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Wednesday, 3 October, 2001, 13:39 GMT 14:39 UK
Survival of fittest for Euro airlines
Swissair A330 aircraft
European carriers are all fighting to be part of the future
By BBC News Online's Sheila Barter

Swissair is the first of dozens of European airlines which could lose their fight for survival in the aftermath of the US terror attacks, say industry experts.

Firms already in crisis before the terrorists struck have been pitched into a fight for their lives.

Only the fittest - or most ruthless - are expected to live.

The commercial reality is that even before 11 September those carriers' days were numbered

Keith McMullan, Aviation Economics
The Belgian firm Sabena crumbled into bankruptcy protection on Wednesday, a day after Swissair was forced to ground all its planes indefinitely.

Just a day later, the Dutch carrier, KLM, announced it was cutting 2,500 jobs as well as reducing hours and pay.

But across Europe, analysts believe dozens of other traditional flag carriers will fall one by one into bankrupty, merger or takeover.

"The commercial reality is that even before 11 September those carriers' days were numbered," Keith McMullan, managing director of Aviation Economics, told BBC News Online.

"Some are financial basket cases; only a very few are not vulnerable."

Crisis becomes disaster

The current European tally of 30-40 state airlines will plummet to between four and seven major carriers in the next decade, predicts Rigas Doganis, former head of the Greek national carrier, Olympic.

What was a crisis - brought on by overcapacity, recession fears and high fuel prices - is now a disaster, he said.

"The future of airlines in Europe is very, very difficult," he told the BBC.

The departure board at Zurich airport
Passengers of the future can expect only a few carriers to choose from
"It is clearly the case that there are far too many flag carriers in Europe. The present crisis means there will have to be consolidation."

The US, he points out, has only six or seven major carriers, probably reflecting the future shape of the European industry.

Many of the flag carriers are seen as hidebound, ineffiecient operators which have been propped up for years by governments.

Most have been partly-privatised, dipping at least their toes into the icy waters of commercial reality. Only a handful remain fully state-owned.

There are simply too many airlines around - about a third will have to go

Swiss analyst Sepp Moser
But most are seen as overweight, incapable of surviving in their current state.

Hungry, lean newcomers like Easyjet and Ryanair have cut out the extra weight and are expected by analysts to stand the test of time.

"That type of business is going to grow exponentially," said Keith McMullan. "It is the only type which has proved consistently profitable in the US."

Within a decade, a leaner, fitter industry could have shed tens of thousands of jobs.

Three big operators - BA, Air France and Lufthansa - are being seen as the best bets for survival.

Euro airlines fight back
Air France - cutting schedules, freezing hiring
Iberia - Ticket surcharge for extra security and insurance
Lufthansa - insurance surcharge, postponed orders for 19 planes
Alitalia - 2,500 jobs at risk, planes mothballed
TAP (Portugal) - trying to sue Swissair for pulling out of partnership contract
British Airways - cutting 7,000 jobs, cancelling 190 flights per week
SAS (Scandinavia) - cutting 800-1,100 jobs, raising prices, cutting capacity by 12%
Other names and liveries could vanish forever.

Popular "brands" and liveries - including Swissair - could well survive, even if the firms themselves have been taken over. They would operate as regional airlines within the larger firms.

But other less-loved carriers, including Sabena, could simply vanish from European skies forever, said Oliver Sutton, editor of the industry magazine Interavia, Business and Technology.

"Firms like Swissair are a source of national pride. There is real anger in Switzerland towards the board, who were supposed to be the best managers in Switzerland," he said.

The job losses across Europe could be between 50,000 and 70,000, analysts told BBC News Online.

Other jobs in related industries, including manufacturers, will follow. Travel agents, for example, could lose out heavily as airlines try to cut the current average of 15% spent on selling their tickets.

Expect online sales to be heavily promoted in the new world, says Oliver Sutton, as airlines cut out the middlemen.

Other predictions for the future include:

  • Unprofitable or unpopular routes will face intense scrutiny, and some will disappear.
  • On other routes, fewer services will fly, probably in more reliable air traffic control slots.
  • More alliances like BA's Oneworld will be formed as airlines try to cut costs by pooling resources.
  • Older planes in firms' fleets will be mothballed, perhaps forever.
  • Ticket prices to unusual destinations could go up, as airlines cut overcapacity and stop selling off spare tickets cheaply.
  • On city-to-city hops, within Europe, prices could fall as the industry shapes up.
Analysts point out that the history of aviation is littered with commercial disasters. But the culling of the next few years will probably be the most dramatic the European industry has known.

"There are simply too many airlines around," said Swiss aviation analyst Sepp Moser. "About a third will have to go."

The BBC's Mary Gahan
"The question is, how much of this would have come anyway?"
See also:

02 Oct 01 | Business
Swissair: Proud past, grim future
02 Oct 01 | Business
Q&A: Swissair in crisis
02 Oct 01 | Business
Q&A: Booked on Swissair?
02 Oct 01 | Business
Airline collapse dents Swiss pride
02 Oct 01 | Europe
Swissair passengers stranded
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