17 July 2008

Airlines looking for government support in hard times

With the price of jet fuel having doubled in 12 months and a weakening global economy, the international airline industry is "battening down the hatches" by cutting services, laying off skilled staff and grounding older, less fuel-efficient aircraft.

It will not necessarily always be a case of "creative destruction" or "survival of the fittest." Past history would suggest that many "flag" carriers will again look to survive through government intervention. All around the world there are already signs of this happening:

In South America - on 17 July 2008 Reuters reported that the Argentine government is to takeover Aerolineas Argentinas from the Spanish travel group Marsans.

In Asia - on 10 July 2008 The Times reported that it understood Air India is seeking a "rescue finance package" from the Indian government of UK Pounds 270 million.

In Oceania - on 14 July 2008 Pacific Magazine reported on the latest developments with respect to the finances of Air Tahiti Nui. Note the reference to the airline's 16th recapitalisation being approved last year.

In Europe - on 15 July 2008 Reuters reported that the European Commission has received a reply to its concerns about the Euro 300 million loan from the Italian government to Alitalia.

In Africa - on 16 July 2008 SABC News reported that South African Airways says it needs another Rand 5.7 billion in government funding to reduce its debts.

In North America - the US Air Transportation Stabilization Board continues its existence and Chapter 11 bankruptcy protection provides a safeguard for US airlines.

Meanwhile in the Middle East some of the major Gulf airlines simply do not report their losses and their aircraft orders continue unabated. A 15 July 2008 Wall Street Journal article, with some more positive news from the global airline industry, suggests that Etihad Airways will miss its target of breaking even by 2010.

Finally, tongue in cheek, referring to this poster about a government funded air service means that I have all continents covered!

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