The September Airline Massacre in Europe

And these are still the good times, with growing passenger traffic.

By MC01, a frequent commenter on WOLF STREET:

Today, Adria Airways, three years after being privatized.

On September 24, Slovenia’s Adria Airways, which has long been dogged by insolvency worries, “temporarily” suspended all operations as it is “intensively searching” for new capital from unidentified “potential investors.” On September 20, two planes had been grounded after the airline defaulted on the lease contract.

The Slovenian government privatized the airline by selling it to German PE firm 4K Invest in 2016. Since then, the company sold all its planes and has been operating with leased planes. In February 2019, ownership changed to STBE, which had previously bought the airline’s brand name. The Slovenian government said that it would not bail out the airline as it would violate EU rules on state aid.

Yesterday, the Thomas Cook airlines.

On September 23, after Thomas Cook Group collapsed and entered liquidation, Thomas Cook Airlines and Thomas Cook Airlines Scandinavia halted operations. Thomas Cook Airlines Scandinavia was hastily spun off from Thomas Cook Group as part of the liquidation and is said to be resuming flights today. Thomas Cook Airlines remains shut down.

The Thomas Cook group wholly owned three airlines: One registered in the UK (Thomas Cook Airways), one registered in Sweden (Thomas Cook Scandinavia), and another in Spain (Thomas Cook Balearics). Thomas Cook also owned 50% of German leisure airline Condor Flugdienst.

Condor Flugdienst is still operative but struggling to stay alive and is pressuring the German government for a “bridge loan,” effectively a short-term bailout. While the Lufthansa group is “reported” to be interested in Condor, the only valuable asset the company has left are the routes, and those can be acquired at a discount during a liquidation procedure.

This is exactly what happened during the liquidation of Germania earlier this year: Interested parties held off their offers until the liquidation process had started.

These four Thomas-Cook affiliated airlines combined had a fleet of 116 aircraft. All but 5 were leased. As it so often happens these days Thomas Cook vastly underestimated the real costs of leasing. Like other loss-making airlines, such as Alitalia, the airlines sold their own aircraft and leased them back to raise quick cash, causing leasing costs to spiral out of control over the years.

Yesterday, France’s XL Airways.

Also on September 23, French airline XL Airways, ceased all operations, after having announced on September 19 that ticket sales stopped due to “great financial difficulties.”

Back in April the company had announced ambitious expansion plans which included new aircraft, new cabin layouts, and new routes which now will most likely sound like a cruel joke to the company’s employees.

In December 2016, XL Airways merged with business-oriented airline La Compagnie. What will happen to La Compagnie whose profits were used over the past two fiscal years to patch the holes in XL’s budget remains uncertain. The Commercial Court of Bobigny gave XL shareholders a September 28 deadline to present a rescue plan. XL Airways will need €35 million right away to stay afloat.

A week ago, France’s second largest airline, Aigle Azur.

On September 16, Aigle Azur, the second largest French airline by passenger numbers after Air France, entered liquidation proceedings. This came despite two weeks of the usual swirl of rumors that would-be saviors and shareholders were ready to pump millions of euros into the dying airline. On September 2, the airline had asked the Commercial Court of Ivry to grant it bankruptcy protection.

The exact fate of the company will be known on September 27, but it’s likely that the company’s assets will be sold off in one or more tranches to pay off creditors. Air France-KLM, French Bee, IAG, and EasyJet have all expressed interest in buying parts of the company, with the routes from Paris Orly being particularly sought after. This marks the end for the 73-years old company which has been bleeding red ink without a pause since 2011.

Aigle Azur’s largest shareholder is none other than Chinese conglomerate HNA Group, which bought 48% of the French airline in 2012. HNA has proven unable or unwilling to pump money into the company.

Competition made me do it.

These airlines are but the latest victims of the ultra-competitive European aviation market. As an example of the kind of competition we are talking about here, there are presently 10 daily flights between Paris and New York, with 2 more to become operative later this year. Competitors include everybody from legacy carriers such as United Airlines to the new IAG low-cost brand, LEVEL. Cutthroat competition has driven ticket prices to all-time lows: economy round-trip tickets on the New York-Paris route can be easily found for around $800, while business round-trip tickets can be found for about $1,800. Those willing to deal with one or more stops can pay even lower prices.

This kind of competition is dramatically affecting airline profitability even for airlines such as Ryanair that are out there to make a profit and know how to do it.

In Q2 2019 Ryanair announced a 21% year on year drop on profits. Ryanair’s profits peaked in its fiscal year 2018, at €1.45 billion, after which increased competition pushed that down to €885 million in FY2019. For FY2020 Ryanair hopes to maintain that new and reduced level of profitability, but doesn’t exclude it will drop to €750 million, which would cut in half its 2018 profits.

Norwegian Air Shuttle kicks the can down the road.

Then there’s Norwegian Air Shuttle. According to media reports, the money-losing over-indebted airline recently “strengthened its financial position.” In reality, what the company did was a far bit more complicated: Norwegian negotiated with bondholders what is effectively a debt restructuring deal. In return for extended maturities of those bonds (the bonds coming due in December 2019 will now come due in November 2021; and those coming due in August 2020 will be pushed back to February 2022), bondholders will receive an interest premium and “additional covenants” – and thus the can gets kicked down the road a little further.

And these are still the good times.

In the first half of 2019, passenger traffic throughout Europe grew 4.3% year on year. But we don’t know how much of this growth was due to healthy economic conditions, and how much due to our peculiar economic climate fostering the sale of airline tickets at cost or even at a loss to increase sales volume.

Many of Europe’s busiest airports have reached the limits of their growth: ultra-congested London Heathrow and Amsterdam Schiphol grew by just 1.7% and 1.4% respectively. Growth is mostly happening at smaller airports which, perhaps not coincidentally, are those favored by low-cost airlines, both established and startups.

Last year, Ryanair CEO Michael O’Leary predicted that in the saturated European air travel market, “bankruptcies will become the norm.” As it so often happens, the ruthless Irish aviation guru was absolutely right, regardless of what his many critics say. By MC01, a frequent commenter on WOLF STREET

The curse of pushing volume by selling tickets below cost became an even bigger curse with the peso massacre. Read… The Airline Fiasco in Argentina as Peso Collapses and New Plan Goes Awry

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  82 comments for “The September Airline Massacre in Europe

  1. 2banana
    Sep 24, 2019 at 12:33 pm

    Cheap and easy money will always find a place to die.

    Zombie corporations are like a magnet.

    • DV
      Sep 24, 2019 at 1:47 pm

      True. Overcapacity in aircraft industry has translated into overcapacity in aviation industry. Until that overcapacity is removed, through bankruptcies or otherwise, airlines will keep blowing up.

  2. Paulo
    Sep 24, 2019 at 12:55 pm

    The perpetual race for the bottom. Customers want to fly for peanuts, then complain they are shoehorned into seats with no legroom, have lost all inflight comforts, and have to pay for everything, including bag checks. Deregulation ensures that all the wannabe airline magnates and new ownership groups must chase each other to the bottom or lose market share. This is the logical result of total deregulation and unfettered competition. legitimate airlines, those that pay a standard wage to all employee groups, that own their AC and maintain them in-house, and view the industry as something more than a balance sheet, are quickly deserted by their customers for the latest fast-food type airline company with leased equipment and barely qualified flight crew.

    Last year my buddy met a fellow tourist in the Canaries. The touri was from Britain and obtained his ticket for 29 US dollars equiv…some kind of special sale/promotion. What do people expect will happen?

    I would love to see this same airline mindset bleed over to dentistry, medical procedures, and the legal profession. Then, sit back and listen to the screams of public outrage and screeching brakes on the initiative. I used the word, ‘bleed’ deliberately. IMHO, the only factor keeping this nonsense airborne is there are still enough flight crew with a vested interest in staying alive and carry an adequate skill set. For now. Lots of newbie pilots just itching for a 1st officer slot…cheap.

    Some feeder airline flight crews are paid so poorly in the US, they are on food stamps.”14. Being on Food Stamps is Not a Myth.Major media has gotten a lot of play out of profiling pilots who are paid so little that they sometimes apply for food stamps in order to make ends meet. While this is more common in regional circles, Tim says it’s not far-fetched, either. “People always seem to assume that if you fly for an airline in any capacity that you’re loaded,” he says. Regional pilots can make as little as $21,000 a year, according to Bloomberg, while the cost of flight training can exceed six figures.” https://www.yesfm.com/2019/07/03/15-behind-the-scenes-secrets-of-airline-pilots/

    I hear there’s a bunch of Max 8s available…cheap. New names, new paintjobs, cute flight attendants (paid by the hour), contract flight crews, catchy adverts and there’s no telling how much lower prices can drop next season? Let the Good Times roll.

    Like I said above, let’s dereg the dentistry, medical, and legal professions. Ain’t capitalism grand?

    • Jest Love
      Sep 24, 2019 at 2:50 pm

      wow, good to know that! I never realized that they got such low pay. And i read a lot!
      thanks

    • marie
      Sep 24, 2019 at 3:18 pm

      Doctors and lawyers have real jobs. Pilots are just drivers. Like Uber or taxis. Big difference.

      • ElKay
        Sep 24, 2019 at 5:40 pm

        @marie:

        I beg to differ with your statement that “pilots are just drivers”. Half the “drivers” you describe couldn’t describe the operation of their automobile. Many don’t even know where the dipstick is and even if it has one.

        I’m not a pilot, but I have witnessed the training that one must complete to “be a driver”. Trust me…. you wouldn’t get anywhere near a cockpit of an aircraft with the same level of training that most automobile operators have.

        • marie
          Sep 24, 2019 at 7:25 pm

          Deregulate the pilots and nothing happens.
          Try deregulating the doctors and witness the mayhem: can’t be done.
          As a matter of fact many doctors own planes for entertainment.
          I wouldn’t bet on the reverse.

        • Jim H
          Sep 25, 2019 at 1:04 am

          Marie,
          Not sure if you’re possibly serious but if so I’d suggest a quick read of Langewiesche’s long Times article on Sunday 9/22 regarding the whole MAX mess. Would you really want to fly on a Lion Air flight, given the level of training pilots receive (compared to U.S. Navy flight training regimens per the article.) Also check out AF447, Colgan Air 3401, Commair 5191 for other examples of pilot errors causing large numbers of deaths. Granted, Airbus had the foresight to design aircraft with the idea that as the demand for air travel increased more mediocre aviators would become pilots so best to design planes more difficult to crash. As the AF 447 crash demonstrated, it still possible to do with a large enough number of bad decisions.
          As Langewiesche noted, by definition, half the pilots flying were in the bottom half of their flight training programs. At least with docs, dentists and lawyers one can do some research before engaging in a contract with them. Not so with pilots unless you have the means to hire your own.

      • Jos Oskam
        Sep 25, 2019 at 2:14 am

        @Marie,

        I partly agree.

        Doctors have real jobs. So do engineers, farmers, bakers and hosts of other people. Yes, drivers too. When these people all stop working, this will cause discomfort. To put it mildly.

        In my book, lawyers are on a lower level. Together with politicians, marketeers, PR and advertising hacks and so on. Were these to suddenly all disappear, that might even be considered an improvement.

        • Saltcreep
          Sep 25, 2019 at 2:46 am

          Jos, according to the Hithhiker’s Guide to the Galaxy we’re already the descendants of the colonists of the Golgafrinchan Ark Fleet Ship B, consisting of the occupants of your least favoured professions, shipped out of Golgafrincham under a ruse in order to improve the lives of the rest.

          (For some more general relevance to this site, then from the book I can also recommend the discussion on inflation that ensues as the colonists adopt leaves as money.)

      • RagnarD
        Sep 25, 2019 at 10:13 am

        I’m with u on the doctors. Doctors make the world a better place.

        Lawyers?
        Lawyers make the world a better place for lawyers.

      • Vic
        Sep 25, 2019 at 8:22 pm

        Well sweetie, if that’s the case why not just design pilots out of the airplane? Would you step aboard such a flight? I think not. I certainly won’t – and I’ve got 40 years of military and airline piloting experience. Tell us the truth please: When you step aboard that swept-wing jet, you’ll be glancing into the cockpit looking for me. Fair skies, eh? Steve Canyon

  3. PghExpat
    Sep 24, 2019 at 1:25 pm

    While they lose money on every ticket sold, they make it up in volume.

    • Dan
      Sep 24, 2019 at 3:27 pm

      Doesn’t that mean they just lose money in volume?

      • qt
        Sep 24, 2019 at 4:18 pm

        The Uber/Lyft/Tesla/Slack/Zscalar/WeWork/Juul/etc. model. Hurry and IPO this B****

      • Jim
        Sep 24, 2019 at 9:42 pm

        Woosh

  4. Stephen
    Sep 24, 2019 at 1:29 pm

    Wowl. Really makes me want to book on a budget airline. Not that these airlines would ever consider cutting cost in critical areas.

  5. HR01
    Sep 24, 2019 at 1:31 pm

    MC01,

    Many thanks for continuing to keep us apprised of the ongoing turmoil in the commercial airline industry.

    Just one request. Would it be possible to include a table with the timeline of announced airline bankruptcies over the last three to four years? Seems hardly a week goes by without reading of another airline failure somewhere across the globe.

    Many thanks for you fine reporting.

    • MC01
      Sep 24, 2019 at 4:09 pm

      Thanks to you.

      To be honest the high water mark of air transport was the Summer of 2017, when Air Berlin went burst. It wasn’t supposed to happen, but it did, and it opened the floodgates.
      As I predicted there won’t be a well defined crash, just airlines dropping dead at the side of the road one by one. But as the Romans said gutta cavat lapidem.

      There are also a lot of clinically dead airlines on life support: Alitalia, Air India, Asiana, Etihad… these are the true big ones that are only kept alive by governments willing to throw billions of good money after bad.
      Let’s see what happens when that political will runs out.

  6. Petunia
    Sep 24, 2019 at 1:36 pm

    These bankruptcies may crimp holiday travel, will they affect holiday package shipping as well? Recently ordered something from Italy which took a grand tour of Europe before reaching me in Nowheresville, USA. But it still beat USPS from California.

    • Jessy S
      Sep 24, 2019 at 4:15 pm

      If you need something for Christmas, it is best to not wait until the last minute when ordering from overseas. That is even if a major carrier such as FedEx or UPS is involved in the package. One time, I sold a canopy to somebody in British Columbia, via eBay. In any case, UPS had trouble delivering the package because customs wanted the guy’s phone number. I eventually got it all sorted out but it added a few days to delivery.

      BTW, this was before the “Great Recession.” But imagine if that took place in the days before Christmas and that canopy was a present?

    • MC01
      Sep 25, 2019 at 1:11 am

      Definetely not.
      What is affecting air freight is the mismatch between capacity and pricing. To cut a long story short overcapacity worldwide is growing and prices keep on growing as well. Think of it as the flying version of a Southern European real estate market. ;-)

      The difference is that here somebody will start slashing rates, for no other reason than to show nervous creditors load factors are increasing. The market will attempt reaching an equilibrium from there.
      In Southern Europe real estate valuations will continue to be completely detached from reality long after mankind has disappeared through sheer inertia.

      • Xabier
        Sep 25, 2019 at 5:04 am

        Very true about S. Europe: and the families insist on those valuations even when grandfather’s house hasn’t sold in 3 years….. Contemplation of real estate ‘wealth’ destroys brain cells, no doubt.

  7. Seneca's cliff
    Sep 24, 2019 at 1:58 pm

    I think that trying to run a technically complicated, energy intensive air transportation system that is dependent on very expensive capital equipment as if it were a network of bus lines was a business model that was destined for failure. Things might seem like they work for a while, but eventually the piper has to be paid.

    • Harrold
      Sep 24, 2019 at 3:29 pm

      Capital intensive, but with incredibly low marginal costs.

    • MC01
      Sep 24, 2019 at 3:58 pm

      Small difference.
      Ryanair and Easyjet, both much vituperated low-cost airlines, have long been profitable, albeit their profitability is declining in face of the never-ending onslaught of companies run by a loose coalition of wide-eyed dreamers and shady characters.
      Flixbus, which runs true bus networks, is definitely not profitable, otherwise they wouldn’t keep financials so close to their chest. But they have just raised over half a billion euro in fresh capital so they can burn through money a little longer.

  8. Ken Wu
    Sep 24, 2019 at 2:05 pm

    Forgive me for my clear lack of economic literacy, but with “Growing passenger traffic” and during “Good times” it seems odd a 178 yr old travel behemoth would fold overnight.

    Yes, too much debt, but debt incurred for what purpose? My educated guess would be debt incurred to keep the business going long after it should have folded.
    I am having an increasingly harder and harder time buying this narrative about “all is well” as we watch Rome’s flames grow larger all around us.

    • qt
      Sep 24, 2019 at 2:24 pm

      Thomas Cook was a dinosaur and would have gone bankrupted in 2011…

    • Buddha
      Sep 24, 2019 at 2:29 pm

      Some of what we are seeing is the turn over/retirement of employees who were interested in making the company a going concern sacrificing short term gains for the long term benefit. You frequently see this when the founders of a company retire. What I suspect is happening is that those company’s which had responsible successors from the founders are now themselves retiring and the replacement leaders only care about their short term bonuses. At a prior employer I saw the original CFO retire and over the next 5 years we went through three sets of CFOs(with their entourage). In each case they repeatedly took actions which compromised the long term benefit of the company for short gains and were subsequently fired. I since left the company but my understanding is that they are still struggling to find CFO’s with horizons longer than one quarter. Doesn’t bode well.

    • Sep 24, 2019 at 2:46 pm

      Just watch what happens when passenger traffic actually DROPS for a while. That’s when the biggies get in trouble.

    • MC01
      Sep 25, 2019 at 1:21 am

      I’ll give you an example.

      I know absolutely nothing about the restaurant business, but I can assure you that in the present economic climate I could have people lining at the door to enter my establishment.
      How? Simple: by selling my services at a loss.
      As long my investors are fine with it I can burn through their money with complete abandon.

      This is exactly the model favored by “disruptive” startups such as WeWork, Netflix and Delivery Hero to show impressive growth and revenue figures: sell at a loss.
      How in the blue blazes do they manage to bamboozle investors that way? That is a story for another day.

      • Old-school
        Sep 25, 2019 at 6:09 am

        Yep. Been thinking about that a lot lately. Someone wise said the purpose of a business is to use less resources than it produces. These companies that lose money the the whole economics cycle are a sign of the times. Seems like modern gov economic policy is to reward any economic activity and socialize losses when they come.

      • stan6566
        Sep 25, 2019 at 2:20 pm

        There is no bamboozlement of investors. Investors give money to professional swindlers, called investment managers. Investment managers want their fee first and foremost and the easiest way to do that is by buying any old crap, providing the fee is collected at the front end.

        Investors live in a world of avatars where all those that invest, make money. Except that when cleaning lady pulls the plug out so to energise the vacuum cleaner, all the electrons scatter and investments go “woofff”.

        When electricity back on, investment managers welcome new cohort of investors for a new and exciting ride.

  9. Trinacria
    Sep 24, 2019 at 2:05 pm

    Little by little the tide seems to be receding and we are seeing the first of probably many naked swimmers. Will be an interesting 13 months leading up to the 2020 elections. Be sure to secure a bathing suit and gird your loins !!!

    • James Nauylor
      Sep 24, 2019 at 8:52 pm

      Trinacria,
      I have noticed that you often reply and participate in the blog.
      Thar’s great, but I’m perplexed why you ALWAYS END YOUR COMMENTS with “gird your loins!”
      Did your Mother or someone else drill this into you when you were younger?
      Just wondering.

      • Peter Kerr
        Sep 25, 2019 at 6:32 am

        Some Brits facetiously render this as “grid up your lions”.

  10. Buddha
    Sep 24, 2019 at 2:18 pm

    Time and again we see that the financial folks with their MBAs have screwed the company. Short term gains to enhance their bonuses which create long term pain for the company, its employees and shareholders. Think Toys-r-Us. In nearly every case, the companies have been saddled with far too much debt. Another part of the blame should be placed on their Board of Directors. One of my former employers was pressured relentlessly by a recently reconstituted BoD to issue more debt in order to invest it in questionable high yield investments. Investment management was not their business but it had the potential of making more money in the short term over their core. The jury is still out for them but if the economy turns they will be screwed.

    • Harrold
      Sep 24, 2019 at 3:33 pm

      Toy R Us was profitable except for the payments Bain extracted.

      Wolf covered that story extensively.

  11. Mary
    Sep 24, 2019 at 2:54 pm

    With ownership of these planes changing hands like trading cards, how confident can we be that needed maintenance is still being performed? And what about the flight crew? Maybe they are (understandably) loading up on alcohol and Xanax to drown out fears of unemployment.
    If I can’t get there by train, bus or boat, I’m staying home.

    • TXRancher
      Sep 24, 2019 at 5:35 pm

      If I recall correctly, airline travel is safer than train, bus or boat.

  12. David Hall
    Sep 24, 2019 at 3:12 pm

    The US airline industry has consolidated in recent years through M&A activity. They used ex-military pilots. Indeed.com pegs average airline pilot salary at about $74,500. The market is down on impeachment fears. The consumer confidence index sank in Sept.

  13. Joe
    Sep 24, 2019 at 3:14 pm

    Scratch ships and now planes off the bucket list…
    It is getting pretty small in what I want to do and see…
    Had a fantastic time travelling in the 80’s and early 90’s, it slowly went to crap after with cheaper and lighter and much less safe…

    • MC01
      Sep 25, 2019 at 1:26 am

      Basil Fawlty… is that you?

  14. marie
    Sep 24, 2019 at 3:16 pm

    $1800 business to Paris? Direct?
    other than La companie, it just doesn’t exist. Unless you go Icelandair 1 stop or other detour.
    But I’m open and interested. Give us a link.

  15. LouisDeLaSmart
    Sep 24, 2019 at 3:35 pm

    \\\
    About Adria, the official story is they were short 4 mil Euro for the two airplanes, and 60 mil Euro for the entire operation. Don’t foget, they sold the entire fleet prior to that.
    \\\
    Slovenian government is changing laws to allow airline subidy and they have a government based backup plan.
    \\\
    This fail greatly affecs the operation of the Ljubljana airport whose operation is ~50% based on Adrial Airlines.
    \\\
    Something is fishy here. A country with 54 bil GDP cant afford to subsidise their only major airline and airport with a few milion a year. Come on, this is Europe, a place where principles matter only when someones other money is at stake, not your own.
    \\\

  16. curiouscat
    Sep 24, 2019 at 4:29 pm

    And so these companies join the ranks of the makers of buggy whips, typewriters, and telephone booths. Lamentable but necessary for the restoration of healthy economies. We need more of these situations, not fewer.

  17. unit472
    Sep 24, 2019 at 4:40 pm

    If I can drive to a destination, I’m going to do it.

    Consider a couple going from Miami to San Francisco business class. Flight booked one month in advance costs about $4000. 2 hours to airport plus parking. Arrive 2 hours ahead of take-off. Flight time 6 hours non stop, 8 hours one stop. Time from airport to ultimate destination 2-3 hours depending on if you are picked up or need to rent a car. Total travel time 12 to 15 hours each way with no delays.

    Drive in private auto. Time 3 days each way. Cost of fuel round trip@25mpg= $650. Two nights in motel plus meals $500. Total cost= $1150.
    .
    Advantages. carry as much luggage as you want either way. No airports. No undesirable people. More comfort and flexibility. Saved more than $1800 plus no taxi, parking or rental car expenses.

    Disadvantage. Travel time. 144 hours by private auto. 24 to 30 hours by airline.

    Yes, YOU can fly economy for less but I can’t. I’ve spent hours in confined spaces under buildings on my stomach but I was working. I’ve had two claustrophibic panic attacks in my life ( and I’m 67). One was under a college gymanasium building when, for no reason, I knew I had to get out. When I did a moderate earthquake occured. The other was on a packed economy class Allegiant Airlines flight when, sitting in the middle seat the ‘passenger’ in the row ahead reclined and I felt trapped.

    • walter map
      Sep 24, 2019 at 4:51 pm

      Sounds like the US could benefit from a passenger rail system.

      Never mind.

      I don’t fly, at least not in aeroplanes. If God had meant for me to fly, he would not have gotten the Chunnel built for me.

    • weinerdog43
      Sep 24, 2019 at 5:32 pm

      I won’t link to the story out of respect for Wolf, but I recommend you take a look at “Crash Course” in The New Republic about the Boeing 737Max. It’s really quite good and all too predictable about how the MBAs have made a mess of things at Boeing.

      Another really good reason to reconsider flying unless absolutely necessary.

    • Sep 24, 2019 at 9:06 pm

      Give me a train with sleeper and white-table cloth dining car! That could be a spectacular trip across the Rockies, or more likely south along the coast to LA and then across. That would be a vacation, taking days, not a business trip. But in Europe and Asia, those trains flit right along and you can actually get somewhere in 12 hours.

      • Unit472
        Sep 25, 2019 at 7:58 am

        Amtrak’s Zephyr with roomette takes 55 hours SF to Chicago. Meals are included but it’s not cheap. About the same as 1st class air. Empire Builder from Chicago to Seattle takes 50 hours. Never taken the Chief Amtrak’s LA to Chicago route.

        • Sep 25, 2019 at 9:41 am

          20 years ago, my loved one (now my wife) and I took the Amtrak Chief from Chicago to Albuquerque. We had our own sleeper compartment with bath and shower, and there was a dining car with white-tablecloth service and decent food. We met all kinds of nice people. It was part of our vacation, it was expensive, and it was wonderful. The train was many hours late arriving, and that was fine too because we enjoyed being on the train.

  18. walter map
    Sep 24, 2019 at 4:44 pm

    Today, Adria Airways, three years after being privatized.

    Sometimes the business model is to mismanage the firm, profitably for insiders and unprofitably for everybody else. It seems to be a thing these days, in many cases enabled by rock-bottom interest rates.

    • MC01
      Sep 25, 2019 at 1:36 am

      More often than not people have no clue about what they are doing, especially if their investors have been driven insane by the quest for yield and will fall for anything.

      In The Simpsons episode “I Am Furious (Yellow)” (aired in 2002), Bart starts working for a Silicon Valley startup which is ultimately revealed as being run by idiots whose sole path to profitability is to rip out the copper wire from their leased office after the company goes bankrupt.
      We have long passed that point.

      • fajensen
        Sep 25, 2019 at 3:22 am

        We should know that we are Done when satirical cartoons turns out to predict the future!

        • MC01
          Sep 25, 2019 at 8:16 am

          2002 was in the immediate aftermath of the Dotcom burst, when such irresponsible behavior had been commonplace. The amount of money that was blown on hopeless ventures was simply mind-boggling, as was the amazing naivete displayed by people that should have known better such as venture capitalists.
          People could easily relate to that situation because it was so fresh in their memory.

          Right now it feels like one of those nightmares that keeps on getting worse and it’s impossible to wake up from.

      • walter map
        Sep 25, 2019 at 7:56 am

        A metaphor for modern business practices, I suppose.

        No wonder Treasuries are so popular. It’s not safe out there.

  19. Willy2
    Sep 24, 2019 at 4:48 pm

    – Selling one’s business to a PE firm is guarantee for a (financial) disaster. All the PE firm is interested in is sucking that company dry before it collapses.

    • walter map
      Sep 24, 2019 at 4:54 pm

      Schumpeterians might call it ‘creative destruction’, except there’s no ‘creative’ bit.

      Do it to enough companies and you don’t have much of an ‘economy’ left. There are indications that is a goal in certain circles. Would you put it past them?

  20. Nico
    Sep 24, 2019 at 5:34 pm

    I keep getting Air Asia,Gold Coast to Kuala Lumpur $146 ads popping up while I have been reading this article and comments.

    • Sep 24, 2019 at 9:01 pm

      AUD or USD? Either way, sounds like a deal.

    • Gold is just..gold
      Sep 25, 2019 at 12:16 am

      After I retired I used to fly Air Asia a lot, more or less on a whim, just scroll through the dates till an ‘el cheapo’ popped up. Need to be flexible of course.
      ( Once did an 8 hour flight with Air Asia when they had the seats bolted in the upright position. No sissy leanbacks for us! Not a problem as I’d bought 3 or 4 miniature Southern Comforts etc and I tore off the plastic bag’s ‘DO NOT OPEN’ sticker with my teeth. Mate did the same and we had a great flight.)

      Air Asia is still great once you get to Asia but Scoot specials (Oz – Singapore return for sub AUD500) and Cebu Pacific (similar $$ to Manila) are more competitive .. but need to book 2-3 months ahead and forget peak…

      My wife who travels with work a lot has club membership with one of the majors so for annual holidays we play at being rich.. and even I’m often amazed how much good qual fizz I can consume and stay upright for boarding.

      But I find the cheapies pretty good as long as you don’t have too many/any expectations and I enjoy travelling light so 7 kilos not a problem. So far no major dramas – delays, cancellations etc – no more than with full fare airlines so I hope they don’t all go belly up at once…

  21. Willem
    Sep 24, 2019 at 5:53 pm

    MC01

    Fascinating insight.

    Many thanks

  22. zebra
    Sep 24, 2019 at 5:58 pm

    Abra Cadaver – and it’s gone.

  23. Sep 24, 2019 at 7:23 pm

    Regarding these “good times”, is it fair to assume that jet fuel prices trend with other petrol prices?

    • Kasadour
      Sep 24, 2019 at 9:05 pm

      Jet fuel is high octane gasoline. 97-99. Probably subject to price controls just like any other hydrocarbon fuel.

      I’m of the opinion that competition is killing low fare airlines. I’ve rarely been on a flight within or to Europe that wasn’t completely full.

      My husband and I are flying from Los Angeles to Paris this coming November on Norwegian Airlines and the fare is only $750 a piece business class and $250 coach.

      Delta (KLM) charges ~$5000 for business class from Portland to Amsterdam but their business class seats are a dream. Only way to fly.

      • Sep 24, 2019 at 9:28 pm

        Kasadour,

        “Jet fuel is high octane gasoline. 97-99.” You’re talking about avgas here, which is used for aircraft piston engines.

        In theory, jets are not nearly as picky as piston engines and can burn a wide variety of hydrocarbons. In terms of jet fuel varieties, they’re close to kerosene (which is close to diesel) or to naphtha.

      • MC01
        Sep 25, 2019 at 2:03 am

        Jet fuel,or avtur, is actually kerosene-based pumped full of additives. JP1 fuel, which was used by the US military and allied forces immediately after WWII, was actually highly purified kerosene with zero additives.
        These additives include corrosion inhibitors, antistatic agents and biocides. ASTM standard D1655 defines them.

        Aviation fuel used on NATO aircraft carriers (F-44) is completely different and is actually a complex (and expensive) mixture of hydrocarbons designed for an extremely high flash point. Fascinating stuff but with no real applications outside of aircraft carriers.

        There are several kinds of avtur available for cold climates, most of them derived from NATO and Warsaw Pact military fuels, which are designed to lower the freezing point by mixing the kerosene base with naphta or, more brutally, gasoline, but these fuels account for a minute percentage of worldwide consumption.

      • Vic
        Sep 25, 2019 at 8:42 pm

        Wrong-o. Jet fuel is very close to kerosene when crude oil is cracked.

  24. Kasadour
    Sep 24, 2019 at 8:59 pm

    How does one get a million bucks? Invest two million in an airline.

    I love flying in continental Europe. Everyone claps when the plane lands safely.

    • MC01
      Sep 25, 2019 at 1:43 am

      Do you remember those old Warner Bros cartoons where Sylvester the Cat does something really really stupid and/or humiliating and his son puts a paper bag over his own head due to how ashamed he is of his father? My reaction.

      • Kasadour
        Sep 25, 2019 at 10:51 am

        yes I do remember those old cartoons and that particular one. Perfect comparison.

    • stan6565
      Sep 25, 2019 at 12:01 pm

      …and in some places, they all stand up and start unloading the overhead lockers while the plane is still rolling down the runway…

      until the captain shouts “sit down!!” on tannoy. :)

  25. Sep 25, 2019 at 6:00 am

    If we claim to spend little, our work – sooner or later – will be worth even less.

  26. Tim
    Sep 25, 2019 at 6:53 am

    The CEO of a long-ago British airline once said this:

    “In a recession, you have to tighten your belt.

    “In a depression, you don’t have a belt to tighten.

    “If you’ve lost your trousers as well, you’re in the airline business”

    Plus ca change?

    • MC01
      Sep 25, 2019 at 8:21 am

      Ryanair, EasyJet, Lufthansa, IAG, AirBridge Cargo, Antonov Design Bureau, Ethiopian Airlines… they all make profits. Ethiopian actually managed to maintain profitability even during the periodic political upheavals that rattle the Horn of Africa.

      Just because I cannot cook to save my life it doesn’t mean everybody in the world is like me. ;-)

      • Kasadour
        Sep 25, 2019 at 12:12 pm

        What about Vueling?

        • MC01
          Sep 25, 2019 at 12:35 pm

          Vueling is part of IAG.

  27. IslandTeal
    Sep 25, 2019 at 9:42 am

    All this talk of losing money and not one mention of PELOTON which launches this week to much anticipation of new wealth.

    • stan6565
      Sep 25, 2019 at 2:10 pm

      A guy in my kid’s school said he was working on a startup peloton ting, where, as opposed to all other non-tech pelotonistas, his megatech peloton minicorn will have a, wait for it, a two way communication channel by which the trainer based in say Boise, Idaho, can directly communicate with the recipient of peloton advice in say, Ripley, Surrey.

      All of you who want a piece of this action, contact me directly through my Cayman Islands headquarters. Guaranteed to beat 0800-call-eat.

    • Sep 25, 2019 at 5:14 pm

      Stationary bikes that you pedal as hard as you can to go nowhere are not particularly related to airlines, but the way things are going with airlines, the relationship may be closer than we thought :-]

  28. raxadian
    Sep 25, 2019 at 9:54 am

    And this is yet another reason why negtive rates suck your soul.

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