Bankrupt Low Cost Airlines = Redundant Overseas Property Hotspots
Zoom Airways, XL Airlines, Oasis Hong Kong, Silverjet, Eos, Maxjet, KLM and Alitalia, it seems low-cost airlines even national carriers are dropping out of the skies like flies and with every low cost route that disappears there is a direct impact on the local property industry. The double whammy of higher fuel costs, currency fluctuations and falling revenues as a result of weak consumer spending has put industry experts on red alert for the next casualty. With the travel and tourism industry in turmoil, the impact on overseas property is going to be felt in full force as travellers, tourism developments and low-cost flights disappear before our very eyes.
As we write today, news of the failure of stag do company Brilliant Weekends (a stag & hen party organiser) and K&S Travel (a specialist Turkey travel operator) is also hitting the headlines. In a market where supply is now exceeding demand and airlines and travel businesses are no longer able to pass on rising fuel costs to consumers. On the back of rising recession fears, cautious consumer spending means luxury expenditures such as travel and holidays are the first to go and holiday homes and buyers move down in the pecking order.
Airlines such as Zoom Airways and XL operating in an industry often already running on very low margins, had seen fuel costs rise by $50 million over the last year and in the end all succumbed to the increasing pressure on profitability and income. Indeed Italian airline Alitalia recently filed for bankruptcy protection in a vain bid to fend of creditors and give the group time to try and organise a refinancing which appears unlikely. Instead of a proliferation of new routes, the low-cost market is contracting…fast. KLM merging into Air France and news that BA, the UK’s national carrier is to review a possible merger with American Airlines, a move set to be highly disputed by Virgin boss, Richard Branson.
Despite the price of oil has fallen back to just over $100 over the last few weeks for many airlines it has all come too late with much of the damage already been done. Thousands of holidaymakers have been left out of pocket, without a holiday and literally left stranded around the world having to incur added expense to get home.
The face of the airline industry is changing and an industry which over the past decade has forged new horizons in travel. With new flight routes once launching on a near weekly basis to obscure and previously unreachable destinations market and fed the fortunes of overseas property, creating new property hotspots overnight. Now as the holiday industry scrambles to cut costs and the global holiday destination list is shrinking as we speak, the ulimate winners in overseas property may well be the old standards of Spain, France, Portugal and Cyprus as destinations accessible in ways other than just by plane.
