Friday, 29 August 2008

Zoom Doom!

With thousands of Brits stuck abroad and thousands of Canadians stuck in the UK, following the collapse of low cost airline Zoom, it appears there is little hope for many more airlines in the current economic crisis.

The business model of low cost carriers is fundamentally reliant on the price of fuel and it appears most budgeted this year based on the cost of a barrel of oil not rising above $80 a barrel. When the cost of fuel rose above $100 a barrel things looked bleak but as it rose further still, to more than $140 a barrel at one point, 26 airlines have found it impossible to stave off the inevitable and have gone out of business.

Everyone likes a bargain but you know what they say - "if something looks too good to be true it usually is". Low cost airlines may seem attractive with low fares on desirable routes but the truth is they take huge gambles on what the trading conditions of the day will be months in advance and those buying tickets early, at the cheapest rates, leave low cost carrier airline hugely exposed to unacceptable business risk.

Thousands of people will soon return to recount stories of woe. They will tell us there is no obligation for an airline that has gone under to provide them with any help, any food or any accommodation. Those with travel insurance will get home without any additional cost and those without will be left considerably out of pocket just to get back to their port of dispatch. It almost makes you grateful for British Airways and their full fare service, doesn't it!

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