9 Dec, 2017 @ 10:46
4 mins read

After the collapse of Monarch is the future of budget air travel in jeopardy?

AIRLINES: Struggling to fill the gap left by Monarch

THIS year has been inauspicious for low-cost flights.

The October 2 collapse of Monarch Airlines required the biggest ever peacetime repatriation exercise to return 100,000 Brits who were stranded overseas.

A further 300,000 people lost their bookings. After struggling financially for over a year, Monarch was unable to renew its ATOL license – a legal requirement to fly. Rumours are circulating that Norwegian has similar problems and may go bust during winter. The airline recently withdrew all flights between Birmingham and Spanish airports, citing poor demand as its reason.

Meanwhile, Ryanair has its ongoing pilot hours crisis. After making serious errors with its pilot holiday planning, the airline cancelled 50 flights a day from mid-September to the end of October and then a further 18,000 flights between November 2017 and March 2018, affecting 400,000 passengers. The Civil Aviation Authority has launched action against Ryanair for “persistently misleading passengers” about their rights.

Refunds or re-bookings can be a thorny issue. Many customers of collapsed Monarch say they have received refunds from their banks but others haven’t been so lucky.
Glenys Mason Cuming, a resident of Alicante, said: “We booked flights to the UK from Spain with Monarch for Christmas. We used our Spanish debit card and spent €288, which we have seemingly lost.”  

SPAIN: Benefits the most from UK flights

Meanwhile, Pam Amos, from Tenerife, has seen her plans grounded: “My family booked with Monarch to visit me in October. I missed out on a family reunion and seeing my seven-year-old grandson. Now I hear that Norwegian has stopped flying to Birmingham Airport, leaving me with less choice for trips from Tenerife to Birmingham.”

Although passengers are unhappy when airlines withdraw their services, cancelling flights and abandoning airports is hardly a new trick. In the days before BA and Easyjet contracted to fly out of Granada Airport, Ryanair was criticised for withdrawing its Granada-Gatwick route in  2010 in a row over subsidies from the Diputación de Granada. The same route had previously been pulled by Monarch Airlines in 2007 for ‘commercial reasons’.

When airlines pull out of regional airports – as was also the case in Jerez de la Frontera in 2011, when Vueling decided to withdraw – the local tourist industry and property prices can take a direct hit. People who have invested in second properties and holiday homes can suddenly find their properties harder to reach and, accordingly, more difficult to rent to holidaymakers and to sell. The end result is that they lose money.

Martino Matijevic, founder of cheap flight search site, Whichbudget.com, comments: “Ryanair is famous for playing the cost game. It picks lesser-known destinations that aren’t on the tourist radar and need investment.

It asks the airports to offer slots, gets the destination to subsidise the flights and promises them thousands of new visitors. The cost of living and nearby property become cheap.

When the external financial support dries out, Ryanair simply leaves the passengers with their second homes abroad and no flights. Hiking up fares to cover the shortfall would ruin their business model.”

He adds: “When you see a flight for €10 you have to realise this is unsustainable and someone has to pay the difference. Ryanair’s entire corporate philosophy is built on this short-term pricing model.

It is driven by subsidies and isn’t an economic reality.”
Another issue looming over the low-cost airline industry is Brexit. Michael Barnier, the EU’s chief negotiator, has pointed out that a ‘no deal’ scenario would have ‘consequences’, including ‘the capacity of British planes to land in Europe’.

Open Skies, a bilateral agreement governing flights between the UK and the EU, doesn’t revert to WTO rules if negated. It reverts to nothing.

MONARCH: Collapsed earlier this year

Martino points out the difficulty in forecasting the Brexit impact. Nobody knows how it will pan out – not least Theresa May and her cabinet. He says: “At the time of the referendum, there wasn’t any difference in search patterns on Whichbudget.com and our user statistics aren’t showing any difference today. It is hard to make predictions.”

Easyjet has reacted to Brexit by opening a new European HQ in Austria and launching a new airline, Easyjet Europe, headquartered in Vienna. Now operational, this has enabled EasyJet to obtain an Air Operator’s Certificate (AOC) from Austria’s regulator so it can continue to operate flights within the EU, regardless of whether a no-deal Brexit occurs.

And last week, the airline announced an increase in the number of seats to Gibraltar this winter by more than three thousand, to take up the slack left by Monarch.

The extra capacity comes from upgrades to its aircraft at both Gatwick and Bristol from 156-seaters to 186-passenger planes. Minister for Tourism, Gilbert Licudi, says the move ‘demonstrates EasyJet’s commitment to Gibraltar’.

Michael O’Leary of Ryanair, meanwhile, foresees a period of industry consolidation, resulting in the survival of the British Airways group (IAG), Lufthansa, Air France-KLM and ‘possibly Easyjet’.

John Moffett, vice chair of Bremain in Spain (www.bremaininspain.com), a group campaigning for the rights of British citizens in Spain, is an ex-BA manager.

He says: “A no-deal, cliff edge scenario could cast into chaos the travel plans of people wanting to fly between the UK, US and EU by invalidating the Open Skies agreement – potentially with nothing to replace it. However, we are hoping for a no-Brexit, not a no-deal.”

He adds: “A hard Brexit could find BA flights grounded if there’s no aviation deal.  The UK would have to renegotiate old aviation treaties, such as Bermuda Two, which was a predecessor to Open Skies. However, this would take time and considerable effort.”

IAG takes a positive tone: “We’re confident that a comprehensive air transport agreement between the EU and the UK will be reached. It’s in the UK and Europe’s interest to have a fully liberalised aviation agreement.”

Easyjet concurs: “We believe a UK-EU aviation agreement is needed and should be a priority for the next stage of the negotiations. We are confident there will be a new agreement. Aviation is essential to all the economies of Europe as an enabler of trade, tourism and travel.”

Javier Gándara, Easyjet’s country director for Spain, said at the recent Brexit, Tourism and Aviation conference in Madrid that a future without flights between the UK and EU is ‘inconceivable’.

Overall, the future of low-cost air travel does not seem endangered. Easyjet insists that it is ‘here to stay’.

However, nobody has as a crystal ball. With some short-haul routes proving unprofitable without subsidies, Brexit being an unknown factor and GBP/EUR exchange rates remaining unpredictable, carriers will surely continue to examine their bottom lines and may choose to abandon certain routes.

So, while the industry seems stable, passengers should be aware that individual flights they book could potentially disappear into thin air.

Staff Reporter

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  1. The article says: “People who have invested in second properties and holiday homes can suddenly find their properties harder to reach and, accordingly, more difficult to rent to holidaymakers and to sell. The end result is that they lose money.” To my mind viewing Spain as merely a source of ‘rental profit’ and speculation has contributed to cultural and environmental destruction.

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