2020, Already the Year of Zombie Airlines

And the year has just started.

By MC01, a frequent commenter on WOLF STREET:

In South Korea:

Hyundai Development Company (HDC) and Mirae Asset Daewoo (MAD) were “selected” in November by the Korean government as “preferred bidders” to purchase a large share in the country’s second largest airline, Asiana, whose financial troubles we have previously covered.

Asiana’s financial situation has been steadily deteriorating: Total debt at the end of the first half of 2019 ballooned to 9.6 trillion won, or over $8.2 billion, and passenger numbers to the once profitable Korea to Japan routes have been reduced to a mere trickle. These are terrible numbers that should have long sent Asiana into bankruptcy protection and executives in damage control mode, as Asiana is apparently underreporting lease costs as well.

However, this is not about rescuing an airline that is likely to keep on losing money for years but about bailing out the Kumho-Asiana chaebol (family-owned conglomerate) which is sinking under the weight of its enormous debts: proceeds from this sale won’t go toward paying Asiana creditors but entirely to Kumho.

It’s expected HDC and MAD will pay Kumho about 2.5 trillion won (over $2.1 billion) for a 31% share in the airline, most likely more than the whole airline is worth. In 2018, Kumho-Asiana had already been forced to sell a 45% stake in their tire division, Kumho Tires, for $600 million to Qingdao Doublestar to raise quick cash and avoid bankruptcy.

As the Korean government organized and oversaw this operation every step of the way, this is yet another act in the massive bailout of the country’s conglomerates which started in 2016 with a huge stimulus package aimed at the country’s financially troubled maxi-shipyards and that shows no sign of slowing down.

In India:

In December, the Indian government, after many changes of heart, finally announced they are going to get rid of the entirety of Air India by seeking to sell 100% of the money-losing airline. Air India is reportedly sitting on $10 billion in debt and in 2019 was cut off from fuel supplies at several airports due to unpaid bills by the state-owned Indian Oil Corporation (IOC) before the government stepped in with a bridge loan.

All previous attempts to privatize parts of Air India met with complete lack of interest: Besides the company’s financial woes, prospective buyers were no doubt scared away by the Indian government’s well-known tendency to meddle in restructuring plans for newly privatized companies, but this time it’s different, or so the Indian government assures us.

They are even ready to consider waving foreign ownership limits to get rid of this hot potato and to transfer over $7 billion of Air India debt onto other state-owned enterprises. Unfortunately, there’s not a word about how the government will react when the new owners will have to cut jobs, eliminate unprofitable but politically important routes, sell assets, and slash the compensation of state-appointed executives in an attempt to restore profitability.

In Italy:

In terms of basket-case Alitalia, it turns out the robust campaign to promote a sale to Lufthansa was based on wishful thinking and not reality, just like the bid Lufthansa was supposed to place for Thomas Cook operations earlier this year. Lufthansa has zero interest in Alitalia, already owns an Italian subsidiary (Dolomiti), and while the group as a whole is in good financial shape, the onslaught by Ryanair, EasyJet, and a slew of Turkish airlines such as SunExpress on the German market is severely impacting profitability on short routes, to the point the low cost Lufthansa subsidiary, Eurowings, is predicted to lose money at least into 2021.

Alitalia entered the third year of “extraordinary administration” (a form of bankruptcy protection) in May 2019, and has exhausted the €900-million lifeline extended by the Italian government two years ago. A new €400-million lifeline should be available by the end of January 2020, as no serious buyers were found. This fresh “this-is-not-a-bailout-honest” money is urgently needed as Alitalia is reported to have lost €600 million in 2019.

Alitalia has been at the center of a complicated political match since August 2018 when a highway bridge collapsed in Genoa killing 43 motorists. While the criminal trial is likely to last many years with a far-from-settled outcome, it was immediately apparent that this horrifying event was not the fruit of chance but of lack of maintenance.

The Atlantia conglomerate, which runs most the Italian highway network under license from the government, became the prime suspect. Atlantia has since been hinting that it might be willing to buy “a large stake” in Alitalia, a political hot potato for obvious reasons.

This drove away the only serious bidder, low-cost behemoth EasyJet, which was ready to buy a stake in Alitalia in return for slots at the highly constrained Milano Linate airport. In short, it’s a mess.

I’d venture to say it’s time for Alitalia to go. The company should be liquidated and the assets auctioned off to pay off debts, starting with the bridge loans provided by the government.

But among those not able to bid for these assets — should they ever come up for sale — will be Italian low-cost airline Ernest, which announced at the end of December that the Italian government would suspend its commercial license on January 13, 2020, and that the airline would suspend operations on that date.

When licenses are suspended in this way, the cause is invariably the inability to finance operations in reliable fashion. While it’s possible Ernest will be back in full form once fresh sources of financing are found (Turkish airline AtlasGlobal is notorious for this pattern of operation), it’s hardly a sign of overall good financial health.

In Germany:

While the EU threatens hellfire for a new Alitalia bailout, they don’t seem to mind that Condor Flugdienst, formerly a part of Thomas Cook, is still gingerly flying around on a taxpayer guarantee. Condor obtained a €380-million bridge loan, guaranteed by the German government during its “investor protection” proceedings, a form of bankruptcy protection that allows the company to restructure its debts while continuing to operate.

There’s presently an April 2020 deadline for the Condor administrators to find a new owner and work out a deal with creditors, after which the company should (technically) be sold or liquidated. But I’m not holding my breath. The German government is keen to avoid a repetition of the Air Berlin fiasco, no matter how much money it will ultimately cost the taxpayer, how much it will have to bend its own rules, and how much pressure it will have to apply on domestic aviation groups Lufthansa and TUI to buy something they don’t want and don’t need. For the record Lufthansa got rid of their final Condor share in 2010.

I’d venture say it’s time for Condor to meet its fate whatever that may be, without government meddling, for no other reason than it would set a dangerous precedent. As long as Alitalia was the lone government-backed zombie airline on the Continent, we could just blame notorious Italian politics. But should another airline, and a leisure one to boot, keep on flying on the taxpayer’s dime, it would set into motion a dangerous process of “Germany and Italy are doing it, so why not us as well?”

2020 has just started and already promises to be the year of zombie airlines. By MC01, a frequent commenter on WOLF STREET

On paper, this looked like a no-brainer. Read…  When Losses Don’t Matter: How Japanese Conglomerate Mitsubishi Blows Billions on a Jet Nobody Really Wants

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  87 comments for “2020, Already the Year of Zombie Airlines

  1. Old Engineer says:

    Maybe this will be the year of the zombie apocalypse. Zombie airlines, zombie banks on Wall St. still being bailed out, and the entire country of Australia is on the verge of a fiery zombiedom. But then what does Wolf say, “things just keep on keeping on… until they don’t”.

    • Tank says:

      Sounds similar to how Hemingway described going bankrupt by Mike Campbell, in The Sun Also Rises:

      “How did you go bankrupt?” Bill asked.

      “Two ways,” Mike said. “Gradually and then suddenly.”

      “What brought it on?”

      “Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”

    • Old-school says:

      Off topic but not too far. Zombies and transportation. Is there any good reason for why Teslas’s stock price is so high, but their bond rating so low? All I have is that stock market is disconnected from reality and the greater fool theory.

    • sierra7 says:

      Old Engineer:
      The whole world is in an “economic swamp” and nobody knows where the quicksand is that will just suck us all under…..
      I don’t understand a world based on debt. That can’t be real and is unsustainable.
      Have been watching the national and global economies for multiple decades and this is the worst unreal one of any…….
      Good luck to all!

  2. Gary Baroney says:

    The last time I flew was more than five years ago between Germany and Spain and that cured the habit. I have no intention of flying again. Traffic jams or overcrowded and unpunctual trains to the airport, long check-in lines and times, strip-tease and anatomical probes at security, and cattle transport conditions in the fuselage. The only difference between business and economy class was a thawed-out bread roll in the former. The public want dirt cheap air fares and they get what they pay for.

    • Xabier says:

      All so awful that the anatomical probing is perhaps the only potentially enjoyable part of the whole thing….

      • WT Frogg says:

        Xabier: Quite true but only if you mention Al Qaeda during check in.

        ;) ;).

        Actually , if you lack medical coverage the airport is the place to go:

        free x-rays, full body scans and the aforementioned colonoscopy.

        • Erle says:

          One might think that with so many airlines losing gobs of taxcow dough that they would be overdoing the comfort level of the customers but the service just deteriorates.
          Perhaps if they got into the movie business on the side to provide more engaging video during the flights that would help the situation. There are scores of starving you tubers that they could buy for a song.

  3. joe says:

    Air India “cut off from fuel supplies at several airports”
    Thanks Wolf, good to know. I’ll go back to Kingfisher. Are they still in business?
    For what it is worth, air travel for the peons is heck – as I recover from a 44 hour ordeal.
    I think this is part of the NWO restrictions on non-elite travel and currency movements. Elites use private jets with expedited customs and security. Heck, even Robert DeNiro has dual citizenship with a diplomatic passport.
    Right now, I fly anyone who gets a jet to the tarmac, schedule be darned.

    • Tank says:

      …”even Robert DeNiro has dual citizenship and a diplomatic passport…” EVEN!? The guy could take over Alitalia or at least get one of their jets.

    • Sammy Iyer says:

      1)Kingfisher was a premium airline founded by flamboyant liquor baron billionaire Vijay Mallaya (style similar to Vigin founder)& airline had excellent service record.I have flown Bomaby-Hog Kong direct no of times. But the Liquor baron fell foul of the political masters & the Govt controlled SBI Bank called $1 biilion or so loan back upruptly& all the Govt Enforcement agencies painted a narrative that founding was a crook& put a arrest warrant on him(sure he stole a few 100 million $ but he had a net worth of 5-10 billion $) & the airline folded one fine morning 6-7 years back. The billionaire Vijay Mallaya currently is hiding out in UK/ fighting court battle & waiting for deportation to India .

      2) Jet Airways was India’s No 1 private airline with good record till 2018 (domestic +international routes) with 50% market share was allowed to fold/fail in April 2019 by the BJP Govt (same tricks employed Govt controlled bank lenders pulled the plug.Naresh Goyal Jet airways Founder was indeed a crook but ruling party did not like him .Govt could have jailed the founder( his passport has been invoked & waiting trial in India) but could have saved the best airline .But Govt did not save the private airline& the airline folded abruptly one fine morning in April 2019! passengers yet to get refunds and creditors worth 5 billion$ are mired in bankruptcy court.
      3) Air India’s (flying white elephant !)only asset is fully paid for aircraft’s + leased aircrafts & the premium rotes/slots they hold in indian airports & the global airports they operate. The staff have govt employee mentality and the service is shit & the aircraft toilets stink. I have travelled Madras-Singapore 100’s of times. Only consolation(after horrible check in,dirty seats etc) is hot indian vegeterian food (prepared by Taj 5 star hotel group) and air hostess generously will give 4-5 miniatures of scotch or bourbon+soda or 3 beers till meal is served.

      4.IndianGovt is funding at the moment this (Maharajah)white elephant with Govt backed $ sovereign bonds. Tata group who started Air India in 1940’s(Govt nationalized way back & took it away from them)is ready to buy AirIndia only in bankruptcy court (not as a whole). Singapore airlines is ready take over but with not with all the existing gordo’s &babushka employees whose work culture is rotten.
      5. Govt has to swallow (say 50%)of the bad debts & sell Airindia as a running airline with landing slots/aircrafts etc,. But the Employee unions are blocking this as new masters may absorb only 40% of existing bloated work force( pilots+eng staff are the only essential staff. -rest are all dead wood)
      6) Vodafone (UK) merged with IDEA group & is the 3rd biggest mobile telecom after govt’s pet boy Ambani’s Reliance Jio (No1) & Airtel (No2). He recently gave a news interview in London that “doing business in India is tough due to political machinations” ( he promptly took the comment back next day as feelers went back to him that Vodafone will loose subscribers en masse( if the govt subjugated press paints a narrative that Vodafone is folding operations in India)—just giving a example what awaits billionaires in India -chinese style!

      • Jon says:

        Looks like you are against the current ruling party BJP and spreading falsehood here.
        You are basically mixing a lot of lies with some truth and making this narrative.

        I don’t have time to refute all you wrote but readers be aware !

      • Erle says:

        Sammy Iyer, Your comment reads like a successful stand up comic.
        Bravo for your humor.

  4. 2banana says:

    The German WWII Condor 4 engine plane was pretty interesting.

    The “Scourge of the Atlantic” was a long range bomber, long range troop/passenger transport, long range reconnaissance, shorter range cargo and Hitler’s personal air transport.

  5. MCH says:

    I can see it now. Asiana is flying way too low again. :)

    As for the rest, I would be reluctant to fly those, you never know if they keep up with maintenance. For example, I would be not interested in flying Hainan at this point.

    • MC01 says:

      Korean airlines have only one problem: the truly staggering mountains of debts behind them. For the rest they are absolutely fine: we often use KAL Cargo for sending stuff from China and they are great despite being in somehow worse financial shape than Asiana.

      But I suspect that sum tin wong with the Korean economy, and corporate debts especially, at this point. ;-)

      • roddy6667 says:

        When we fly from China to JFK, we almost take Korean Air now. Comfortable, professional. Last time we were on an A380. Seats 853 comfortably. Makes the 13 1/2 hour flight almost enjoyable.

        • MC01 says:

          They have taken the old slogan “Our loss, your gain” to a completely new level. ;-)

  6. Petunia says:

    Regarding India, I am sure I heard this past week that India had overhauled their bankruptcy laws and streamlined the process. The intention was to get all bankruptcies resolved in a few months and the bad debts officially off the books. Was that bad information?

    • Desai says:

      No that is not bad information. New bankruptcy process is applicable only if a company is taken in bankruptcy court. However , Air India is not taken in the bankruptcy court because of risk of forced liquidation. As per new law if no buyer is found within 330 days than company has to compulsorily go into liquidation . But Liquidation is not an option for government due to current economical and political climate. Thus government is trying find buyer without taking bankruptcy court route and will continue to provide bail out till it finds a buyer.

  7. Paulo says:

    Interesting article. IMHO, this is a result of deregulation and the natural outcome of providing low cost everyday air travel for the masses. While the current production of GHG by air travel is currently less than 3%, I have read forecasts that at this continued rate of growth it could very well reach 25% in the next 30 years.

    I guess my real concern is the consumption race; the consumption of resources and experience. It is now common for folks of modest means to expect destination weddings and yearly foreign travel. I think of my good friend for an example. A few years ago he and family traveled to the Dominican Republic for the marriage of his nephew. He doesn’t even like his nephew. Furthermore, he got into a fight with his brother-in-law while there and the usual family dysfunctions and event stress oiled up with too much to drink has lasted longer than the hangovers. In the works for same family is a ‘trendy’ river boat cruise to ‘see’ Europe. Another friend traveled to the Canary I for kayak surfing last year. It is still normal in Canada for snowbirds to hit Mexico every winter and let’s not forget Hawaii and Florida.

    Of course these airlines are going broke. They are in debt up the ying yang, they compete by offering tickets cheaper than bus fare, and somehow have marketed themselves into ‘must do’ standing.

    Spain and Iceland are now trying to limit tourism. 7X as many tourists visit Iceland every year than people who actually live there. Iceland.

    I just read this little gem: ” Only a few decades ago, flying was regarded as pure luxury. By now, however, air travel has become affordable for the middle class, which is growing around the world. Fierce competition between the airlines, more efficient aircraft, a larger number of flight connections, the expansion of airport infrastructure and better transparency of fare prices thanks to online portals have contributed to this development. At the same time, business travel has been growing quite steadily on a global scale.”

    From the same article: “To some extent, the overtourism phenomenon is caused by the fact that flying has become affordable or even cheap. At the beginning of 2018, low-cost carriers had a share of roughly 30% in overall air travel in Europe, up from 24% at the beginning of 2011. Of course, other factors contribute to overtourism, too, for example online portals which have specialised in providing private accommodation.”


    Have we reached peak tourism? Peak consumption? Peak debt? I’ve been hoping that computer access, easily available knowledge and photos, film clips and movies, would start to limit tourism. It looks like the opposite is true.

    And just put it on plastic.

    • tom says:

      How dare the “masses” fly.

      GHG? At least Gore & hollywood can purchase
      carbon credits, what will the “masses”
      use? Does my burning barrel qualify?

      I just can’t understand why these peasants
      can’t stay home. Cancel their cards & lower the
      minimum wage.

      Back to my youtube tropical vacation….

      • MCH says:

        Yes, they should follow the right example and take boats everywhere. Much more comfortable and you get more work done if the boat has good WiFi, which you can’t guarantee on an airplane.

        It would be kind of weird though for a country to go without a national flagged airline.

        Going back to Asiana again, I wonder if we might see another princess Nutrage… it would be funny.

        • char says:

          Belgium lost Sabena, Switzerland lost Swiss air, KLM is owned by Air France. It is not that weird to not have a flag carrier

      • Mike G says:

        Show me on the doll where Al Gore hurt you.

        • NBay says:

          Good line.
          BTW, he was redeemed on South Park and a new contract was sign with man-bear-pig.

          First species to cause it’s own extinction is a dubious honor in Earth’s natural history.

    • roddy6667 says:

      Globalism has a leveling effect. The poorer countries become middle class, and the middle class countries become poor. “Peak tourism and peak consumption” will vary according to which side of the process you are on. Here in China (and all Asia), the party is just starting. I understand that things are not going so well for the middle class, the working class, and the working poor in America.

    • Tank says:

      Wasn’t it Warren Buffet who said: “Investors have poured their money into airlines … for 100 years with terrible results. … It’s been a death trap for investors.”

      BRK annual meeting in 2013, and went on to buy what’s now “worth” $9 billion in airline stocks

    • rhodium says:

      And statistically none of these people are likely to have retirement savings. I’m all for boosting social security, but not much above poverty level, because so many people burned their money out the back of a jet engine or on expensive vehicles, weddings, vacations. It’s kind of funny though. Humans. It always kind of irritated me that a dog cannot savor a steak anymore than his kibble. We think we are smarter than animals, and we are mostly, but when it comes to emotions surrounding consumption people aren’t terribly different from their dogs. They just always want more until it makes them sick.

      • JBird4049 says:

        I would not compare humans and dogs eating habits in talking about social security.

        Dogs are not human. Dogs are eating machines. I love them, but they will eat anything, anytime, anywhere. Like five pounds of still frozen hamburger sitting on the kitchen counter.


        Ever have a cat? Picky eaters. If they don’t like something, and you insist, they will sometimes eat and then barf where you cannot miss it. A house cat that can go outside can decide to hunt his meal. To heck with its servants’ offerings.

    • Nicko2 says:

      The populations of Asia/MENA/Africa will grow by 2 billion people over the next 30 years. All growth in the middle class will happen there.

    • MC01 says:

      Deregulation has absolutely nothing to do with this. This is a money issue. A financially viable company is financially viable whether they fly around Gulf tycoons in opulence or budget tourists packed like sardines in a can.

      Low budget tourism of the “Stack them high and sell them cheap” variety has been in the spotlight for much longer than most believe: already in 1970 Benny Hill was entertaining millions by playing Fred Scuttle, a shady tour operator who promised to take you to the French Riviera and perhaps back for a handful of quids.
      Nothing has changed but the scale and the fact comedians these days are far too political and far less funny. ;-)

    • char says:

      It is more the EU that made fares transparent that online portals.

    • Erle says:

      Several years ago there was a Wisconsin based airline that I always specified for my infrequent business trips to LAX and DFW. The name was Midwest Express which made it sound like puddle jumpers but no. They had big leather seats with lots of leg room. I felt spry after flying with the best looking and most gracious Stews in the sky. It was really something that I could walk through the terminal when all others seemed to have a bad limp and a stooped gait.
      One redeye from LAX to MKE the gals decided to splurge with the free wine. Everything airborne is awful since that memorable flight. I even bought the inexpensive Stew pins with the logo for my very young daughters.

  8. 2banana says:

    A few decades ago…

    Interest rates were at 18%, money was hard to come by, bubbles deflated quickly, houses were as far from an ATM as you could get and debt was frowned upon.

    “Only a few decades ago, flying was regarded as pure luxury…”

  9. Costs keep mounting, no end in sight. Autos, airlines, shipping firms all facing overcapacity:

    //Earlier this fall Nippon Yusen KK, Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., Japan’s three largest ocean shipping companies, announced plans to merge. Once complete, the new company will be the sixth largest in the world. Meanwhile, China Ocean Shipping Company and China Shipping Group Company merged last summer and sought approval to operate internationally. The union of China Ocean Shipping Company and China Shipping Group Company created a new entity that controls 22 percent of the market share of cargo moving between Europe and Asia.//


    • Willy Winky says:

      ‘Costs keep mounting’

      Yep. The low hanging fruit has been picked so the costs of everything will keep mounting – and the central banks will keep the money train running on low interest rates to help people continue to afford to buy ‘stuff’.

      But at some point (very near) we will hit debt saturation when no matter how low the interest rates are people will stop buying stuff.

      This is worth watching — near the beginning he mentions something like we used to get 30 parts per 1000 copper to waste rock… now it’s like 3 parts — and the response is ‘just dig up and process more rock’

      Well ya, but that COSTS MONEY – and that adds to the cost of stuff.

      Former career mining professional Simon Michaux gives a public lecture describing the onset of ‘peak mining’ and its various implications for natural resource management.

      This talk was presented in Adelaide by the environmental group, Sustainable Population Australia. The presentation looks at the looming energy crisis, and plots peak gas, coal, uranium and other energy sources as we head towards a time of resource scarcity and radical societal change.


      • HowNow says:

        Thanks, Willy!! Excellent lecture which is followed by an equally good one from Charles Hall on the ROIE of resources. It would be great to have an update from each of them. Kinda puts MC01’s report into context.

  10. R2D2 says:

    The global airline industry is massively oversupplied and racing to the bottom on price. You can’t own a big airplane that costs $10m a year to run, and expect to recoup the money with cheap tickets. We recently flew from London (UK) to Venice (Italy) and back for $40. The taxi from home to the airport cost more! As long as those negative economics are in place, zombie governments will continue to bailout zombie airlines (like South Korea, Italy, etc.).

  11. Cobalt Programmer says:

    Air India was actually a private airlines TATA airlines during British period. TATA group is a mega steel- industrial company. Government of India purchased it from TATA group after Indian independence. In future, when Indian gov. is selling the airlines, I am sure TATA will buy it back. Apart from mismanagement, government is under pressure (intense lobbying) to sell the company. Because, they have so many prime air routes and private companies can take care of them.

    Kingfisher airlines is out of business and charged with corrupt practices. The company is bankrupt and owner escaped to London (I guess officials sent him with honors).

    • Tank says:

      Or he escaped in a crate in a plane a la Ghosn

    • MC01 says:

      The Tata family already owns an airline (Vistara) and a minority stake in another (Air Asia India). They also have the hot potato of the Jaguar-Land Rover Group (JLR) on their hand right now, a puzzlingly bad investment given Tata rarely makes a bad call.

      I honestly doubt anybody would buy the whole of Air India right now, not so much on account of the debt but on account of the endless troubles the Indian government is sure to cause despite all promises to the contrary, and anybody who has ever dealt with them knows this fully well.

  12. Javert Chip says:

    Airlines are always great toys for politicians, but sometimes they act as mirrors, allowing countries to see their reflections. Alitalia lived beyond its means for yeas as unions refused to bend to economic reality, forcing countrymen (aka: taxpayers) to fund their extravagance as the world passes them by. They’ve now created a multi-billion dollar entity that literally nobody actually wants. but politicians justify its continued existence as a symbol of Italy’s might & majesty.

    Yea, right; Happy New Year, Italy.

  13. Bookdoc says:

    As I am over 6’6″ tall, I stopped flying years ago. I flew a lot on business and it was a bit different. That was pre-9/11. Now, if I can’t get there driving in 2 days, I don’t go. Period. Seats are miserably uncomfortable for tall folk and the security is a major pain. I drove to Charleston, SC from Ohio a few years ago. I checked flight schedules and would have saved at most 2 hours when you add in check in time, waiting for baggage, getting a rental car, and driving from the airport to the B&B I was staying at. No brainer.

    • weinerdog43 says:

      6′ 2″ here, so I feel (almost) your pain. Don’t forget, the flight time is if everything happens perfectly. Maintenance and weather delays, especially in winter, are extremely common.

      Wife just back from an ORD to AUS trip and back and commented that O’Hare was better than Austin. WTF? Lines moved quickly in Chicago, but in Austin, it was amateur hour.

      The security theater is the last straw for me. It’s just 1 indignity too many. At least in a vehicle, we can (mostly) control our own destiny.

      • HowNow says:

        Now, flying, for me, is up there with a root canal. Too bad I had a few flights many years ago when it was a thrill – my expectations of decent flying conditions has ruined the experience today. Besides, coral reefs are being bleached due to GW, so seeing a good video of a dive is preferable.

    • NBay says:

      Saw an Airbus patent for stand-up seats with a small bummy rest to take some load off legs. For us over 6 footers that might even be better, if your legs are strong.
      Beats pissing off flight attendants by wandering around back at their station, although some took pity on me.

  14. a citizen says:

    These zombies have to go before one or more of them has a major accident. History repeats in aviation.

    And I’m with Bookdoc. If the trip can’t be done in two days by car the trip doesn’t happen.

    • MC01 says:

      This is a completely different matter from the bush airplanes my mother flew in her youth in Asia and Africa (for several months with me in her womb). Plenty of funny stories. ;-)
      Maintenance and crew training are not an issue: financial self-sustainability is.

      As long as governments cover any hole in the budget directly (Italy) or indirectly (Korea), the folks working in these companies will have zero interest in cleaning up their act. The arrogance Condor executives are displaying right now is something that defies belief: these guys are 100% sure the German government will keep on picking up the tab and even if the company is broken up or sold to somebody who starts trimming dead wood to restore profitability, their politician friends will find them a nice cushy well paid job in some other firm. And they are rubbing it in everybody’s face. See what the problem is?

      Put it this way: letting a slew of these zombie be liquidated and some executives go without their bonus would go a long way towards teaching some valuable lessons and perhaps defusing the ticking time bomb we are all sitting upon.

      • Erle says:

        MCO1, thanks yet again for your entertaining and informative writing. I did my part in buying two mugs from Wolf, but you get none of that to be sure. Anyway the mugs are so pretty that I might stop drinking beer from the can. Cheers!!

  15. David Hall says:

    The FAA has not cleared the 737 Max for takeoff. It is grounded; bogged down in bureaucratic procedural reviews.

    • weinerdog43 says:

      Perhaps the bureaucratic reviews would have been a good idea BEFORE the 737Max crashed twice.

      There is a strong possibility that the traveling public will avoid flying those jets, and who can blame them?

    • Wolf Richter says:

      The 737 Max is grounded because two of them crashed one after the other because the FAA was asleep or totally compromised, and now the FAA finally woke up under global pressure and doesn’t want a third plane to crash.

      • Paulo says:

        CNN today reports another Max problem with two wiring clusters. They run next to each other and their EM fields can short circuit one or another or both and interrupt the control of tail surfaces.

        We are at peak complexity with our needs, oops meant to say “wants”. My friend has a new jeep. Tires require pressure sending units, (think little radio transmitters), as do horns, transmission…everything. This year I gave my wife a refresher on checking tire pressure with a gauge. She checks the oil on her car and rinses out her wheel hubs with a garden hose over winter to negate salt and road brine. (Pick an above 0 deg day) It takes seconds, and at least drivers who actually operate their vehicles and do basic checks understand why and how things work.

        Like I said above….peak complexity, peak debt, peak consumption, and peak nonsense. What’s next, home delivered meal kits and diet food?

        I got jumped on above by suggesting maybe everyone should not be flying willy nilly. I stand by that assertion and raise you one question? Is it not possible for human beings to find fulfillment and life satisfaction without conspicuous consumption? Living like dogs eat, indeed.

  16. peter says:

    Malaysia Airlines is another basket case, existing on government bailouts.

  17. Jerome says:

    We’re in a full-on monkey market at this point, nothing but noise and fake prices thanks to massive manipulation by central banks, many of whom are not just printing massive amounts of money/buying bonds, lowering rates to near zero or negative, but are also buying large amounts of stock outright. Add to that most securities are now purchased on autopilot by passive etfs or index funds, buybacks by the companies themselves, or by computer algorithms that have “come of age” and “machine learned” primarily during the longest bull market in history the last 11 years. Thus this is a market almost devoid of “natural” human buyers. Those who are left are forced to buy or lose their jobs. Anyone playing at home at this point should understand you are simply at a casino. Your table mates are a bizzare mix of fellow gamblers, manipulators, and clueless “cult of stocks” followers.

    • roddy6667 says:

      The biggest buyer of stocks in the last ten years has been the companies themselves, via buybacks. It temporarily jacks up the stock price. The whole market is a house of cards.

    • sierra7 says:

      Been preaching for years (decades) that we, humans under our economic/political system are nothing but individual markets to be exploited knowingly or unknowingly.
      There was a time (up until around the end of WW2) when a whole family was that “individual” market but the useage of wartime propaganda instructed how to break down in this case, “families” into “individuals to be used.
      Even our pets are “markets”.
      Until we turn this abomination around we will slip further and further into inhuman representations of our “humanness”.
      Time is getting shorter and shorter……

  18. Willy2 says:

    – South Korea has another problem. In the say last 10 years it had a housing bubble as well. And that housing bubble is now deflating. That will be a contributing factor for why people from South Korea are “less willing” to travel by plane (to e.g. Japan).

    • MC01 says:

      The Korean economy has ballooned to enormous dimensions thanks to a combination of debt creation and what can only called government ignoring the chaebol’s financial shenanigans. This is not healthy growth in any way shape or form, and explains why young people are so keen to emigrate these days while nominally the Korean economy is still booming.

      Korean families are trying to deleverage because it’s the right thing to do, especially in a country where government pensions are nothing to write home about: that’s why their real estate bubble is in trouble. It remains to be seen if the government will just accept this or will step with some other cunning plan.
      But the chaebol… they cannot get enough debt to keep on growing whatever the cost, quite literally.

      Growth at any cost, all cost, has been Korea’s religion for decades now. The system to obtain that growth is subtler than it was before the 1997 Asian Crisis but possibly more pernicious. Debt has not been hidden: it has merely been ignored. Never has the government (who still indirectly controls all major banks and hence has all the leverage it wants and some) stepped in to force restructuring aimed at producing profits instead of mountain of debts. Growth was the only thing that mattered, but as the saying goes growth for growth sake is the life philosophy of a tumor.

      As I keep on reporting, the Korean government is pouring billions of dollars (in form of trillions of won) into these zombies, both directly (shipyards) and indirectly (airlines). But it’s not applying any pressure for serious reforms: if anything they seem to be leaning towards more lenient accountancy rules. Call me cansado but not surprised.

      The Korean people are as tired as anybody else all over the world but they are even more skeptical towards the ability of their political system to provide a reasonable fix. Again, a deadly mix.

      • Petunia says:

        While Korean airlines may not be doing that well, the Korean cosmetics industry is in full bloom. Their products are now sought after around the world, good quality and price. I just used a Korean face mask and I look absolutely marvelous.

        • MC01 says:

          One of the girls in our concert-going circle back at the lycée (ancient history) had a mother who had made a lot of money by being the first to import cosmetics from Japan, Korea and Singapore and selling them at a huge premium. Cosmetics and beauty care are extremely serious business there and the market is extremely competitive if not downright cutthroat.

          As a chemist I know what is the stuff that goes in there and I hear a bit about the companies’ backgrounds (most Korean cosmetics companies are controlled directly or indirectly by AmorePacific, Kumho and LG) but that’s about it.

        • Erle says:

          Good for you Petunia on your new look. I wear a goalie mask from the Blackhawks and everyone avoids me.

      • Erle says:

        Why worry?
        The Zimbabweans have quadrillions of dollars to buy up the market failures.

  19. No1 says:

    Hoping to see some zombies die in 2020! The madness needs to end.

    • MC01 says:

      My physics professor used to say there are two ways to stop an out of control train: one is to cut power to it and let it grind to a halt, the other is to increase the speed until it exceeds design speed and jumps the tracks.
      It all depends on who’s in charge.

      Guess how this train is going to stop? ;-)

      • Brant Lee says:

        Rail? Does anyone remember rail? Most of the tracks were torn out years ago. It was apparently too primitive and slow to move goods and people back and forth in favor of modern overnight luxury.

  20. Sammy Iyer says:

    In other news : (of Loss making Unicorns funded by cheap money / money printing central banks )
    Swiggy India (food delivery leader in India) posted a net loss of ₹2,367 crore in FY19, which is a substantial increase compared to ₹385 crore losses posted a year ago in FY18. The startup however grew its revenue by three-fold in FY19 which stood at ₹1,128.3 crore, compared to revenues of ₹417 crore reported a year ago.
    NB : Swiggy increased their turn over by 300% but losses grew by 700%)
    $333 million loss on a turn over of $158 million !

  21. Kasadour says:

    Maybe all airlines should ban horses from entering the cabin. When you have horses assigned to the business class section of large commercial passenger aircraft, it tends to compromise customer service.

  22. Yak now says:

    How many weird crashes did the Boeing 737 have before people started questioning if something was just not right? This plane was flying all over the world, and only had “a few” crashes (read next before disputing this).

    How many weird crashes have Tesla Cars had, in less time, when it is mostly available only in the USA? (a little Europe, a little China… but mostly USA).

    If you think twice about flying in a 737, why would you get into a car that has far more unexplainable crashes?

    What about being in another car or being an emergency worker (police, fire, etc) on a highway with Tesla crashes?

    lots of companies are experimenting with electric vehicles, but most are not experimenting on public highways and risking real lives

  23. Ravi Uppal says:

    MC 01 ,as usual you hit the ball out of the park . Eye opening and mind boggling information . Keep plugging . Thanks to the commenting public also for sane commenting .

  24. FinePrintGuy says:

    “How do you make a small fortune? Well…start with a large one and buy an airline…”

    Reality keeps that joke fresh.

    • Trinacria says:

      Yes, I was thinking of that quote as it’s very appropriate. Also:
      1. As Wolf says…”and these are the good times”…it’s going to get “interesting”.
      2. Last May from Amsterdam to Rome had two choices: Alitalia or KLM. My wife and I waited two more hours for KLM. You see, having known of the Ailitalia problems for a long time, I just don’t trust their maintenance program under these circumstances…they have had problems for far too long, so I’m sure corners are being cut.

      • MC01 says:

        Maintenance is not an issue, but I have heard one complaint too many about Alitalia cabin crew not being up exactly consistent in their handling of customers. It’s always been a problem for them, especially on short hauls, and they have always thought to solve it by buying favorable PR instead of investing in crew selection and training like everybody else does.
        LEVEL (IAG) should have an Amsterdam-Rome flight up and running this year, check into that if you ever need an alternative.

    • MC01 says:

      Ethiopian Airlines has long provided a steady income stream to the government in Addis Ababa because they have always been profitable, even at times when Ethiopia was torn by civil war. A perfect example of how a State-owned airline should be run.
      The recent talks of privatizing the company make absolutely zero sense: why fix something that works well? We’ll get back to this soon enough I fear.

      Then we have Ryanair, IAG, Lufthansa, Delta Airlines… but if cargo is more your thing the Volga-Dnepr Group is another profitable company to look into. Besides their well known ability to handle oversized cargo everywhere their AirBridgeCargo division literally owns the pharma business. It will be curious to see how that letter of intent for 28 777F they signed last year will be handled in the present political climate.

  25. RD Blakeslee says:

    Commercial aviation is a service and, as Wolf has pointed out elsewhere, services are 80% of our economy.

    Do these outlier airline failings portend a decline in airline service and a precursor to recession? How are the major airlines doing? Is air travel shrinking overall?

  26. raxadian says:

    I would ask why anyone would invest on an airline since everyone “knows” is a money losing business.

    Then I see people buying Tesla’s stock.


  27. Augustp says:

    Airline industry is full of government meddling but when the losses get too big or go on too long, they eventually get out. Unfortunately, not before racking up even more losses for the taxpayer.

  28. Cashboy says:

    Lets now talk about: Etiad, Qatar, Emirates Airlines.

    They appear to have unlimited funding from their governments and the result is:
    Their terminal hubs are some of the best airports in the world.
    Their airlines generally win best inflight service
    They do not lease old planes but buy new with cash.
    They are located in the middle of Europe and Asia so ideal location.
    The aviation fuel is probably cheap as most are oil producers.

    I cannot see how other airlines can compete in the long term with these airlines.

    • MC01 says:

      Etihad has long been in very serious financial troubles. Yes, the Abu Dhabi government keeps them afloat but they lost over $4 billion between 2016 and 2018, so much they had to go on a diet, including cancelling new aircraft orders and selling off the bulk of their cargo business to DHL. Losses matter until they don’t, or so they say, and they are starting to matter even in the Gulf.
      Emirates is less brazen, or to be more precise more secretive, but once their fuel hedging contracts (paid for in full by the Dubai Development Authority) attracted the attention of EU regulators they immediately made their displeasure known by ordering 40 Boeing 787-10 over the expected same number of Airbus. It’s kinda hard playing King Solomon when your top (only?) priority is nominal GDP growth. ;-)

      It’s well known Saudi Arabia is not in good financial shape overall, and to make matters worse in spite of using ample amounts of carrot and stick the much hyped Aramco IPO is already losing steam.
      Where Saudi Arabia goes, the rest of the Gulf follows, and if cash starts to be a problem like it seems airline subsidies may come in the crosshair: remember Emirates, Etihad and the rest were not merely meant to be flag carriers, but State-owned cash-generating businesses to make all these countries less dependent on oil and natural gas.
      As things stand it’s impossible to really say in what financial shape these companies are: Etihad was well known for inventing budgets outright with full backing from the government until losses became too large to ignore. But if they really need to be competitive, and to generate cash, many things will need to change.

      In the meantime let’s enjoy those ridiculously low fares. ;-)

      • char says:

        They are also public transport and the state does not make a profit on the public transport but on the extra economic activity it makes possible. I don’t think Dubai would be a holiday destination without their state airlines

  29. morpheus says:

    Air India and Alitalia.
    2 of the worst airlines I’ve ever used.
    Air India in business was disgusting as in dirty carpets.
    Both have staff that are state employees and service to clients is the least of their problems.

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