will be next?
There is widespread agreement that the big, low-cost airlines in the UK - the likes of Ryanair, Easyjet and BMI - are well-financed and in no danger.There is widespread agreement that the big, low-cost airlines in the UK - the likes of Ryanair, Easyjet and BMI - are well-financed and in no danger.
Many analysts believe other carriers will follow Zoom's demiseMany analysts believe other carriers will follow Zoom's demise
These carriers - and the likes of British Airways and Virgin Atlantic - have been tinkering with their routes, though.These carriers - and the likes of British Airways and Virgin Atlantic - have been tinkering with their routes, though.
This has included cutting back on flights over autumn and winter as they try to ensure that their overheads are controlled and their planes are as full as they can manage.This has included cutting back on flights over autumn and winter as they try to ensure that their overheads are controlled and their planes are as full as they can manage.
One analyst, Chris Yates, says that newer long-haul budget carriers were most vulnerable because their margins were so small - especially with the economies of many countries beginning to unravel. One analyst, Chris Yates, says that newer long-haul budget carriers are most vulnerable because their margins are so small - especially with the economies of many countries beginning to unravel.
Oasis, Silverjet and Zoom all fell into that category.Oasis, Silverjet and Zoom all fell into that category.
Other low-cost airlines elsewhere in the world could go to the wall too, he said. Other low-cost airlines elsewhere in the world could go to the wall too, he says.
And it seems inevitable that there will be more consolidation between carriers - allowing them to spread some of the overheads.And it seems inevitable that there will be more consolidation between carriers - allowing them to spread some of the overheads.
British Airways and American Airlines are hoping to get permission for a tie-up. BA also hopes to link up with Iberia.British Airways and American Airlines are hoping to get permission for a tie-up. BA also hopes to link up with Iberia.
Arguably this latest development with Zoom adds weight to their argument that such deals need to happen if airlines are to continue to operate on some routes. Arguably the latest development with Zoom adds weight to their argument that such deals need to happen if airlines are to continue to operate on some routes.