Travel company failures may signal end to cheap travel

The chief executive officer of TUI, Europe’s largest travel company, Peter Long, has warned the travelling public that “the days of cheap travel are over,” following the collapse of a series of UK travel operators, and in particular, rival XL, just last week.

The CEO has ruled out buying the failed travel operator, which went into administration when it was unable to refinance it £150 million in debt. According to Long, XL, unlike most tour operators, relied on the sale of air tickets rather than higher-margin holiday packages.

“An airline is not attractive to us,” he said, and added: “The business has no value now that it has ceased trading.” XL units in France and Germany have been sold already.

XL succumbed to the high cost of fuel and to decreased passenger demand, which had already claimed a number of airlines, including MaxJet, Oasis, Silverjet and Zoom. BA boss Willie Walsh is predicting that many more are likely to fail before Christmas, and bookmaker Paddy Power is taking wagers on the next airline to collapse. Alitalia and SkyEurope are the current favourites.

The TUI chief executive commented that the travel market is much different today than it was during economic recessions in the past, when airlines would ground aircraft rather than operating at a loss. TUI and Thomas Cook, the leaders in the travel market, have decreased the number of holidays they offer, hoping to eliminate any spare capacity and lowering the likelihood of having to offer cut-rate deals later in the season.

Investors have viewed the failure of XL as positive news, and shares in Thomas Cook and rival TUI have gone up on the news.

www.xl.com