Cobalt, a low-cost carrier based in Cyprus, is the latest airline in Europe to fail. But it will not be the last. Who is next?
Visit Cobalt’s website and you’ll be met with this lovely page:
Cobalt regrets to announce that it will be cancelling all Flights as of 23:50pm on October 17, 2018 due to indefinite suspension of Cobalt’s operations. As a result, future flights or services provided by Cobalt will be cancelled and will no longer operate.
Bottom line: the company lost money last year, lost money this year, and its main Chinese investor (Avic Joy Air) decided enough was enough.
Apparently the writing was on the wall. Cobalt had skipped its payment on two leased planes earlier this month. Civil aviation authorities in Cyprus also exercised close oversight, making sure that Cobalt did not skip paying for salaries or properly maintaining its aircraft.
While not a big airline, Cobalt served 23 destinations within Europe using a fleet of two Airbus A319s and four Airbus A320. It had recently introduced business class onboard.
Who Is Next?
One Mile At A Time reports that Air Belgium is also on the brink of liquidation. Its whole business plan frankly never made sense. Instead of operating premium service out of a secondary airport in Brussels, the carrier should focus on leasing its planes to those in need. Currently the carrier is only leasing one of its aircraft out, an A340 that British Airways is using to operate between Abu Dhabi and London.
But frankly I am more worried about WOW Air. There is no question that WOW Air expanded its service to the United States too aggressively. It already cut service to San Francisco and will discontinue service to St. Louis, Cincinnati, and Cleveland. In Europe, it has recently abandoned Stockholm and Edinburgh.
WOW Air is also laying off employees, struggling with higher oil prices, and finds itself in a highly-competitive market for budget travel to/from Europe.
The carrier is now focusing on Asia instead. It has plans to add service to 15 new destinations in Europe by the end of the next year. Even so, I’m worried about the long-term viability of WOW in this market.
We face an airline market that (arguably) has too many participants. While all the recent shutdowns may simply be natural market corrections, the results are not pretty. Not only are jobs lost and holiday ruined, but fares will go up to counter the lower supply.
Leave a comment if you were booked on Cobalt. How did the airline handle it?
Whilst in the long run, profits and good business plans make for success, airlines actually fail because they run out of cash – which is usually brought on by funding sources drying up. Yes, you need to be worried about WOW, but you also need to look at Norwegian. It is still expanding rapidly and devouring cash. If confidence remains that either a) it can own its space of the low cost market or b) it will be taken over by BA or LH, then it will continue to be backed. But, if confidence waivers, then it will be a different story. BA’s and LH’s interest will fade very rapidly if they sense that there’s no more cash.
I’m actually Surprised about Cobalt because it had a reasonable business model. Would not surprise me if Wow or some of the other TA low-cost carriers go under. These are unsustainable business models. Does no one remember People Express? it’s a classic case study.
So regarding refunds, most travelers are SOL unless a credit card issues a refund?
Please let it be highly subsidized Alitalia.