How can you tell when an airline is going bust?

ONE week before Christmas, Scottish airline Flyglobespan collapsed, and thousands of holiday travelers were left high and dry. Not the best of time to be hit – from the customer’s perspective – though there is really no better time for such news. If only air travelers could be forewarned before they booked with the doomed airline!

That’s the crux of the problem – the nature of the business is such that users of air service buy in advance, as far ahead as a year, either to secure seats during popular windows or to take advantage of promotional fares. You buy in good faith that the airline will be around to honor the deal when the time comes.

Yet for all that is said about putting the customer first during good times, business can be and is often cold and cruel. What better time can there be for an airline to recoup losses before folding its wings than the rush for seats leading to a peak season?

Not too long ago, Hong Kong-based Oasis Airlines went bust, but until the eve of the announcement it was still peddling tickets at very special fares for travel during the summer six months ahead. Good luck to those who were caught and who trusted the defunct airline to compensate them as promised, following a complicated spate of tedious paperwork. Even dust-biters know how to make use of the PR machinery to contain bad press.

Some people will swear only by the big names, but even the big boys who once boasted stellar performances had been brought down to their knees. Others will bet presumably more cautiously on a flag carrier. Very few governments, if any, will ignore the plight of a national icon desperately struggling to stay above water, nor do they relish the ill repute associated with it.

Take the case of present-day Japan Airlines (JAL), battling to survive the economic recession. Already the Japanese government is doubling a state-funded credit line to 200 billion yen to help save the airline, having largely ignored the bids by foreign carriers to take a major stake in the airline. But pressure from shareholders is mounting. And there is rival All NipponAirways waiting to move into its berth. Rumors had it that JAL may be forced to cease operating international routes.

Certainty comes at a cost. All said, it is a gamble that travelers who must fly cannot help but take. How much risk you will take should depend on how desperately you want that seat and how attracted you are to the perceived savings. And, of course, your appetite for the unknown. Unfortunately, for many of us, often it is blind faith that drives us to our woes!

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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