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Nordic airlines “exposed in cold winter”

Europe’s airlines face a chilly winter, Bloomberg writes, with Nordic carriers in particular exposed to brutal headwinds.

In an article posted today, the New York-based business and finance media company Bloomberg writes that the prospects for Europe’s airlines – and Scandinavia’s in particular – are grim, in stark contrast to their American counterparts.

Limited consolidation has left Europe’s carriers with overcapacity and little room to manoeuvre. The report adds to other recent jittery assessments by aviation experts.

Competition from bigger airlines is keeping fares low, while unpredictable oil prices this year have made it hard to manage costs. Mounting debt and weak balance sheets are leading to worries about the future of some carriers.

Six European airlines have gone bankrupt since June – Denmark’s Primera Air, the Swiss carriers PrivatAir and Skywork Airlines, Lithuania’s pan-European Small Planet businesses, Azur Air of Germany and Belgium’s VLM.

For Icelandair and WOW air times are bleak, Bloomberg says, while debt-laden Norwegian has been targeted for takeover, Alitalia has been in insolvency for 18 months and the UK’s Flybe Group is looking for a buyer. Even Finnair’s share prices have plunged.

But among US airlines there are record earnings.

Cash squeeze
WOW air founder Skuli Mogensen points the finger at fellow discounters Ryanair, easyJet and Wizz Air for dragging down margins for airlines across Europe.

“These are all very aggressive and still fast-growing operators, and as a result the whole market becomes much more aggressive,” he says. “If you look at North America, there’s been a lot of consolidation, and as a result it has become less competitive.”

A merger trend in Europe starting in 2004, led by British Airways, Air France and Lufthansa, left out the Nordic region. As a result, Bloomberg says, SAS, Norwegian, Finnair and Icelandair are suffering from a regional cash squeeze that was begun by Norwegian itself.

Even in Europe’s healthiest markets, the biggest operators are struggling to raise margins as a glut in seating capacity keeps fares low. In contrast to the US, in Europe “there is still too much discounting on continental and trans-Atlantic routes for the rest to enjoy the benefits of consolidation,” Bloomberg writes.

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