The demise of Hamburg International Airlines

Another airline that has recently stopped operating: Hamburg International Airlines, from Germany, has joined the list of the recession's victims.

Hamburg International was no conventional airline, it was considered a "hybrid airline", operating a mix of scheduled and charter flights and, as this article explains, some of its routes were certainly off-the-beaten track (if such thing exists in aviation!), such as Germany to Iraq. It also operated a small mixed fleet of just 9 aircraft that included both Boeing 737s and Airbus A319s (that have now been returned to the lessors). Amazingly, a year before its bankruptcy the airline was contemplating ambitious expansion plans...

The demise of Hamburg International Airlines illustrates the difficulties small airlines face when they can not find the right positioning in the market.

Air Malta's struggle and the dependent island

Malta's lifeline (Photo: Wikipedia)

Government subsidies to airlines are a regular topic on this blog, however, up until now we had focus mostly on the funds governments pay out in order to develop air routes or airports, and devoted relatively little space to that government aid whose objective is to guarantee the survival of an airline.

We have, admittedly, seen less and less of these since the wave of market liberalization of the 90s and the stronger stance of the European Commission on these matters, however, a new, and I hope exceptional, case is back on the table. This time it affects one of the small players of European aviation, but one that can have a massive impact on the economy of one of the European Union members states: Air Malta.

I guess the capital importance of tourism and air travel in this island nation, that happens to be also the Europe Union's smallest member, has been the decisive argument in convincing the European Commission to give the green light to a €52 million aid package to Malta's ailing flag carrier. We saw in a previous post how the market is often able to adapt quite quickly to the demise of a relatively large carrier, however, the fact that tourism accounts for around a quarter of the country's GDP and Air Malta is carrying nearly half of this traffic, could make any less-than-immediate transition extremely painful for the island's economy.

When I was reading about the case I could see how many commentators had serious doubts about Air Malta's capacity to reverse its situation, an opinion that seems to be shared in Brussels too...in any case, the aid package is supposed to guarantee operations for the next 6 months, a time the Maltese authorities should use to prepare for the worst-case scenario and to make sure that a possible Air Malta's bankruptcy does not bring about the bankruptcy of the country too!

Mexicana's bankruptcy and the quickly-adapting Mexican air travel market

Picture: Wikipedia

Mexico's second-largest carrier, Mexicana de Aviación, went bankrupt last August, however, the market moved in quickly to fill the void. Mexico's air traffic did not even register the loss of such a large operator. On one hand a number of new international routes were opened, mainly between the US and Canada and several Mexican destinations. Domestically, the spare demand has been absorbed by local operators, flag carrier Aeroméxico (a Sky Team partner) and Mexican low-cost airlines such as Volaris, Interjet and Viva Aerobus, that reported increasing load factors and market share.

As this article points out, this was possibly a case of excess capacity that has now wiped out. The speed with which the market adapts to the new situation highlights the dynamism of the air travel sector and its capacity to adapt to supply and demand factors and, in my opinion, strengthens the case for limiting government subsidies to loss-making airlines.

In any case, despite there are people willing to defy the new market equilibrium: a reborn Mexicana, under new management, plans to start operations in January. The new Mexicana will be smaller, it has rehired 30% of the previous staff, and operate a fleet of 20 aircraft. Half of its routes will be to international destinations, and, if everything goes well, the plan is to increase the fleet to 30 aircraft during the year and hire the remaining 70% of the staff of the original company.

This is certainly a bold move, since it might bring back excess capacity, but will possibly be good for Mexican air travellers, as the new Mexicana will have to work hard to regain its place under the sun and this possibly means lower fares...