Insurer warns of more airline failures to come…

1 February 2012

The grounding of Spanair could herald the start of a ‘very turbulent’ year for aviation, a leading trade insurer has warned.

Travel credit insurance specialist International Passenger Protection said it was concerned that big industry names were unable to secure funds they needed in the continued tough economy.

IPP director Paul Mclean said: ‘The airline industry is so resilient but constantly being tested; the smaller airlines simply cannot survive without either investment or a merger. What concerns us more are the larger airlines, many of whom rely on continued investment which is simply not there anymore.’

Already this year, Cirrus Airlines, Czech Connect Air Alps and the biggest among them, Spanair, have ceased flying.

IPP put the number of airline collapses in 2010 at 30 and said although 2011 had seen fewer failures, the squeeze by the banks might be starting to ‘filter out the weak and test the strong’ in 2012.

Mclean warned that this included state-owned carriers.

‘We have never believed an airline that is owned by a government is safe, our historical results have proved this, so with Europe in deep decline we are now seeing many national carriers in great difficulty with future investment and funding,’ he said.

He added that last week’s collapse of Spanair demonstrated how central governments were willing to let companies collapse.

The Catalan government had offered a €10.5m lifeline to the carrier, but Spain’s central government had declined to support it after a rescue deal with Qatar Airways fell through.