In This Article:
* Thomas Cook collapse highlights common threats
* Two French carriers in bankruptcy court
* Bust airlines list expected to grow
By Laurence Frost
PARIS, Sept 23 (Reuters) - The collapse of travel group Thomas Cook and a trio of subsidiary airlines, leaving 600,000 holidaymakers stranded, is unlikely to be the last failure among Europe's struggling second-tier carriers.
As Britain was activating plans for its biggest peacetime repatriation, two smaller operators, Aigle Azur and XL Airways, were before the French bankruptcy courts on Monday.
Shares in larger airlines rose on expectations that Thomas Cook's demise would bring them more passengers, higher fares and new airport slots. But many are wrestling with similar problems.
"We expect all the airlines we cover to rally today but we caution investors not to get over-exuberant, given other challenges," said J.P. Morgan analyst David Perry - citing higher fuel prices, a strong dollar and cut-throat competition.
The list of sector bankruptcies is growing: Monarch, Air Berlin and Alitalia failed in 2017, followed by Primera and Cobalt last year and Germania, Flybmi and Iceland's WOW so far in 2019. Regional operator Flybe's sale to a Virgin Atlantic-led consortium has narrowly averted its collapse.
Larger European carriers are not immune from the threat.
Third-ranked low-cost operator Norwegian Air, which has bled cash while making inroads in the transatlantic market, won a reprieve from creditors last week, postponing repayment on $380 million in debt for up to two years.
Last week's oil price spike that followed attacks on Saudi infrastructure will have a knock-on effect for kerosene prices that were already running high.
BREXIT 'LAST STRAW'
The strong dollar has further inflated prices for fuel and plane leases - two of the sector's biggest costs that are usually billed in the U.S. currency.
For British operators the problem is exacerbated by the pound's slide, amid worries over the country's impending European Union exit. At Thomas Cook, currency effects likely increased some leasing costs averaging $250,000 per jet by about a quarter once converted into sterling, industry sources said.
The venerable travel brand also suffered from deliberate price-slashing by rivals TUI and Jet2, Bernstein analyst Richard Clarke said, and a "flood of cheap flights" from online-only operators.
But he added: "Brexit was likely the straw that broke the camel's back."
European airline traffic has grown 1.6% so far this year, according to air traffic control body Eurocontrol, about half the rate assumed in industry capacity plans. That has made it harder to fill planes or raise fares, adding earnings pressure that can be eased by bankruptcies or mergers.