Which are the airlines most likely to go under in the coming 3 months?
#31
Join Date: Jun 2008
Location: GLA
Programs: BA Silver
Posts: 2,961
https://www.yahoo.com/finance/news/a...035548868.html
Btw, I wonder if one could rely on credit card company to reimburse you in case the airline goes under and you can't get your money back from them.
Unfortunately I've got bookings with 3 of the airlines in this article in June and July.
Btw, I wonder if one could rely on credit card company to reimburse you in case the airline goes under and you can't get your money back from them.
Unfortunately I've got bookings with 3 of the airlines in this article in June and July.
#32
Join Date: Feb 2013
Location: Hilton, Hyatt House, Del Taco
Posts: 5,378
I live in USA, my cards are USA-issued, but some of the itineraries (one-way segments) in question originate from Jpn and Taiwan.
#33
Some of the 2nd-tier Chinese carriers would most probably be folded into one of the 3 large airline groups like Air China, China Eastern and China Southern. Probably allowed to maintain separate branding etc.
In Asia some of the privately owned carriers like Asiana, Philippines, EVA Air and ANA are probably more at risk.
#34
Join Date: Nov 2014
Posts: 602
They are [...] majority owned by the Singapore government which has more than enough assets to fund them for as long as it takes. Singapore's quest to be the hub of South East Asia would also make it near impossible to see the government let SQ fail. Cathay counts its shareholders as Swire, Air China and Qatar, and they have been profitable so I doubt they will fail either. Neither would any of the large Middle-Eastern carriers like Emirates and Qatar as they have government backing.
And SQ's situation wasn't great even before the outbreak. With the growth of ULH flights and competition from other hubs, SIN's position was already getting difficult to maintain. But I agree they won't be allowed to fail: SQ took a $13bn lifeline from SG gov't (OK, Temasek) just yesterday (so much for their great financial standing). The main SQ brand is there to stay but their LCC business might just have to scoot off.
All this also reminds me I forgot to include Etihad in my list.
#35
Except, CX's predicament is a bit more precarious. Given the right opportunity, CAAC would be glad to see them fold (little love lost for Swire), and QR will have problems of their own.
And SQ's situation wasn't great even before the outbreak. With the growth of ULH flights and competition from other hubs, SIN's position was already getting difficult to maintain. But I agree they won't be allowed to fail: SQ took a $13bn lifeline from SG gov't (OK, Temasek) just yesterday (so much for their great financial standing). The main SQ brand is there to stay but their LCC business might just have to scoot off.
All this also reminds me I forgot to include Etihad in my list.
And SQ's situation wasn't great even before the outbreak. With the growth of ULH flights and competition from other hubs, SIN's position was already getting difficult to maintain. But I agree they won't be allowed to fail: SQ took a $13bn lifeline from SG gov't (OK, Temasek) just yesterday (so much for their great financial standing). The main SQ brand is there to stay but their LCC business might just have to scoot off.
All this also reminds me I forgot to include Etihad in my list.
#36
Join Date: Nov 2014
Posts: 602
You brought up Air China as the reason why Cathay would survive. Air China is run by CAAC, which is a branch of the Chinese government. Cathay, as you correctly pointed out, is a Swire business. In the Chinese perception, Swire is a company associated with opium trade and a symbol of oppression of the Chinese people. The extent to which this perception is true is beside the point but you must recognize that the reason for the Chinese government's involvement in Cathay is not to help Swire: in fact it has been hinted numerous times by government-linked sources that the plan was quite the opposite. This was, arguably, the long-term objective but Cathay's entanglement in the political situation in Hong Kong will have accelerated the push for this further. Writing about "Air China" and "HK government" as if they were completely separate entities misses the bigger picture, when push comes to shove any decisions about this will be made centrally. Cathay was important for China early on but by now they already have more than enough of their own airlines.
Now, all of this would matter less if the company were immensely profitable but that's hardly the case, for a multitude of reasons, some of which were self-inflicted (the misguided fuel-price hedging strategies) but mostly stem from HKG's general loss of importance in relation to the rest of China, and are thus very difficult, if not impossible, to overcome for any business geographically constrained to Hong Kong.
You wrote: "CX has a near monopoly over the HK air travel market." I'm not really sure what that's supposed to mean: Hong Kong-based travelers have always had lots of choice in terms of which airline to fly. It's definitely not like Air Koryo's monopoly over the NK air travel market, for example. But even assuming that were the case, any large carrier needs not only the control of their home market but to attract transferring passengers to feed their network as well, and this is where things are the most difficult for Cathay.
Historically, Cathay were the gateway to China for the world. Sadly (or not, depending how you look at it), China is no longer in need for any such gateway. There are now direct international flights from China to practically everywhere. If anything, Beijing Capital Airport is being groomed as the new gateway to China. Further, a significant proportion of Cathay's traffic were Taiwan passengers but with the introduction of direct cross-strait flights this market has diminished as well. For both intra-Asia and long-haul, there are now numerous other choices for transfer points, such as for example TPE, and, although it's largely not CX's fault, transferring at HKG is no longer the kind of compelling proposition it used to be. The ME3 and others have taken a huge slice of the lucrative market for travel between Europe and Australia. Cathay's remaining strength is thanks to HKG being the principal entry point for the Pearl River Delta but this could change before long as well.
I can understand the sentiment. Cathay is a solid airline with an impeccable safety record. The day they have to wind up will be the end of an era. But looking at the facts, I can't see them getting out of their current predicament easily. A while ago they seemed more destined to become "Qatar Pacific" of sorts but that's unlikely to happen now as QR will not overextend themselves this way in times like this.
As for SQ, if they were "one of the best-managed" why the need for the single biggest rescue package this early on into the pandemics?
Also, the question was about "major airlines." PAL, for instance, is not even the largest airline in the Philippines, I don't think it's one of the carriers the OP was considering.
Now, all of this would matter less if the company were immensely profitable but that's hardly the case, for a multitude of reasons, some of which were self-inflicted (the misguided fuel-price hedging strategies) but mostly stem from HKG's general loss of importance in relation to the rest of China, and are thus very difficult, if not impossible, to overcome for any business geographically constrained to Hong Kong.
You wrote: "CX has a near monopoly over the HK air travel market." I'm not really sure what that's supposed to mean: Hong Kong-based travelers have always had lots of choice in terms of which airline to fly. It's definitely not like Air Koryo's monopoly over the NK air travel market, for example. But even assuming that were the case, any large carrier needs not only the control of their home market but to attract transferring passengers to feed their network as well, and this is where things are the most difficult for Cathay.
Historically, Cathay were the gateway to China for the world. Sadly (or not, depending how you look at it), China is no longer in need for any such gateway. There are now direct international flights from China to practically everywhere. If anything, Beijing Capital Airport is being groomed as the new gateway to China. Further, a significant proportion of Cathay's traffic were Taiwan passengers but with the introduction of direct cross-strait flights this market has diminished as well. For both intra-Asia and long-haul, there are now numerous other choices for transfer points, such as for example TPE, and, although it's largely not CX's fault, transferring at HKG is no longer the kind of compelling proposition it used to be. The ME3 and others have taken a huge slice of the lucrative market for travel between Europe and Australia. Cathay's remaining strength is thanks to HKG being the principal entry point for the Pearl River Delta but this could change before long as well.
I can understand the sentiment. Cathay is a solid airline with an impeccable safety record. The day they have to wind up will be the end of an era. But looking at the facts, I can't see them getting out of their current predicament easily. A while ago they seemed more destined to become "Qatar Pacific" of sorts but that's unlikely to happen now as QR will not overextend themselves this way in times like this.
As for SQ, if they were "one of the best-managed" why the need for the single biggest rescue package this early on into the pandemics?
Also, the question was about "major airlines." PAL, for instance, is not even the largest airline in the Philippines, I don't think it's one of the carriers the OP was considering.
#37
A FlyerTalk Posting Legend
Join Date: Dec 2000
Location: Shanghai
Posts: 42,011
That having been said, in the absence of some clever legal footwork, I can't envision either CA or MU playing a direct in any investments. CA already owns its maximum 29.9%, and I believe this cap applies to all PRC investment.
#38
A FlyerTalk Posting Legend
Join Date: Dec 2000
Location: Shanghai
Posts: 42,011
You brought up Air China as the reason why Cathay would survive. Air China is run by CAAC, which is a branch of the Chinese government. Cathay, as you correctly pointed out, is a Swire business. In the Chinese perception, Swire is a company associated with opium trade and a symbol of oppression of the Chinese people. The extent to which this perception is true is beside the point but you must recognize that the reason for the Chinese government's involvement in Cathay is not to help Swire: in fact it has been hinted numerous times by government-linked sources that the plan was quite the opposite. This was, arguably, the long-term objective but Cathay's entanglement in the political situation in Hong Kong will have accelerated the push for this further. Writing about "Air China" and "HK government" as if they were completely separate entities misses the bigger picture, when push comes to shove any decisions about this will be made centrally. Cathay was important for China early on but by now they already have more than enough of their own airlines.
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#39
Join Date: Jan 2014
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Why would you say that? Leisure tourism is a huge driver of the economy, and can be very important for communities just like the industries supported by business travel. If business routes are bailed out and leisure routes aren't, it would be yet another example of the government giving money to corporations (which pay for their employees' business travel) instead of individuals.
Bailouts always create a moral hazard, but the government should not be picking winners and losers. After the financial markets crashed, the big firms were bailed out while the smaller ones were left to go bankrupt. This led to the "too big to fail" mindset where large banks started taking more risks, knowing that they had a guaranteed lifeline. We don't want the same to happen to the airline industry because that would stifle competition.
Bailouts always create a moral hazard, but the government should not be picking winners and losers. After the financial markets crashed, the big firms were bailed out while the smaller ones were left to go bankrupt. This led to the "too big to fail" mindset where large banks started taking more risks, knowing that they had a guaranteed lifeline. We don't want the same to happen to the airline industry because that would stifle competition.
As I said, the US is different because the travel is mostly within the US (there being some exceptions...Spirit serves a decent number of Central American destinations, for example) but from a policy perspective I'd wonder whether there's an advantage to bailing out the airline in lieu of (implicitly) encouraging travel to nearby destinations or roadtrip vacations (preferably not involving Chevy Chase ;-)). Presuming that leisure spending is a somewhat-fixed pool at any given moment, I'm not sure there's a strong policy case to be had for "Let's pack an additional hundred thousand vacationers into Florida next summer at taxpayer expense", and I'd also point out that based on what surveys I'm seeing, that market segment is gonna get bashed to pieces for the next year or two even if the economy rebounds, while those airlines are far more exposed to an economic downturn (since the annual trip to Wally World is probably in at least some danger of getting axed vis-a-vis a given corporate conference, and said airlines really don't have a model to encourage corporate lock-in).
On the one hand, I'm sympathetic to the line "If you're too big to fail then you're too big." On the other hand, I do think that "too big to fail" companies are going to exist in some fields naturally (natural monopolies/oligopolies due to scale effects) and the best you can hope to do is arrest "bad behavior" by the worst actors. If moral hazard is inevitable (and in many cases it probably is), the ideal would be to use the bailouts to force better behavior as a term of getting said bailout.
(This does come back to the following question: If you put a bailout out there that effectively killed a number of ULCC practices as a condition of accepting it, presuming everyone needed the bailout to survive, how many ULCCs would just call it a day?)
#40
Join Date: Oct 2005
Posts: 3
Like a Prayer
Let us all hope and pray that United and American Airlines are the only REAL casualty of the Pandemic. This airline (and Ryan Air) have done the most consistent damage to consumers. They are rude and incompetent and deserve to "go under".
#41
Join Date: Dec 2004
Location: New York, Paris
Programs: AA ExPlat 4MM, AA Life Plat, Lufthansa FT, Delta Basic
Posts: 1,593
The closest event I can relate this to is Chernobyl in Ukraine in 1986 which, by Gorbachev's own admission, "was the main cause for the collapse of the USSR five years later". This is Chernobyl to the power of (insert any number you find feasible). Unless China goes to war against the rest of the world (possible...) or accepts full responsibility and offers damages (possible but unlikely), it will become a pariah state or at least extremely scrutinized until it becomes a "normal" nation, much in the way Japan and Germany did after WW2. A lot will depend on China's attitude but precedents are not encouraging.
At any rate, they will (again, unless in a war context) not be in a position to profit from the situation by invading another airline's turf, even if they hold equity in it.
Last edited by Cofyknsult; Mar 31, 2020 at 11:03 am
#43
#44
Join Date: Mar 2009
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Posts: 577
The competition brought us misery with shrunk seats, available space, toilets and horrendous on board services.
U!
#45
Join Date: Mar 2009
Location: United Kingdom
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Posts: 577
I'm not defending ULCCs, I don't fly them myself, but if you start bailing out one airline you almost have to help all of them. Their business model works because people will suffer for a lower price, supply and demand has spoken and ULCCs are a successful business (when travel is possible, that is).
The sooner they go, the better.
U!