First Spanair and now Hungary’s Malev airlines have shut down suddenly leaving passengers stranded and lessors contemplating more used aircraft sitting on the market.  We all know what passengers go through when such a thing happens and we even know how crippling it can be to a small country when its main airline goes “poof”.

Europe and other parts of the world aren’t immune to the economic problems going on today in the airline industry.  However, we often get surprised by these shutdowns elsewhere because there is often two things at play that we don’t see much in the United States:  pride and a lack of transparency.

At the end of the day, it’s still quite the thing for a nation to have it’s own indigneous airline industry.  Practically speaking, it’s often silly in the world we live in today but it remains a focus for leaders in countries around the world.   There is a eason why Alitalia has survived as long as it has.

Furthermore, that pride leads countries and their airlines to hide financial problems rather than address them.  It’s not entirely the airlines’ fault.  Political pressure is brought to bear to keep airlines doing prideful things even when they make no economic sense.  Even worse, in 2012 we still have countries financing their airlines.

Nations keep making huge sums of money available to their national airlines to continue operating.  Money, to an airline, is oxygen and very hard to refuse.  But when here is no ultimate consequence for poor decisions, the airlines become very dependent on that kind of oxygen and never enforce self discipline in their operations.

This is two small airlines in Europe.  What needs to be considered is that there are quite a few larger ones in Europe that get both direct and indirect state support that are not only not financially solvent but aren’t being forced to consider the world they actually operate in. 

This is true for several parts of the world and I’ll wager that we’ll see both large and small, old and new airlines fail in the next few years.  Some will fail because countries can no longer afford to inject hundreds of millions of dollars into them and some will fail because of pride.  Still others will fail because, at the end of the day, they are a shell game.  (Lion Air and Kingfisher come to mind with respect to the latter.)

Filed under: Airline News by ajax