Why so many airlines are going bankrupt and being bought out!
A common joke in the aviation industry (which is really quite savage when you think of it), is that airlines are "Dropping like flies!" 2019 saw the most airlines fail and go bankrupt, in the history of aviation! But, 2019 also saw the most mergers in the airline industry- especially that of bankrupt airlines.
Yes, airlines are buying out smaller airlines that have gone bankrupt! We have seen 2020 also start off with this, with WOW Air 2.0 and the King of Bananas buying out Adria Airways.
Many people have put the reason so many airlines are going bankrupt is due to poor management and the consolidation of the airline industry. But in fact, this is not the real reason, even if it is a contributing factor.
The real reason so many airlines are going under is purely financial. Traditional airlines, who operate on the "pay for thrills" philosophy, it's business as usual. However, most of the airlines that are going under are low cost carriers. But there's more, they're trying to expand further than they can reasonably expect to, mainly through becoming long haul, low cost carriers.
This is making more and more airlines drop like flies due to one major factor: profit margins. You see, low cost carriers, such as Thomas Cook, Ryanair and Adria Airways operate on extremely slim margins, making only a few dollars per seat.
This has one major risk: one misstep and the proverbial "House of Cards" comes crashing down. This is what we have seen in the case of Thomas Cook, where one Tweet talking about how stable the company is, led to many investors pulling out and banks putting their foot down on more credit.
But then, as in the case of WOW Air 2.0 and Adria Airways, they were saved. In the case of WOW Air, it was the former owner, who wanted to learn from his previous mistakes and become the Ryanair of the Icelandic market- that is to say the king of the industry. In the case of Adria Airways, it was Izet Rastoder, a man nicknamed the "King of Bananas" (due to his European banana empire) who bought it out, in order to resurrect it and have the prestige of owning Slovenia's national carrier.
But, this is expected to rise, with more business people buying up smaller, defunct airlines to use as their own ventures. Some people also expect that we will see more defunct airlines being bought for their assets, mainly their aircraft and their slots at smaller European airports, due to the fact that air travel is increasing exponentially.
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