INTERNATIONAL. The high-profile failure of two UK travel companies in recent days, allied to news that the fourth-largest investment bank in the US, Lehman Brothers, is filing for bankruptcy protection, spells darks days for the global travel market.
Following the dramatic failure of XL Leisure Group, the UK’s third-largest package holiday business, late last week, a north London-based tour operator called K&S Travel (Travel Turkey) collapsed over the weekend, stranding up to 150 passengers.
Between 85,000 and 90,000 British travellers had been stranded by the immediate grounding of the XL Airways fleet.
In the UK the weekend print and television media were full of stories and images of angry and upset travellers returning home, following special flights arranged by the Civil Aviation Authority (CAA). The aviation regulator said that by noon on Sunday some 22,090 XL customers had returned to the UK on a total of 94 repatriation flights. Additionally the holiday plans of some 200,000-plus British consumers have been dashed by the two business failures.
Travel industry sources say confidence in the sector is taking a pounding amid a string of business failures that have such immediate and often harrowing consumer impact.
Meanwhile, in Italy, Reuters reported this morning that Alitalia’s biggest unions have clinched a framework agreement today that could save the troubled national carrier. But talks are continuing and the outcome is uncertain.
Alitalia is operating under a bankruptcy commissioner. If no agreement is reached with the unions the airline could go into liquidation in coming days. It risks being grounded because of a lack of cash to pay for fuel. Reuters said that four of the airline’s trade unions held talks through the weekend with the government and a business consortium offering to buy the carrier, subject to a rescue plan that includes job cuts.
The travel industry’s woes come against the backdrop of a deteriorating global economy and the oil crisis of recent months. The latter has prompted a huge rise in the price of jet fuel through much of 2008.
Though oil has fallen sharply in recent weeks – light, sweet crude for October delivery ended Friday at US$101.18 a barrel, after touching US$99.99, the first time it has traded below US$100 since 2 April – the softening has come way too late for companies such as XL.
XL Chairman Phil Wyatt said last week: “Unfortunately the huge fuel price hike and the inability of the business to hedge all its fuel has increased our costs year-on-year by over US$80 million.”
LEHMAN BROTHERS FAILURE UNDERLINES FEARS OVER GLOBAL ECONOMY
Meanwhile concerns over the US and global economies deepened last night as Lehman Brothers, the fourth-largest investment bank in the US, announced it would file for bankruptcy protection, after incurring multi-billion losses in the US mortgage market.
For such a major and respected banking house, which has survived the great Depression and two world wars, to fail, underlines the gravity of the crisis. Meanwhile fellow American blue-chip institution Merrill Lynch, also hit by the credit crunch, has agreed to be taken over by Bank of America to secure its long-term future. Banks from around the world are urgently calculating their exposure to a failed Lehman.
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