Jeremy Warner's Outlook: With travel companies, it's survival of fittest

Willie Walsh, chief executive of British Airways, expects a further 30 airlines to go bust by the end of the year, a similar number having already gone down in flames in the year to date.

Meanwhile, XL, billed as Britain's third largest tour operator but in truth more of a low-cost airline with a bit of packaged holidaymaking tacked on the side, bites the dust. With customary tact, Ryanair says it serves XL's customers right for signing up with such a dodgy operator. They should have flown Ryanair instead. That way they could have been sure of at least getting their flights.

One of the effects of a downturn is to cleanse the system of the excess capacity that builds up in the boom. In this regard, what's happening in the airline and package holiday business is not so different from what's going on in banking. A Darwinian process of survival of the fittest is underway. Those that manage to come out the other side will be bigger and stronger.

What's made the process much worse this time around for airlines is the oil price. High fuel prices are also what seems to have put the kibosh on XL. With XL, it wasn't so much a collapse in demand that was the problem as that the cost of providing a holiday had risen to more than it was charging for them. The fact that the company was also loaded up with debt, the result of an Icelandic-backed leveraged buyout a couple of years back, made matters more difficult still. As ever, the lesson is that debt is a killer. Those that enter the downturn with too much of it are less likely to survive than those that don't.

A big tour operator can be guaranteed to go bust in every downturn. You can set your watch by it. In the 1970s it was Court Line. Come the early 1980s, it was Laker. In the early 1990s, it was Harry Goodman's International Leisure Group. Out of that implosion was built the explosive growth of David Crossland's Airtours. Sure enough, when the downturn of the early "noughties" arrived, he too met his come-uppance. Shareholders were virtually wiped out in a series of recapitalisations.

By comparison, XL is a comparatively minor stripping out of capacity, though we haven't yet entered the full depths of the downturn, so presumably there will be plenty more where that came from. Shares in the bigger tour operators – TUI, Thomas Cook and Holidaybreak – all rose in anticipation of a wider bloodbath. Fewer tour operators means more business for the ones that survive. Like nature, the capital markets are a brutal place.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
The cartoon depicts the UK (far left) walking around a Syrian child refugee
newsIn an exclusive artwork for The Independent, Ali Ferzat attacks Britain's lack of 'humanity'
Life and Style
tech
Arts and Entertainment
film
Sport
footballManager attacks Sky Sports pundit Jamie Redknapp after criticism of Diego Costa's apparent stamping
News
video
Life and Style
food + drink
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore