HOW TO THINK ABOUT IT

The culprits. Struggling airlines have blamed cash flow problems on fuel costs and the pressure to offer ultra-low fares, but the industry has seen other difficulties in recent years. Thomas Cook’s position as a package holiday dealer suffered as it failed to adapt to the internet — and a world in which people routinely book their own travel instead of using agencies.

The next domino. Rumors that popular Norwegian Air will declare bankruptcy have been swirling for months, and now airlines are getting past the lucrative summer months and hunkering down for winter. But other European airlines might go first: Slovenia’s government is reportedly preparing for the potential bankruptcy of Adria Air, and France’s XL Airlines suspended ticket sales last week, citing financial difficulties.

Brexit to blame? While Thomas Cook held billions in debt and was ultimately unable to find the hundreds of millions of dollars needed to stay afloat, the company in May warned that Brexit uncertainty was hurting business. Brexit is currently set to happen at the end of October, and if the U.K. leaves the EU without a deal, the withdrawal is expected to significantly disrupt border crossings and other travel basics, as well as spark food and medicine shortages.

Knock-on effects. Package holidays are protected by European law, which means the government must cover repatriation costs. The price tag is expected to be far greater than the 2017 collapse of Monarch Airlines, which cost British taxpayers about $51 million. Meanwhile, the 21,000 employees of Thomas Cook — and all the hotels and other businesses that depend on their package holidays, particularly in Greece, where about 50 hotels have franchise agreements with Thomas Cook — are headed for a rough patch. Some airline collapses have had even more far-reaching effects: When Wow Air went down, for example, it reduced the number of tourists to Iceland, hurting the country’s economy as a whole.

WHAT TO READ

Europe’s Airline Industry Is Consolidating, in The Economist
“Concentration has resulted in poorer service: three American operators can be found on the list of the world’s 50 best carriers, as rated by Skytrax, an aviation website, compared with 13 European ones.”

Wow Air’s New Owner Wants to ‘Make Flying Fun Again,’ by Hannah Sampson in The Washington Post
“Michele Ballarin’s ambitious goal has raised eyebrows among industry analysts who question the scant details available about the plan, as well as why anyone would start flying to the North Atlantic just in time for winter.”

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