Next in the Bankruptcy & Restructuring Saga of European and Asian Airlines

The fate of the A380 is sealed.

By MC01, a frequent commenter, for WOLF STREET:

On February 5, German low-cost carrier Germania announced it has filed for insolvency in Berlin and that all flights will be suspended indefinitely. According to the press release, this was due to unfulfilled “short-term liquidity needs,” meaning the company was struggling to raise the cash needed to pay for obligations coming due in the short term, such as fuel bills/hedging, landing fees, maintenance contracts, and even wages. The bankruptcy court will take over from here.

This filing doesn’t affect operations of subsidiaries Bulgarian Lynx and Swiss-based Germania Flug, at least for the time being.

This is just the latest in a long string of airline bankruptcies, defaults and debt restructuring deals that started hitting the industry in 2017, the product not of a conventional financial crisis but of overambitious expansion plans, unsustainable debt loads, and cutthroat competition fueled by capital looking for any scrap of yield.

Another chapter of this saga is unfolding in India. Asia has been at the forefront of airline growth over the past few years, but this growth came at a price, with airlines having to work on paper-thin margins to continue offering low fares to fuel double-digit year-on-year growth.

This resulted in massive aircraft fleets and equally massive debt loads, which are now starting to take their toll.

Jet Airways, one of India’s largest carriers with a fleet of 124 aircraft (and orders for a further 230), has been flirting with cashflow issues for some time, but lately these cashflow issues have become downright worrying.

On January 29, Jet had to ground six of their aircraft due to defaulting on their lease payment, and nobody has an idea of how large the debt load is right now. The last available figure is for March 2018, when it stood at over 94 billion rupee ($1.3 billion). By contrast share capital on February 12, 2019 stood at a paltry 2 billion rupee ($30 million). This was after Jet Airways shares soared throughout January, buyers apparently blissfully unaware of what’s building up on the horizon.

Jet Airways will be the first Indian company whose dire financial situation is to be addressed under the new Sashakt legislation.

Sashakt is another attempt by Indian authorities to solve the chronic bad-loan issues of their gigantic economy through a mixture of new measures (the introduction of the concept of “Debtor in Possession” for example) and old measures (state-owned banks and asset management companies “eating” the losses, for example).

What exactly will happen to Jet Airways is unclear. But it’s beyond doubt that present shareholders will be at best be left with much diluted equities: In the latest stock exchange filings (January 28 2019), Jet Airways stated an Extraordinary General Meeting (EGM) will be held on February 21 during which the company and its creditors will seek approval to “convert loans into shares” – which is a default and debt restructuring.

Stock markets reacted like they usually do: by going up. Jet Airways shares gained 7.8% following this announcement, which is basically a warning to existing shareholders their present position will be at best much diluted or at worst completely wiped out. Whether this is a classic case of “bad news is good news” or an even more classic case of picking pennies in front of a steamroller remains to be seen.

The February 21, EGM will include representatives from creditors, the largest being the State-owned State Bank of India and privately-owned ICICI Bank but will also include a well-known major player in the aviation industry: Etihad Airways of Abu Dhabi. Etihad already owns a large equity position (24%) in Jet Airways, but it’s no mystery the Gulf company aims at taking control of the ailing Indian carrier.

According to Indian law, foreign investors cannot own more than 49% of an Indian airline. But reportedly, Etihad and the Abu Dhabi government have been negotiating with Indian regulators for a “one-time dispensation” that would allow Etihad to hold a majority in Jet Airways in return for a large capital injection.

This is rather puzzling. Etihad has been posting enormous financial losses in 2016 and 2017, to the tune of $3.3 billion over two years. 2018 data should be available soon. While the situation is bound to have improved thanks to radical measures such as selling half their cargo fleet to DHL Aviation, storing all the long-range Boeing 777-200LR and the usual wave of layoffs, it’s likely not to be exactly positive.

In October 2018, Etihad also rejected entering talks with bondholders who are still holding on to $1.2 billion in bonds Etihad issued in partnership with two airlines it partially owned at the time, Air Berlin and Alitalia. The former has already been liquidated and the latter is once again a ward of the state.

These bondholders are largely vulture funds whose specialty is exactly this sort of distressed assets, so this is unlikely to be the end of it.

How an airline with financials as unsound as Etihad’s can afford to even contemplate large capital investments in a money-losing company like Jet Airways speaks volumes about the business model adopted by Gulf airlines.

And this business model has been what has so far effectively kept the massively disappointing Airbus A380 program alive and breathing for so long, but the writing is on the wall.

Following the announcement by Qantas, Australia’s flag carrier, of the cancelation of the balance of their order of eight aircraft, Airbus and Emirates entered negotiations about the remaining order for 53 A380.

On February 14, it was announced an agreement had been reached to cut the A380 order to just 14 A380, with the balance replaced by 30 much more versatile and cost-efficient A350-900. As a compensation Emirates has also placed an order for 40 A330neo, the re-engined version of the popular but aging A330.

However, expect the latter to be the subject of much negotiation in the near future: the A330neo is not a popular aircraft with airlines and, much more critically, doesn’t fit into Emirates’ strategy, present nor future.

This means that at the present pace of eight A380 deliveries per year the final aircraft will be delivered in 2021.

But as the saying goes, if Athens weeps Sparta isn’t merry.

The Boeing 747-8, the latest version of the four-engined aircraft, faces an extremely uncertain future as well. As of December 31, 2018, deliveries stood at 130 aircraft with just 24 firm orders left. Unlike Airbus, Boeing can count on the freighter market to keep production going for a little while, especially given the stock of passenger 747 available for freighter conversions is aging and rapidly dwindling.

But the future of air transport belongs to the fuel efficient, flexible and long-range twin-engined airliners such as the Airbus A350 and Boeing 787: four-engined airliners will increasingly become relics of the past.

Thomas Cook plc, the UK-based vacation giant, announced they are seeking a buyer for their airline, Thomas Cook Airlines.

This is due to the bad financial shape of the Thomas Cook group as a whole, which accumulated heavy debt loads over the past few years and posted a record £60 million loss in Q4 2018. The company has long been struggling despite its size. Squeezed between the meteoric ascent of travel-oriented websites and intense competition from German vacation colossus TUI, it has failed to adapt.

Thomas Cook Airlines itself is a mixed bag: while the fleet is composed of aging, less fuel-efficient airliners, many of its routes are highly palatable, especially those to popular vacation destinations such as Palma de Mallorca, Pointe-à-Pitre, and Santorini.

However, as Thomas Cook Airlines has been valued at anything between £1 billion and £3.2 billion, potential buyers are not many and all of them would attract close scrutiny from EU antitrust authorities, making the deal particularly delicate to close.

This is just another chapter in the saga of the reorganization of the European airline industry, which is only bound to accelerate from now one: expect more dismissions, debt restructuring deals and outright bankruptcies in the near future. By MC01, a frequent commenter, for WOLF STREET

But traffic is up, and these are still the good times. Read…  Low-Cost Airlines Are Crashing into Bankruptcy One After the Other as Financial Conditions Tighten in Europe

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  72 comments for “Next in the Bankruptcy & Restructuring Saga of European and Asian Airlines

  1. nick kelly says:

    I wonder how a plane maker reacts to an ‘order’ for 230 planes from a customer who just had six grounded for failure to pay leases.

    • Jessy S says:

      I think they lie back and laugh up a storm while kicking their heels.

    • MC01 says:

      Forget about that: Etihad has just announced a massive cancellation with Airbus. Gone are all the A350-900 (40 units) plus two of the A350-1000.
      I got the news too late for inserting it in the piece.

      This wasn’t supposed to happen as Gulf airlines never cancel orders: they always convert them into something else. After all they are backed by governments and billionaires who are literally swimming in money, right?

      Etihad won’t go bankrupt but if I were Boeing (orders for 22 787-9, 30 787-10 and 26 777X) I’d be rather anxious next time the phone rings.

      • Cashboy says:

        You also missed the fact that BMI (UK airline) operating with 17 airplanes went bankrupt yesterday.
        The excuse for bankruptcy, which many UK companies are using for laying off staff or closing is Brexit.

        • MC01 says:

          I’ll take this occasion to specify that I have to make choices about what I write about to keep the pieces at a manageable size and as interesting as possible.

          For example I have so far avoided any reference to the truly embarrassing situation of Avianca Brasil which is far larger than BMI Regional, chiefly to save my amazing editor from clipping a long and mostly incoherent tirade about Brazilian politics. ;-)

          BMI Regional weaved the rope that will be used to hang them (not many chances they’ll emerge from administration) by having an absurd ticket pricing policy.
          I understand they cater mostly to business travellers, but when your economy ticket is over twice as much as Lufthansa Cityline/Dolomiti business fare on the same route, something’s not right.

        • Global vigilante says:

          Everything is the fault of Brexit in the UK.

      • nick kelly says:

        If the Gulf oil guys are feeling the pinch,more bodies will surface.
        I wonder if these were ‘firm’ orders and if Airbus gets any break fee?

      • MCH says:

        The bigger threat is Emirates. Along with Etihad, they form the basis of the 777x orders. If Emirates start deferring or cancelling, then there will be trouble for Boeing. You could literally see the 777X line end up like the A380 line.

        I am still in awe of the fact that an airline like Emirates would cycle through their aircraft so quickly, I believe they’ve already started retiring 777-300ER, the earliest version has probably less than fifteen years on it. Feels just a bit weird. With the A380 ending, the 777X will eventually become the largest bird in the Emirates fleet.

        They are far from the norm. Both Airbus and Boeing have at least some degree of worry on the amount of backlog. The single isles have been on an unsustainable ramp that is literally crushing the supply chain. Imagine what happens when that bubble finally burst, it is literally like having been stuffed with so much food from one day to being told the next that you’re on a starvation diet.

        The airline industry is just another sign that the global economy is out of whack, irrational exuberance at its worst.

      • Bankers says:

        The 777s order was trimmed also

        “The state-owned Gulf carrier cut its order for Boeing 777-9 aircraft to 6 jets from 25, while cancelling delivery of 42 Airbus A350 wide-bodies, leaving it with 20. While the airline will continue receiving Boeing 787 Dreamliners, Etihad said it’ll decide what to do with the rest of the original order later, “through rescheduling, restructuring or reduction.” ”

        But I think you are right it will not fold, the airline is also a matter of pride for the emirate.

        Related is a downturn in property prices for the whole U.A.E.

        • MC01 says:

          I like to take a break from business whenever possible so over the weekend I took advantage of the weather to manure the vegetable patch, clean pots and containers etc. ;-)

          Etihad has been a dead man walking since their business model was exposed in 2017 and they were practically forced to admit to those enormous losses which beforehand were masked through accounting tricks such as selling their own cargo division back to themselves to show a large profit.

          As I said, what I find puzzling is how a company such as Etihad can even contemplate to buy Jet Airways, which would need large cash injections from day one just to keep working and lots of investments down the road to stay competitive in a dog-eat-dog market such as India.

        • Bankers says:

          :-). I don’t know fully how the competition is shaped at a wider level , but for Etihad it has 24% stake in Jet Airways (which has been losing domestic share) which was sweetened at purchase by an increase of seats on routes to India for Etihad. As from last year Etihad has new management also. The buyout proposal (which is not allowed by Indian law as of yet) would be to remove Indian management and try to take full advantage of the market with/in India. If we assume Etihad is more able to eat losses than some of its competitors outside of the gulf ( i.e. in India) , then the direction when under strong management is clearer maybe. The takeover bid might also be rejection of the alternative of continued Indian management of Jet with Etihad share diluted to 12% by debt to equity proposals as per

          which is likely not a very enticing arrangement for Etihad, and a reversal from the point of view of it previously increasing its influence in India. You’d have to talk to the head of Etihad to find out what exactly their plan is though ;-) .

        • Bankers says:

          Though I didn’t get through to Etihad management (I didn’t try very hard is an understatement) I did come across some relevant articles :

          are very current, and give some background and might help you decipher exactly what Etihad’s interest is in Jet Airways. Funnily, various other articles range between pointing out the two airline’s independence through to how tied they are, usually one or the other depending on the affiliations of the publication. I expect the decisions on Jet’s future will be decided soon enough and that will temporarily spare everyone speculation.

  2. Javert Chip says:

    A few years ago I remember reading a comment to the effect that airlines had never made a net profit since the industry was started.

    I don’t know if the statement was ever factually accurate or only true at some particularly low point in the business cycle.

    However, the satanic combination of airlines & airports are one of the most customer-vicious businesses on the planet…and I’m a multi-million-mile flyer.

    • NY Geezer says:

      I think we would all be shocked to discover just how many public companies around the world are unprofitable and have predictably negative cash flows to infinity. These companies are zombies that owe their existence to the finance sector that sells their junk debt to the public as investment grade bonds. And, its not just the airline sector, or Indian companies, or Chinese companies. A lot of Western corporations are zombies too.

      But a bit more QE should be able to cover this up a bit longer.

      • Unamused says:

        =>A lot of Western corporations are zombies too.

        Do tell.

        Now that you’ve found that loose thread, keep pulling on it and find out what unravels.

        “The fate of the world economy is now totally dependent on the growth of the U.S. economy, which is dependent on the stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings.”

        – former Federal Reserve Chairman Paul Volcker, September 1999

        Volcker was being judicious. It’s actually far worse than that. But you knew that. What you don’t know is just how bad it really is, and you won’t know unless you keep pulling on that thread.

        I can just imagine your consternation when your worst unspoken fears are realized, when everybody finally wakes up to the awareness that the entire global economy is a ponzi scheme run by the world’s central banks, one that manages to survive only because the working world gets up every morning to generate fabulous quantities of wealth and only a handful has the slightest clue about where it all goes. Billions of utter chumps.

        Surprise surprise!

    • MC01 says:

      The big problem with the airline business is that is full of wide-eyed dreamers and fly-by-night outfits. It has always been, but all this money looking for yield is making things really bad.
      Just today I got news a new air company is to be launched, named Great Dane Airlines.
      Best wishes to them but going by what I’ve read they seem to be dreamers backed by Asian capital.

  3. Iamafan says:

    Now that we know that the trillions of dollars created had to be borrowed by someone, then we need to move on and decide what to do with these white elephants in the future. Not sure they can get rid of so much.

  4. fjcruiserdxb says:

    Another European low cost airline went bust today: Flybmi. Last year they flew 29,000 flights and 522,000 passengers. That is an average of 18 passengers per flight. Still the company blames Brexit and high fuel costs. Really ???

    • MC01 says:

      The company is not technically dead yet, but is in administration.

      However your point is extremely valid. The problem with BMI Regional is very simple: they are bloody expensive.
      I won’t delve into the details but on the same routes BMI economy is much more expensive than Lufthansa (be it Dolomiti, CityLiner etc) business.
      Why should I even bother?

    • roddy6667 says:

      The cabin and crew on an Emirates Air A380 is 31, more than the total average passengers on an average Flybymi plane.

    • Robert says:

      There’s some small consolation- I heard they are to be taken over by Flybynight, which operates in the dark.

  5. Paulo says:

    This is a logical conclusion of deregulation and an insane level of competition because people ‘want’ to work in the airline industry, own airline companies, etc. Guestimate…… 75% of airline traffic is unnecessary travel and wouldn’t be done if customers were expected to pay what air travel really costs.

    There is some charge back in airport fees, landing fees, etc but basically it is subsidized black hole.

    Go ahead and take the boots to me in disagreement, but, (and I say this as a blue collar guy who has achieved some success along the way), but when has it been normal for people to have destination weddings and tropical golf vacations? I know tons of people who do this and think it is normal and something entitled.

    • gary says:

      “Guestimate…… 75% of airline traffic is unnecessary travel and wouldn’t be done if customers were expected to pay what air travel really costs.”

      I think your guestimate is probably very close to the truth.

      I believe that it can also be applied to businesses such as Amazon, Uber, meal-delivery services, and many more. (and NY Geezer’s comment above about zombie companies is another variation of this)

    • Unamused says:

      =>This is a logical conclusion of deregulation

      Not exactly.

      Taken to their logical conclusion, present trends, including the consequences of deregulation, leave a couple of thousand in control of everything, including civilization’s unhappy destiny, and the rest destitute serfs.

      I’d spell it all out but it would take years just to put together the source citations, on top of the years it would take to illustrate and correlate the trend lines. It’s just too much trouble to explain a result that can’t be avoided anyway.

      Like the man said, if you think this has a happy ending, you haven’t been paying attention.

    • Mike T says:

      Agree many airlines are like todays unicorns Uber etc. as long as they can borrow or receive new equity they don’t need to make a profit.

    • says:

      My cousin just had a destination in Hawaii right before Thanksgiving. Absurd

  6. California Bob says:

    “… airlines having to work on paper-thin margins …”

    Good thing no airline would ever skimp on maintenance and pilot training just to keep the margins.

    I know the A380 was a technological and engineering marvel, but I always thought it had the aesthetics of a cattle truck, while the 747 seemed graceful and elegant from the start. That may, or may not have contributed to the 380’s spectacular failure.

    • OutLookingIn says:

      “the aesthetics of a cattle truck,”
      Right you are!

      The remaining airworthy A380’s will be destined to do just that. Flying ‘trucks’ carrying airfreight around the globe on the long haul routes.
      Since airfreight is marginally more lucrative than passengers, and the cavernous cargo hold of the A380 lends itself perfectly suited to this task.

    • Pavel says:

      I beg to differ… I didn’t mind the aesthetics. I flew the 380 a half-dozen times on Singapore Air between SIN and FRA or CDG and it was a remarkably smooth flight, and very quiet. The crew seemed to love it, and at least in SQ the business class surpassed any US airline’s first class. Sorry to see it go but obviously it just isn’t economical to fly.

      • California Bob says:

        “I beg to differ… I didn’t mind the aesthetics. I flew the 380 a half-dozen times on Singapore Air between SIN and FRA or CDG and it was a remarkably smooth flight, and very quiet. The crew seemed to love it, and at least in SQ the business class surpassed any US airline’s first class.”

        So ……. you don’t mind the aesthetics of cattle trucks? To each his own, as they say.

        Think I read somewhere the ’47 had the big hump so it could someday have a big front cargo door, like the big Antonovs?

      • Cashboy says:

        The A380 looked ideal financially on paper for airlines. Only one landing slot but twice the capacity of passengers to board. For that reason I don’t like the Airbus A380 because it takes so long from bording to taking off.
        I have never ever flown business class. I just can’t justify the cost when most of the employees in the companies are on not much more than minimum wage and the board of directors are arguing over an extra 0.5% wage increase.

        • Nicko2 says:

          Flying business class in Asia/Middle east is another world; separate on-ramps, segregated terminals (spas, bars, exclusive shopping ect…, limo pickup/drop-off. Petro-dollars are a marvelous thing.

    • MC01 says:

      The Airbus A380 is basically the spiritual child of the unbuilt McDonnell-Douglas MD12. Looks rather similar to the design studies as well.
      But airlines didn’t bite, partly for the same reasons why the A380 has failed and partly because with period engine technology the MD12 was likely to be seriously underpowered.

      The Boeing 747 owes its shape to being designed as an interim type: at the time everybody was very into supersonic transports (SST) so the 747 was designed from the ground up to be easily converted into a freighter: the “hump” was designed to help maximize cargo space and to allow carrying a few passengers if the need be and/or a full spare crew for very long haul flights.
      That design philosophy has stuck with Boeing, and that’s why they have come to completely dominate the freighter market while the only Airbus aircraft to have become a successful freighter is the aging A300.

      • OutLookingIn says:

        Yes. The 747 will continue it’s dominance of the airfreight market, however the A380 can carry more freight per air mile, thus providing a larger profit margin per pound transported.
        This fact has not been lost on airfreight carriers. That being said, it will be a number of years before the cost of obtaining surplus A380’s falls low enough to entice any takers. Then, only on long hauls.

        • MC01 says:

          Without entering into technicalities such as the trend towards lower cargo densities (piooneered by AirBridge Cargo for the healthcare industry and DHL for e-commerce respectively), suffice to say the much more widespread Airbus A330, for which a cargo conversion is already certified and available, has failed miserably as a cargo despite being much beloved as an airline.
          The purpose-built A330F is a rare sight with just 42 built while the P2F conversion is really struggling to gain traction. After EgyptAir took delivery of their two aircraft interest for the -200 conversion apparently dried up and the future of the -300 conversion hinges on DHL finalizing an order for 10 they have been negotiating for over a year now.
          These are not exactly awe-inspiring numbers considering the P2F has been in the works since 2012, but the program has already been paid by Airbus and ST Aerospace and it didn’t come cheap.

          The A380 cargo was killed early on for sound technical reasons (for example the need for extensive structural reinforcement and alterations to the fuel tanks and hence the wings which would have considerably reduced parts commonality and increased manufaturing costs, a lot) and a cargo conversion makes even less sense, especially considering if you have outsized cargo the Antonov Design Bureau and Volga-Dnepr Antonov 124 are not exactly expensive to charter and more mothballed military aircraft are being reconditioned and put into service.
          For everything else the old 747 is more than enough.

        • OutLookingIn says:

          Thank you for the technical clarification.
          Could we now be seeing the beginning of drastic downsizing of large commercial air fleets, both freight and passenger? With attendant drop in passenger demand, because of future increased air fares?

    • Mike G says:

      Airlines would fly a plane that looked like a mole rat if it made them money. Aesthetics matter to planespotters and enthusiasts but not accountants.
      Yes, the A380 is ungainly (‘the whale jet’, ‘the dugong’, ‘manatee’, etc.) but passengers seem to prefer it for quietness and comfort.
      Freighter conversion is unlikely as it would require extensive re-engineering, reinforcement of the upper deck floor and unlike the 747F the three decks won’t fit the taller air freight pallets.

    • roddy6667 says:

      The A380 is a great plane. You don’t sit in one huge cabin with all the passengers. You only see the people in your section. It is not like a cattle truck. My flight last year from Seoul to JFK was almost pleasurable. That’s saying a lot for 13.5 hours in the air. Usually it is an unpleasant experience that is necessary to get to the other side of the planet.

  7. Lemko says:

    MC01 is a great addition to the Wolf’s! Look at Southwest Airlines unfolding

  8. Tinky says:

    A small sample anecdote, of course, but I sure hope that EasyJet remains on good financial footing, as my experience with them in Europe has been consistently excellent.

    • MC01 says:

      EasyJet has no problems right now, but I find their willingness to be pulled into the latest harebrained Alitalia “rescue” scheme something between puzzling and worrying.
      I know they want to compete with Ryanair which literally owns the Italian market, but all Alitalia has left are routes, a mountain of debts which keeps on growing no matter the restructuring deals and, worst of all, politics. All the rest, including the once profitable luggage handling and maintenance services, has been sold off to get quick cash, sometimes at obscenely discounted prices.

      EasyJet would have probably been better off to merely offer cash for routes and not get involved.

      But as puzzling as EasyJet’s involvement is it pales compared to Delta’s. But that’s another story for another time.

      • Tinky says:


      • Cashboy says:

        “All the rest, including the once profitable luggage handling and maintenance services, has been sold off to get quick cash, sometimes at obscenely discounted prices.”

        In Italy on deals, there are all the rown envelopes being passed around so the reported price doesn’t reflect the real transaction.

        • MC01 says:

          Groucho Marx famously categorized politics as “the art of looking for troubles, whether they exist or not, diagnosing them incorrectly and applying the wrong remedies”.

          In a single phrase that’s what happened to Alitalia, which was sorely unprepared for the post-2005 air transport world and which has long proven an irresistible lure for ambitious politicians bent on proving their acumen by being the one to finally solve the Alitalia conundrum.

          Trust me on this: I am half Italian and I can assure you this was no case of “ordinary corruption” just a triumph of politics over common sense.

  9. Brian Eggar says:

    With the oil price likely to rise rapidly over the next few years due to the collapse of US shale oil and gas, maybe now is the time to look at a more earthbound solution.

    Although only a concept, the Vectorr by Flight Rail Corp of California with its update on Brunel’s atmospheric railway might easily fulfil that role for both urban and long distance travel, although not over water.

    It would appear to be both cheap to build, run and maintain.

    I did write to the White House without a reply, suggesting building the Vectorr along the border would be a far cheaper and better solution than “The Wall”. It could even be extended down into South America at the same time.

  10. WES says:

    Somewhere I once read the best way to go from a great fortune to a small fortune was to buy an airline!

    • ND says:

      Yes!!! Please google Kingfisher Airlines.

    • Mary says:

      Didn’t Trump own an airline?

      • MC01 says:

        Excellent memory. Look up “Trump Shuttle”, which was really nothing more than a rebrand of Eastern Shuttle, which the parent company sold to Trump at a large discount to raise some quick cash.
        Trump sold it to US Air three years later.

        However at about the same time Trump Air was also started. Trump Air was yet another attempt to create a scheduled helicopter service which met the same destiny as all others: it crashed and burned.
        To make matters worse Trump Air used a deadly combination of Sikorsky S61 and Boeing 234, civilian versions of military heavy-lift helicopters. A horrible choice for a horrible business which made Trump Air even worse than it already was.

    • MC01 says:

      Ryanair, AIG, Lufthansa, Volga-Dnepr, Ethiopian etc disagree with that assumption. ;-)

  11. Eferg says:

    Thank you MC01 for another fine article. I look forward to your posts because I always learn interesting things that I would not otherwise find. Likewise, the comments are high quality and enlightening.

    Wolfstreet is fortunate to have you as a contributor.

  12. jacquo says:

    I agree with Paulo.
    It’s an uneconomical black hole. But like any uneconomical industry it needs to be taken advantage of.
    Tomorrow I fly Avianca NY-Medellin-Cartagena- Bogota-NY , business class for $780. How is that even possible? I don’t know. I like it.
    The following week NY-Paris , RT on La compagnie for 1650$, which is all business class. Peachy yes when Delta /Air France is 8k.
    I would love to see the industry go back to the old days when only those with money would fly. Hopefully that would make the encounter with those dreadful TSA goons more enjoyable.

  13. Chris says:

    Someone made the point that a lot of air travel is unnecessary and that is certainly true. I have homes in England and Thailand and commute whenever I feel like it because it’s so ridiculously cheap. If prices were more realistic, I would soon change my habits!

  14. Paranoid says:

    As a nobody, I’d like to comment: I used to fly a few times per year; but now only a few times a decade. Between TSA treating me like a criminal, The airports treating me like a fool, $15 buck sandwich anyone?; and the airlines confusing me with cattle; I’d rather drive three days than fly 6 hours.

    • J.M.Keynes says:

      – According to my info, not only the production of Airbus’ A380 is being wound down/won’t be produced anymore but this same story applies to Boeing’s 747 as well.
      – Yep, and now suddenly all those airplane orders are cancelled and/or wound down as well. Now both Airbus and Boeing will see the amount of (potential) orders drop at a very fast pace. Not a good omen for all those Boeing and Airbus workers/employees.
      – I see another reason why banks/financiers were so willing to lend to all those airlines: Low interest rates means that also banks have a hard time when it comes to earning money(/interest) on their loans. I assume the banks made a bet that larger loans would compensate for the low interest rates.

  15. Willy2 says:

    – The Boeing 747 is a four engine plane and the 747 feels the competition of twin engine planes that are able to make a non-stop flight across e.g. the Atlantic. A matter of changed regulation.
    – And a twin engine plane is less expensive (think: maintenance) than a 4 engine plane (747, A380).
    – I also read that a A380 is only profitable when it’s loaded “to the gills”. There were plans to bring the costs of operating an A380 down but that would require some $ 10 billion in re-development costs. Ans that was a bit too much.

  16. Willy2 says:

    – The UK economy is “not in the best of financial shapes” and that’s why I am not surprised to see the british travel giant company Thomas Cook struggle.

  17. Kaz Augustin says:

    It’s not just finance. I was looking at a flight with Condor, Thomas Cook Airlines’ sister company, but their reputation would need to improve dramatically in order to be classed as “dreadful”. It’s the same with Thomas Cook. With all the security theatre currently playing at a boarding gate near you, who needs the extra angst?

  18. Rob says:

    Wolf or anyone else, you have any insights into the lease side of the market? Plane leasing has been one of those well touted ‘high returning’ private credit strategies. I was always pretty sceptical and never looked at it much so dont have many insights. Whatever LTV these leasers envisage if they get the plane back and cant find someone else to take it on it has worse financial dynamics than an empty building.

  19. Bill from Australia says:

    Why are we in such a bloody hurry, with the all modern communication available how I pine for a good old ocean cruise time to relax, meet new people take the air, look a the stars just relax,are you that important????

    • MB732 says:

      Appreciate the sentiment, Bill, but the average person doesn’t necessarily think they’re important, they’ve simply done the math.

      Flying NYC to Chicago half a day all in. Train 24 hrs, which I would call effectively 2 days, and not significantly cheaper. Maybe not cheaper at all when you figure in 3 meals and other expenses. So your time does not need to be particularly valuable for flying to be the best choice.

      If you are on a ship, you’re on vacation. If you are on a train, you are either traveling less than 4 hours, or you are retired / sightseeing, or trains are a whole lot cheaper relative to flying than here in USA.

      Hope to take that cruise you mentioned someday!

  20. yngso says:

    Transporting people in any of the dimensions the Merc star points to is extremely capital and labour intensive, because people are fragile, and care has to be taken.
    The inefficiencies and malinvestments in all people transport industries are simply appalling. The need for consolidation is tremendous!

  21. Iamafan says:

    I’ve flown on Air France, Korean Air and Asiana’s A380. On many occasions, there’s usually a delay because only a few gates at JFK can handle the big bird at Terminal 1 & 4. I regularly fly the JFK-ICN route and normally they use either the A380 or the 747-800. These huge 4 engines are comfy over the Pacific. I’ll miss the A380.

  22. chevron9 says:

    Starflight One – Still a great film…


  23. Dusterdave says:

    I have been a ATP pilot over 45 years, crop dusters to commuter airlines and mostly personal and business flights in my own aircraft. The government and airlines have made the flying experience so miserable that people like me and many of my pilot friends hate flying as an airline passenger. I wonder if the airlines wouldn’t be more profitable with higher fares and a somewhat improved experience, moving up above cattle car status but not first class.

    • Altandmain says:

      Technically economy premium and business class do exist to fill those niches.

  24. raxadian says:

    This plane was to big to not fail in making money.

  25. HR01 says:


    Economic Times out with a story on Jet Airways today. Shareholders voted overwhelmingly at the extraordinary general meeting on Thursday, Feb 21, 2019 to convert debt to equity.

    Story doesn’t say which portions of the debt or how much.

    A while back had read on Bloomberg that Jet had $900 million in loans due by March of 2021.

    Jet Airways has 225 Boeing 737MAX aircraft on order. Boeing has already extended aid to the company by refunding some deposits and returning progress payments. Not sure how the company plans to acquire the capital for those aircraft.

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