‘301 airline failures’ and counting… but the industry has learnt to quickly recover

In the first week of Oct-2018, Robert Martin, managing director and chief executive officer, BOC Aviation, revealed at the CAPA – Centre for Aviation Low Cost Long Haul Global Summit in Seville that this decade alone there have been ‘301 airline failures’. Just a couple of weeks along and we can add Cypriot carrier Cobalt Air and UK charter operator Cello Aviation to that list and there are numerous rumours that many other operators are on the brink of collapse.


  • BOC Aviation MD & CEO Robert Martin says  that this decade alone there have been ‘301 airline failures’, and that number is rising;
  • That number is rather alarming and equates to more than two airline failures per month, but most had not reached critical mass, according to Mr Martin;
  • The executive says February and October/November are acknowledged as the most likely windows for airline collapses through the year;
  • This time last year we had the major collapses of airberlin and Monarch Airlines. This year the largest failures, among others, have been Primera Air and Cobalt Air.

That number is rather alarming and equates to more than two airline failures per month during the 2010s. However, Mr Martin notes that many of these would have escaped widespread media attention. Adding context to the numbers, he highlighted that most of these were operators that were unable to reach a level of critical mass and many only had small aircraft fleets. “Around 90% didn’t hit the point of critical mass,” he stated.

We are currently at two of the big windows for collapses with February and October/November the most likely times that an airline will fail, according to the executive. “We tend to watch those periods very, very carefully,” he explained. “We also watch, in particular, the liability side of the balance sheets. That’s the crucial part. Airlines don’t tend to fall over due to lack of revenue. They fall over because they can’t meet their liabilities.”

His comments on the scale of airline failures were part of a discussion on LCC fleet financing at CAPA’s inaugural Low Cost Long Haul Global Summit where he was joined on the stage DVB Bank’s SVP aviation financial consultancy, Albert Muntane Casanova and industry stalwart Steven Udvar-Hazy, executive chairman, Air Lease Corporation.

Air Lease Corporation is one of the industry’s biggest lessors and Steven Udvar-Hazy one of the most respected leaders in the industry. He highlighted that smaller airlines are facing a “huge cash flow challenge”. He said that credit card providers are holding back funds from smaller operators and start-ups. “The airline may sell a ticket purchase by credit card, but it does not have access to that cash until the service is performed. Sometimes until well after the flight has operated,” he added.

The discussion painted a balanced outlook for the industry, but Mr Martin warned that “the party’s over,” in terms of low interest rates. However, he noted that world GDP growth is more balanced than at any time in history. As such, BOC Aviation does not expect any global recession in the short term, but Mr Martin said there will be “pockets” of recession in individual countries and regions.

For BOC Aviation – like all lessor and financiers – there is a significant amount of due diligence that is completed before working with an airline partner. Mr Martin said the company considers some main elements when considering a new airline customer: the business model, the ability of management to execute the strategic plan and the carrier’s cash flow and source of liquidity. Additionally, it also considers competition and the airline’s ability to weather the inevitable competitive response to its entry into the market.

It is clear that airline collapses are not as unexpected as in the past and the industry is much better prepared to recover from a failure whether that being rescue fares for passengers, airlines back-filing capacity voids or lessors and financiers finding homes for recovered aircraft.

LEARN MORE insights into the BOC Aviation business model, the value of critical mass of operation and how the high value assets needed for Low Cost Long Haul could impact availability of liquidity, in our exclusive CAPA TV interview with Robert Martin, filmed on the sidelines of the CAPA Low Cost Long Haul Global Summit in Seville in early Oct-2018.

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