Willie Walsh, British Airways’ CEO, has told journalists that he expects a string of bankruptcies and mergers in the commercial airline industry to make headlines this year. Walsh pointed to the problems in the US economy, as well as to the consistently high oil prices as being behind the problems currently experienced by just about all airlines. Walsh conceded that 2008 will prove to be a very challenging year for British Airways, but he is expecting BA to cope well. The UK flag carrier’s CEO did, however, observe that all those airlines which found it difficult to turn a profit when oil stood at just over $100 a barrel, may find themselves pushed over the edge into bankruptcy, as the price of fuel approaches $130.
Yet Walsh believes that a few bankruptcies may actually serve as good news on the whole, for the commercial airline industry. “Clearly, bankruptcy is an effective form of consolidation, as failed airlines take their capacity out of the market,” Wash pointed out during a presentation in New York City late yesterday.
Walsh’s predictions of further bankruptcies are hardly out of the blue. Over the course of the past four months, seven carriers have declared insolvency, including some relatively prominent brand names, such as Eos Airlines, MAXjet Airways and US companies like Aloha Airlines. Yet Eos’ exit from the transatlantic market is clearly good news for British Airways, as the now defunct carrier proved to be a source of competition, especially when it came to lucrative business class passengers.