Airlines in crisis

Norwegian dives to £270million loss Thomas Cook eyes selling off its planes Flybe cancels bonuses for bosses

THE crisis in the airline industry deepened yesterday as struggling Norwegian Air, Thomas Cook and Flybe were hit by fresh turbulence.

The sector has been pummelled by over-expansion, with too many budget carriers competing to woo customers at a time when volatile oil prices have increased costs for airlines.

And analysts say it could be only a matter of time before more airlines go bust following the collapse of Air Berlin, Germania, Primera and Monarch.

On another bleak day for the industry:

■ Flybe warned it will fold if shareholders don’t back a £2.2m rescue package;

■ The airline also said it will not make any bonus payments to company executives next year;

■ Norwegian Air plunged to a £270m loss in the fourth quarter and put a brake on its growth plans;

■ Thomas Cook announced it is considering selling its airline business to raise cash.

Ryanair warned earlier this week that it expects ‘more closures and airline failures’ this year, as the presence of too many budget carriers offering cheap flights to Europe means companies cannot raise ticket prices.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘The short-haul European airline market is witnessing the effects of over-capacity in the sector, combined with disruption from industrial action and terrorism.

‘Falling fuel prices at the back end of 2018 will provide some respite, but Ryanair and EasyJet are still increasing the number of seats whizzing around European air space, which is keeping ticket prices low. This is an environment where weaker business models are going to come under heavy pressure, and that probably spells more consolidation, and possibly more failures.’

Flybe’s directors are warning that if shareholders do not vote in favour of a £2.2m offer for the company they intend to wind it up – and leave thousands of shareholders with nothing. The ailing regional UK airline put itself up for sale late last year and in January recommended that investors accept a 1p per share offer put forward by a consortium of Virgin, logistics company Stobart Group and a private equity firm.

Shareholders will vote on the deal on March 4.

The Exeter-based carrier will also slash bonuses for the top brass after the Mail revealed that chief executive Christine Ourmieres-Widener was eligible to receive a bonus worth 250pc of her salary this year, totalling £1m.

A spokesman for Flybe said ‘it will not be making any bonus payment to its executive directors for the year 2018-19, and that neither of the directors would have accepted one in any case’.

Norwegian, meanwhile, said it made a £270m loss in the final quarter of last year and £200m for 2018 as a whole. It plans to cut the number of flights on offer as it seeks to preserve cash and target profits over expansion.

The company, which has shaken up the long-haul market by offering cheap transatlantic fares, this week postponed 16 aircraft deliveries from Boeing and Airbus.

Its rapid build-up has left it saddled with debts and in January it had to issue more shares to raise cash. And the world’s oldest travel company Thomas Cook said it is considering putting its airline business up for sale after a tough 2018.

It believes a sale would mean it could put more investment into its own-brand hotels.

Although first quarter revenue rose 1pc to £1.7bn, its operating loss increased by £14m to £60m in the three months to December 31, the firm said in a trading update.

Thomas Cook shares closed up 10pc, or 3.1p, to 34.18p.