The European aviation industry is having a rough year. There are little signs suggesting the outlook will get better. While airline companies in North America and Asia (except for India, where Jet Airways already went bankrupt, and Air India is quickly running out of liquidity) are enjoying booming demand and high profits, in Europe it is a whole different story.

Since 2018, at least 15 European carriers have gone bust. The list includes Flybmi, Germania, Aigle Azur, Cobalt Air, Wow or Primera Air. Meanwhile, Flybe, the biggest regional airline on the continent, was sold to Virgin for a mere £2.8m, the price of a West London apartment.

Even the giants of European skies are struggling lately, and markets took notice. Lufthansa’s shares shed more than 30% of their value since April, and Ryanair’s shareholders suffered even more before the stock partially recovered in the last few weeks. The shares of IAG, the parent company of British Airways, is not exactly in a bull market either.

Besides external factors such as rising fuel costs, Brexit uncertainty, overcapacity on many routes and a decrease in demand for air cargo (in part due to the China-US trade war), each of these three companies is facing its separate challenges.

After a few successful years, Lufthansa started spending too heavily on purchasing new airplanes and refurbishing old ones, including those from the bankrupt Air Berlin. As a result, capital expenditure increased by 8% to €3.8bn (£3.4bn) in 2018, compromising the firm’s liquidity situation. Eurowings, Lufthansa’s low-cost subsidiary, has also not been a great help in generating cash: it lost €230m (£205m) last year alone, and won’t break even in 2019 either.

Similarly to the German flag carrier, Ryanair has also grown too quickly. The overcapacity on many routes has cannibalised the Irish ultra-low-cost airline’s fare prices, and a hot summer in the UK and Northern Europe curbed demand for flights to vacation spots. Ryanair’s executives responded by scaling back their future growth plans and cutting down some unprofitable routes — partly a reaction to delays in the delivery of Boeing 737 MAX planes. Ryanair ordered 58 of the jets, which have been ordered grounded by regulators after fatal crashes in Indonesia and Ethiopia.

Meanwhile, British Airways’s biggest problem is gaining back the trust of its customers. It had to pay a record-breaking £183m fine for a data breach of about 500,000 customers. Moreover, the airline’s computer systems crashed in August, leaving thousands of passengers stranded at Heathrow and Gatwick airports. And last but not least, BA’s pilots struck on several days in September amid disagreements over wages. It has not been a great centenary year for the airline.

Then there is flygskam, which literally means “flight shame” in Swedish. As anti-aviation sentiment grows due to concerns about the environment, the number of flight tickets sold has decreased in Northern Europe. Take Sweden, for example, where domestic passenger numbers fell by 8%. When the environmental scare spreads across the whole continent, governments will be more eager to tax the aviation industry, posing further issues for the airlines.

Can they fly out of this mess?


Please enter your comment!
Please enter your name here