Will the travel and tourism industry be the next to follow the economic travails of real estate foreclosures and banking meltdowns in the United States that is ailing the world’s economy?
With the collapse of British XL Leisure Group follows the “recent demise” of Spanish airline charter company Futura and Canada’s Zoom Airlines, travelers are now finally forced to face the bitter truth: high fuel prices and the credit crunch are beginning to bite into their comfortable lives.
Will the “perfect storm” of skyrocketing fuel prices and the credit crunch spell the end of the cheap holiday deals?
As the British Civil Aviation Authority (CAA) gets to grips in a “mass evacuation” exercise to repatriate up to 90,000 British travelers stranded abroad, a travel company associated with collapsed XL Leisure Group is reported to be still offering a two-week holidays in Florida for US$600 “at 50 percent of the price other holiday operators quote” and flying on a “brand-new fleet of Airbus 330 with generous legroom, video on demand, free meals and drinks.”
“It may take several weeks and up 450 flights to bring back the stranded holidaymakers abroad,” said a CAA official, who is arranging for the flights following grounding of all 21 planes flown by XL Airways.
XL Airways is part of the XL Leisure Group, the third biggest tour operator in the United Kingdom. The carrier is also used as a major carrier by other tour firms in the UK, including Thomson, First Choice, other independent tour operators, as well as flight and accommodation bookings on its internet website XL.com.
“XL is no longer operating, we are having to bring in substitute aircraft to bring people home,” said spokesman David Clover. XL flies to about 50 destinations from the UK, mostly to European destinations.
According to the CAA, in addition to the loss of 1,700 XL Leisure Group jobs in the UK, stranded holidaymakers, the XL Leisure Group has a further 223,000 advance bookings made with other associated companies.
Respected UK travel writer Simon Calder of The Independent newspaper is predicting that Italian carrier Alitalia could be the next carrier to go under, even amidst last minute moves to inject $1 billion into the airline and talks with the airline’s union. “It has been making a loss for decades, and it is always bailed out by the Italian government. If the rescue exercise fails then the airline will disappear, to reappear as something like Alitalia Lite with billions of debt.”
As of Sunday, Augusto Fantozzi, the Italian national carrier’s bankruptcy administrator warned the legacy carrier, has “run out of funds” to buy fuel and may have to cancel some flights.
In his latest industry update, Giovanni Bisignani, who represents 230 international member airline organization International Air Transport Association (IATA) warned, the industry’s global passenger traffic growth of 3.8 percent was “well below” the 5.4 percent recorded year-to-date.
The Middle East, which is enjoying a boom in airline travel, saw growth slowing down to 9.6 percent in June from 12.8 percent before that.
Weakening long-haul destination economies and inflation concerns in the Asia Pacific saw international passenger traffic growth fall to 3.2 percent against 4.5 percent in May, said IATA.
Europe recorded a growth of 2.1 percent in June, down from 4.1 percent in May.
With more and more countries selling “domestic tourism” the US passenger traffic saw demand growth drop to 4.4 percent, a “significant slide” compared to the 8.2 percent growth recorded in May. Domestic traffic also contracted by almost 4 percent.
With a global passenger growth of just 3.8 percent in June, the world’s air traffic recorded its lowest growth in 5 years. “Strong commodity-driven economic growth in Latin America is the driving force.”
According to aviation expert John Strickland from JLS Consulting, other airlines may be about to follow XL in the months to come. “We have a number of weaker players in a highly competitive market.”
“The airline sector is in trouble, worse is to come,” added Bisignani. “Urgent action is needed to survive the crisis.”