The long tail of European airlines has gotten considerably shorter in the last few weeks due to the financial struggles of a number of small carriers.

Since the start of September, Aigle Azur, XL Airways, Adria Airways, and Thomas Cook have either gone out of business or stopped flying, in a sign that market conditions have deteriorated across the continent.

Meanwhile in France, Aigle Azur has closed down after failing to find a new buyer. The carrier, which specialized in routes between France and Algeria, filed for bankruptcy at the start of September. Its largest shareholder was struggling Chinese conglomerate HNA Group with 49 percent.

Another carrier XL Airways announced on Monday 30 September it was suspending operations until October 3 “due to financial difficulties”.

Bizarrely, French finance minister Bruno Le Maire blamed the airline’s collapse on state aid received by low-cost carrier Norwegian.

“Norwegian Air is undercutting prices while in debt and receiving public funding from Norway,” Le Maire said on LCI television.

Norwegian denied that it had ever received government funding and the two airlines only compete on a couple of routes.

Norwegian itself isn’t out of the woods yet and in September asked bondholders for extra time to pay off $380 million of outstanding debt.

Slovenia’s Adria Airways cut back its flight schedule in the hope of finding new investment but it too has had to file for bankruptcy. The airline is owned by German private equity firm 4K Invest.

Slow Consolidation

Since the turn of the millennium Europe’s biggest airlines have gradually morphed into larger airline groups with multiple brands.

Thanks in part to the European Union and its program of airline liberalization, IAG, Lufthansa and Air France-KLM compete across the continent with low-cost carriers like Ryanair and EasyJet.

Despite this, some smaller countries have looked to hold on to their flag carriers while other small operations exist to serve specific niche functions or destinations.

This has created a market that is much less concentrated than North America’s.

In 2018, the seven largest European airlines accounted for 55 percent of the market, in North America it was 82 percent, according to the CAPA — Centre for Aviation.

Slowly but surely this is changing, however, and while there are individual reasons for each airline’s problems — Thomas Cook’s group debt load, for example —there are other more general factors at play.

“I think a large part of what we are seeing relates to investor confidence. The early failure of Flybe [eventually bought by a consortium including Virgin Atlantic] in the first half of the year, subsequent Thomas Cook collapse, constant noise around Norwegian, failures in Europe and then wider afield South African Airways are all making the market jittery, said John Grant, a partner at consultancy Midas Aviation.

“There are just so many factors that are creating that nervousness; a market softness partly driven by Brexit, too much capacity in the market, the strength of the U.S. dollar and the cost of operations relative to revenues.”

The European economy is also a worry with the most recent GDP growth rate figures showing a decline in both Germany and the UK as well as stagnation in Italy.

“Europe’s airlines currently face big challenges as the winter approaches,” said Jay Shabat, senior analyst at Skift Airline Weekly. “One is the strong dollar, which is driving up costs. The other is Europe’s deteriorating economy, which is driving  down revenues. For airlines with weak balance sheets and sub-scale networks, these twin challenges are proving fatal.”

Recent European Airline FailuresLaunch DateDate of FailureBase
Germania1978Feb-19Germany
BMI Regional1987Feb-19U.K.
Wow Air2012Mar-19Iceland
Aigle Azur1946Sep-19France
Thomas Cook Airlines*2000Sep-19U.K.
XL Airways†1995Sep-19France
Adria Airways1961Sep-19Slovenia

*Some Thomas Cook Group airlines are still flying
†XL Airways operations are currently suspended

Photo Credit: An XL Airways aircraft. The carrier has suspended operations. ERIC SALARD / Flickr