epa06159472 Irish low cost airline Ryanair's CEO, Michael O'Leary, as he addresses a press conference in Madrid, Spain, 24 August 2017. O'Leary announced that the company was not affected by terrorist attacks committed in Barcelona and Cambrils several days ago as the prices were 'automatically' reduced. He added that the fares lowered between five - seven percent in its fights to Barcelona after terrorist attacks, causing 15 deaths and more than one hundred other injured.  EPA/Chema Moya
Ryanair's Michael O'Leary is one of the few European airline chief executives still smiling as competition forces carriers out of business. Chema Moya / EPA

Air Berlin won't be the last European airline domino to fall



Michael O’Leary, the feisty chief executive of Ryanair, reckons that five years from now there will be just five European airlines. Ryanair of course will be one of them, he confidently predicts, as will his big rival EasyJet. The other three candidates in the survival stakes are Lufthansa, Air France-KLM and IAG.

The others will disappear, either merged into one of the bigger groups or killed off by the increasingly ferocious competition currently gripping an industry that is cursed by too many seats and not enough passengers.

The low-cost German carrier Air Berlin, dogged by delays and cancellations that resulted in huge compensation costs, has just become the latest casualty, the second of the summer, after its major backer Etihad Airways, which owned 29.9 per cent, refused to continue supporting its losses. Etihad was also the major shareholder in Alitalia, another national flag-carrier which collapsed into administration. More carriers will follow before the consolidation of a traditionally fragmented industry where every country propped up its own – usually loss-making – national airline, is complete.

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Read more by Ivan Fallon:

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National pride once required every European country to have its own airline. But not anymore. IAG now includes British Airways (itself a merger of BOAC and BEA), Aer Lingus and Iberia, once the fiercely independent state-owned airlines of three European nations. Air France-KLM is a merger of another two. Romania’s Tarom and Poland’s Lot, both of them bleeding state cash, have been restructured as their respective owners accept that hard economics outweigh national pride.

Even five European carriers may be too many in an industry which is fast changing. The low-cost carriers, which have changed the order dramatically, barely featured on the scene 20 years ago. Nor did the big Middle East airlines, Emirates Airlines, Etihad and Qatar Airways, who are eating into the long-haul market where margins are a good deal higher.

Consolidation is a world-wide phenomenon. The US, where commercial air travel basically began, has already gone through the massive restructuring that state pride and legacy delayed in Europe. Forbes recently calculated that in the 30 years leading up to the financial crisis of 2008/9, the US airline industry lost $52bn; in the 1980s alone, they lost more than they made in their entire history. It is extraordinary to think that an industry which has grown faster than any other over the past hundred years and which accounts for a substantial chunk of national budgets is also the biggest loss-maker of all time. The sobering fact is that Amazon, Apple or Google, which didn’t even exist when great airlines such as TWA and PanAm ruled the skies, are today individually worth more than the entire world’s airline industry.  The US experience has been a painful one. Many of the airlines went through Chapter 11 bankruptcies before they could trim their costs to compete with the low-cost carriers. In 2005 the big wave of consolidation began when US Airways and American West got together, and sped up after the financial crisis when a nasty drop in travel threw up a glut of seats. United Airlines merged with Continental in 2010 and Southwest, the model for Ryanair, got together with AirTran Airways a year later.

Air Berlin didn’t make a penny in the last ten years of its life, which is not all that surprising when you look at the fares they were offering: €19 flights from Berlin to Majorca which everyone knew was just not sustainable. You can’t get to the airport for that.

Consolidation would have happened so much faster but for the low oil price which has made the profitable airlines even more profitable and kept the marginal airlines going long past their natural sell-by date. Many airline schedules maintained today could not be kept going on U$75 oil, let alone $100. Any tick-up in the oil price will result in another round of collapses.

Aviation history is full of heroic failures. Freddie Laker survived long enough to leave the lasting legacy of low-price trans-Atlantic flights from Britain to the US which were soon picked up in Europe. Even Donald Trump had his own airline for a time. Richard Branson managed, against considerable odds, to make a go of it after a fierce fight with British Airways, which employed every dirty trick in the book to put him out of business.

When the Irishman Tony Ryan started RyanAir in the 1980s, few gave him much of a chance. But he knew what he was doing, basing his model on  Southwest airlines, which he shamelessly copied. His new airline, he decided, would fly just one plane, the workhorse Boeing 737, would have incredibly fast turn-round times (mostly 40 minutes), pay its pilots less than the national flag carriers did, and make passengers pay for every little frill, including food and drink.

He lived just long enough to see Michael O’Leary turn his dream into a brutal reality, starting by killing off poor old Aer Lingus which, like all the state airlines, operated on an entirely different cost structure. A similar legacy still rules across a number of European airlines. But not for much longer.

What is the definition of an SME?

SMEs in the UAE are defined by the number of employees, annual turnover and sector. For example, a “small company” in the services industry has six to 50 employees with a turnover of more than Dh2 million up to Dh20m, while in the manufacturing industry the requirements are 10 to 100 employees with a turnover of more than Dh3m up to Dh50m, according to Dubai SME, an agency of the Department of Economic Development.

A “medium-sized company” can either have staff of 51 to 200 employees or 101 to 250 employees, and a turnover less than or equal to Dh200m or Dh250m, again depending on whether the business is in the trading, manufacturing or services sectors. 

MATCH INFO

Southampton 0
Manchester City 1
(Sterling 16')

Man of the match: Kevin de Bruyne (Manchester City)

Omar Yabroudi's factfile

Born: October 20, 1989, Sharjah

Education: Bachelor of Science and Football, Liverpool John Moores University

2010: Accrington Stanley FC, internship

2010-2012: Crystal Palace, performance analyst with U-18 academy

2012-2015: Barnet FC, first-team performance analyst/head of recruitment

2015-2017: Nottingham Forest, head of recruitment

2018-present: Crystal Palace, player recruitment manager

 

 

 

 

COMPANY PROFILE

Name: Yango Deli Tech
Based: UAE
Launch year: 2022
Sector: Retail SaaS
Funding: Self funded

Try out the test yourself

Q1 Suppose you had $100 in a savings account and the interest rate was 2 per cent per year. After five years, how much do you think you would have in the account if you left the money to grow?
a) More than $102
b) Exactly $102
c) Less than $102
d) Do not know
e) Refuse to answer

Q2 Imagine that the interest rate on your savings account was 1 per cent per year and inflation was 2 per cent per year. After one year, how much would you be able to buy with the money in this account?
a) More than today
b) Exactly the same as today
c) Less than today
d) Do not know
e) Refuse to answer

Q4 Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”
a) True
b) False
d) Do not know
e) Refuse to answer

The “Big Three” financial literacy questions were created by Professors Annamaria Lusardi of the George Washington School of Business and Olivia Mitchell, of the Wharton School of the University of Pennsylvania. 

Answers: Q1 More than $102 (compound interest). Q2 Less than today (inflation). Q3 False (diversification).

UAE currency: the story behind the money in your pockets
Day 3, Abu Dhabi Test: At a glance

Moment of the day Just three balls remained in an exhausting day for Sri Lanka’s bowlers when they were afforded some belated cheer. Nuwan Pradeep, unrewarded in 15 overs to that point, let slip a seemingly innocuous delivery down the legside. Babar Azam feathered it behind, and Niroshan Dickwella dived to make a fine catch.

Stat of the day - 2.56 Shan Masood and Sami Aslam are the 16th opening partnership Pakistan have had in Tests in the past five years. That turnover at the top of the order – a new pair every 2.56 Test matches on average – is by far the fastest rate among the leading Test sides. Masood and Aslam put on 114 in their first alliance in Abu Dhabi.

The verdict Even by the normal standards of Test cricket in the UAE, this has been slow going. Pakistan’s run-rate of 2.38 per over is the lowest they have managed in a Test match in this country. With just 14 wickets having fallen in three days so far, it is difficult to see 26 dropping to bring about a result over the next two.

Company profile

Name: WallyGPT
Started: 2014
Founders: Saeid and Sami Hejazi
Based: Dubai
Sector: FinTech
Investment raised: $7.1 million
Number of staff: 20
Investment stage: Pre-seed round

UAE currency: the story behind the money in your pockets

Black Panther
Dir: Ryan Coogler
Starring: Chadwick Boseman, Michael B Jordan, Lupita Nyong'o
Five stars

if you go
'My Son'

Director: Christian Carion

Starring: James McAvoy, Claire Foy, Tom Cullen, Gary Lewis

Rating: 2/5


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