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All through last week, the rumors were growing.  Would the travel company get a rescue package?  Even as the company tried to secure a financial package, there were several aircraft being positioned to ensure stranded travelers could make their way home.  The 178-year-old company could not secure the funding it needed and this morning entered receivership.  Reuters has this history of the company.

The biggest public concern was for the expected 150,000 stranded travelers.  Though another estimate has it at 600,000 travelers.  The impact is big by any measure.  These days when an airline collapses, it does so spectacularly.  Anything that impacts so many people is world news.

So, now what?  Looking at the industry, rather than the traveler side of the story, it may not be too bad.  Yes, it is disruptive and scary for employees and their families.  From this point of view employees and customers are equally impacted.

Let’s break it down:

  • People – Of the employees at Thomas Cook, the group with the best chance for a quick career recovery are pilots.  There is a global pilot shortage and they are likely to find jobs first.  Cabin crew may have a tougher time.  Airport employees may find work, but this may be a slog.  Back office employees are likely to face the most headwind.
  • Fleet – Here there is actually some good news.  Thomas Cook had a good fleet. The Boeing MAX crisis means there is a global hunt for single-aisle aircraft.  The least attractive part of the Thomas Cook fleet, the A320s, are likely to be snapped up.  The airline’s A321s are probably being eyed right now. These are in high demand as evidenced by how quickly Air Canada took over WOW’s A321s.  The A330 fleet is also likely to find new employment as evidenced by the quick absorption of the Air Berlin A330s.
  • Travelers – With another low-cost travel option taken out of the market air travel prices are going to rise.  The laws of supply and demand are immutable.  Consumers who have experienced the taste of overseas travel find that it becomes highly desirable. Low fares made this accessible and we expect consumers will find ways to pay for higher fares rather than forgo that foreign travel experience.  The loss of Thomas Cook (and Aigle Azur and XL Airways in France) means that the remaining low-cost carriers (i.e. Norwegian)  can breathe a little easier.  With an expected stable demand for air travel, any EU-based LCC that survives this winter could blossom next summer. But that, in airline time, is far away.
  • Competition – The key airline on everyone’s list here is Norwegian. This airline is suffering from being MAX focused.  It also suffers from Rolls-Royce powered 787s.  The airline is losing money and recently underwent big management changes.  These changes may have come too late. In a recent conversation among knowledgable observers,  the sentiment was that Norwegian probably will not survive through the winter.  EU LCC failure has been predicted by Michael O’Leary every year and 2019 looks like his year.
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Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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