Cobalt Air has gone bust – who's next?
More airlines are likely to succumb to the same fate as Cobalt Air this winter, leaving holidaymakers stranded, as carriers feel the pinch of rising oil prices and competitive fare pricing.
This is the warning from aviation expert John Strickland in the wake of the collapse of another airline, after the Cypriot operator suspended all its services with immediate effect late on Tuesday evening. The carrier served routes from Heathrow, Gatwick and Manchester to its hub, Larnaca, as well as Athens.
The Civil Aviation Authority (CAA) said that the Cypriot government will cover the costs of travel for those booked to fly on Wednesday, but those due to travel at a later date must wait for further information. The CAA said for passengers to book their replacement travel and keep receipts.
Already this year, 10 other airlines have gone bust, including low-cost transatlantic operator Primera Air, while Monarch and Air Berlin were among high profile failures last year. Experts say that an increasingly competitive market means that more carriers may follow suit.
“Fuel prices are markedly up and that’s proving the breaking point for some airlines,” said John Strickland, director of independent air transport consultancy JLS Consulting. “Difficult or impossible to pass on [those costs] in ticket prices especially when approaching the leaner winter months."
The airlines that have collapsed so far this year
Cobalt Air
Primera Airlines
Waves
Skywork
JetGo
NextJet
Nature Air
Latin American Wings
Pawa Dominica
Polar Airlines
Fly Viking
Strickland adds: “On top of this, the need to pay compensation for delayed or cancelled flights often for reasons outside of airline control, such as air traffic control strikes, is adding further financial strain.
“Airlines that are not managing their controllable costs and that don't have strong cash reserves face a tough winter, if they make it at all.”
His remarks mirror those made by Johan Lundgren, chief executive of Easyjet, who said earlier this month that the continuing and sustained increase in the cost of aviation fuel - which constitutes the single largest cost faced by most airlines - was making carriers vulnerable to failure.
Lundgren would not name names but said that those that haven't hedged against a rise in the cost of oil and that did not have the financial strength and resilience to ride out the current economic headwinds would be exposed.
Nick Trend, Telegraph Travel’s chief consumer editor, points out that this further exposes holidaymakers to the financial risk of booking holidays should their airline collapse.
“It’s a sobering reminder for consumers to make sure that they are protected against potential failures,” he said. “The problem when scheduled airlines collapse is not just the disruption to passengers’ travel plans – they may also lose their money and risk being stranded abroad and having to pay for a new flight home.
“Currently there is no automatic financial protection in such circumstances. The government ordered a review after the collapse of Monarch, but it has yet to report its findings. It is an issue which has long been highlighted by Telegraph Travel and Lundgren’s comments are another reason for the government to act urgently.”
Earlier this year, OAG aviation analyst John Grand predicted a squeeze on airlines.
“The competitive environment has become increasingly challenging for many airlines, with many established legacy airlines launching low-cost long-haul services and the continual growth in services from airlines such as easyJet, Ryanair and Norwegian,” he told Telegraph Travel. “This has resulted in many mid-market carriers with relatively high cost bases being continually squeezed to a point of failure.”
Though are a number of carriers to have documented financial issues this year - including luxury behemoth Etihad and long-haul upstart Norwegian - it seems it's anyone’s guess where the next collapse will come from.
How to protect yourself against airline failure
The CAA said that those who booked directly with Cobalt and paid with their credit card may be protected under section 75 of the Consumer Credit Act 1974, and that those who purchased travel insurance should check their documents for scheduled airline failure cover.
Book your flight as part of a package holiday organised by a tour operator or travel agent which is licensed by the government’s Atol scheme.
Pay by credit card (for fares over ￡100). This should give you protection under Section 75 of the Consumer Credit Act 1974. It will refund your fare, but it will not repatriate you if you are stranded.
Buy a travel insurance policy which offers cover for “scheduled airline failure” a few policies offer this, but sometimes charge an extra premium for the cover.
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