Fears over low cost airlines

Fears over low cost airlines
  • Three airline bankruptcies in recent months have caused concern because these low cost companies moved more than one million passengers in Malaga

Major turbulence is jeopardising the low-cost airline business. Not only are thousands of passengers affected, but it is causing new concerns in the tourism sector in Malaga province.

The recent bankruptcy of three airlines, Monarch, Air Berlin and Alitalia, has led to uncertainty among one million passengers who use Malaga airport, according to information from the Aena website. The massive cancellations by Ryanair, which have affected more than 700,000 passengers in Europe, and the bankruptcy of the historic Monarch Airlines, which was the third to be announced in a few months, are clear signs that these low-cost companies which dominate the skies and move 70 per cent of passengers at Malaga airport, are more vulnerable than people think.

Experts say the low-cost model is becoming increasingly exposed, because, like a domino effect, these airlines are continually obliged to react to even the slightest movements in the market or from their own competitors. Even traditional companies, who are now following the low-cost model, are attracting passengers on the Costa del Sol faster than the classic low-cost airlines. The worrying question is: how much can they withstand?

It is an important question because in Malaga the airlines with the highest volume of traffic are low-cost ones. And more than that: two of those which announced that they were going into liquidation in recent months, Monarch and Air Berlin, were on the 'Top 10' list.

Pilots seem to be leaving Ryanair in droves, although the company doesn't admit that, saying that problems with holiday leave were responsible for the cancellation of 50 flights a day on their European network in mid-September and a further 18,000 the following week in low season, and this is flashing warning lights in the tourism sector on the Costa del Sol, even though Malaga airport was not affected by the measures.

Ryanair is by far the leading airline at Malaga airport, and has been for a long time. At this infrastructure, where 61 companies currently operate, the airline moved 3.8 million passengers last year. So far this year it has already moved three million, far more than its closest rival, Easyjet, which has handled 1.4 million so far this year, and 1.8 million in 2016.

The latest statistics show that demand for Ryanair does not appear to have been affected by the latest cancellations, given that it ended September with 10 per cent more passengers on its European routes. Despite this, the Irish company wrote to all its pilots offering a salary increase of between 5,000 and 10,000 euros a year from 1 October, for pilots based in Dublin, Stansted, Berlin and Frankfurt, the four most important of the 82 bases it operates from. The letter, signed by CEO Michael O'Leary, says that improvements to salaries and working conditions at the other bases are subject to negotiation.

Concern among hotels and travel agencies increased last week when Monarch Airlines, which is nearly 50 years old and was the fifth largest airline in terms of passenger traffic at Malaga, announced with no warning that it was going into liquidation because of the effect the terrorist attacks in Tunisia and Egypt had had on the company's finances.

Thousands of passengers were stranded in Malaga, and were eventually returned home by the British Civil Aviation Authority in what is believed to be the biggest peacetime repatriation operation ever. In all, Monarch left 110,000 clients stranded all over the world and around 300,000 reservations were cancelled.

The number of people affected in Malaga is difficult to determine, but eight flights were due to take off that day, to Luton, Manchester and Birmingham. In the first eight months of this year, Monarch moved 418,017 passengers in Malaga, compared with the 652,876 in 2016.

A few months previously, in August, Air Berlin announced that it was filing for bankruptcy. The airline, which employs more than 8,000 people, made the decision after its principal shareholder, Etihad Airways, withdrew its funds after years of losses.

Air Berlin took out a bridging loan of 150 million euros to enable it to keep flying for three months. It is the tenth airline in terms of passenger numbers in Malaga, moving 410,852 last year.

In April Alitalia, which for 70 years had been the Italian flagship, also went bankrupt after some disastrous decisions and a failure to compete with the pressure of low-cost airlines. Alitalia moved more than 90,000 passengers in Malaga.

Altogether, these closures have removed more than a million seats from the market. Experience has shown on previous occasions that demand is normally absorbed by other airlines, but at the moment there are doubts whether the others, which are working at full capacity, will be able to cope with the demand.

This is the main concern for hotels in the area. The president of the hotel association, Luis Callejón Suñé, has warned that “there is now an uncertainty which didn't exist before, and it is worrying because so many clients travel by air to the Costa del Sol. We are faced with a new situation now because it looks as if Ryanair can't do any more than it is already. This winter we are going to see the results of a low cost model which needs to be changed.”

On the same subject Sergio García, president of the Travel Agents Association of Andalucía, is very critical: “the airlines are like towers of glass; they are showing that they are enormously fragile, despite their power,” he says.

The sector is warning the administrations of the need to pay close attention to the air travel sector. The effects of Brexit are not yet known, but they could well affect Easyjet, which is the second biggest airline in Malaga. Its company is registered in the UK, which means that it could be seriously affected by the country's withdrawal from the EU and its impact on the pound. In fact, Easyjet is already working on creating a subsidiary with a base outside the British market.

Meanwhile, for this winter the airlines are continuing to improve their flights to the Costa del Sol. The Costa del Sol Tourist Board says an increase of 11 per cent is expected over the next six months, in all markets apart from France and Belgium.

Specifically, Ryanair expects to offer 9.7 per cent more seats to Malaga. However, the biggest increases will be at, with an increase of 62 per cent; Thomson Airways, with 22 per cent; and British Airways and SAS, with 19 per cent and 18 per cent more seats respectively.

These had been planned before the other airlines went into liquidation, and they show a resurgence by traditional companies which, according to the latest report from the National Institute of Statistics (INE), moved 1.8 million passengers to Malaga between January and August this year. This was an increase of 14.4 per cent, compared with the 3.7 million people who travelled to the Costa del Sol on low-cost airlines in the same period.

These figures make Malaga the second airport in Spain for low-cost flights, behind Barcelona and ahead of Palma, which has been badly affected because Air Berlin used it as its Spanish hub.

If the sector is concerned, passengers who had tickets booked with these companies are indignant. One group of a dozen youngsters still don't know whether they will be able to travel to London with the tickets they had booked later this month with Monarch. “If we can't go on the flights laid on by the Civil Aviation Authority, we won't be able to go at all,” they say.

They are just one example of thousands who have been affected. The State Air Safety Agency (Aesa) says they should make a claim against the airlines. “It's important that people who are affected make a claim so we can take action against companies who do not comply with passengers' rights,” say sources there.

In the case of Monarch, people are being advised to contact the company first and then the CAA to demand a refund on their tickets and compensation.

Lola García, of the Facua consumers association, says that for some time the number of complaints about airline delays or cancellations has been increasing.

“The government needs to fine airlines heavily to stop them doing this. Ryanair was fined 4.5 million euros for its mass cancellations, but for the company that was only 45 euros for every ticket suspended, which was nothing,” she says.