An overview of the impacts of airline failures.
June 28, 2018
Download article
3.2MB
The airline industry has contributed a great deal to the development of the tourism industry. However, due to various reasons, airlines are susceptible to failures*. This summary provides an overview of eNett’s latest research report, which explores the history and factors that trigger airline failures and best practices that travel agencies can use to mitigate impacts.
846 airlines failed between 2003 and 2018.
The failures between 2003 and 2018 affected 155 different countries, 20 countries of which experienced 10 or more failures during this time.
168 airlines failed in the past five years.
Airline failures have been a weekly occurrence in the past 15 years, with an average of 53 such events a year from 2003 to 2018. There has been a lot of variation from this average, with a peak of 95 failures in 2008 and only 18 failures in 2017. Up until 2018, there has been a gradual decline in the number of failures over the past five years due to favourable economic conditions and low oil prices.
Common triggers of airline failures.
Airline cost structures and other industry factors mean they are generally not well positioned to quickly react to increases in costs or decreases in demand. Events that can negatively impact airline financial health include:
- Increase in oil price
- Drop in GDP growth
- Political Uncertainty
- Pandemics & natural disasters
How eNett VANs protect travel agencies.
eNett Virtual Account Numbers (VANs) are 16 digit unique Mastercard numbers that travel agencies can use to pay their suppliers in a fast, easy and safe way.
Each VAN is backed by the Mastercard guarantee, including sophisticated chargeback capabilities. This means VANs can protect against supplier default, such as from prepaid but incomplete travel if an airline fails, as well as other adverse events such as fraud.
As soon as an airline fails, eNett will know. We proactively reach out to our customers who may be affected, and typically get money back to a travel agency in around 10 days.
The protection provided by eNett’s specialist chargeback team rapidly delivers benefits to all parties in the case of an airline failure:
- Travel agencies can recover prepayments made to the airline and are less likely to suffer financial damage or failure themselves.
- End travellers are more likely to be able to recover funds from their travel agency.
- Governments and taxpayers may incur less of the direct and indirect costs as a result of the airline failure.
