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Another European Low-Fare Airline Shuts Down

Three relatively new low-fare airlines have run into troubles ranging from minor to bad, with one shutting down completely and the other two cutting or delaying new air routes. Industry pundits have been saying for some time that it wouldn’t be easy for the slew of new low-fare airlines to make their business models work, given the competition from established low-fare lines and ongoing opposition from the legacy lines. And that now seems to be ringing true.

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Here are the most recent low-fare airlines to show signs of instability, financial or otherwise.

Cobalt Air Strands Passengers

A low-fare airline based in Cyprus has failed, completely shutting down. As in the recent Primera case, travelers already at their destinations were stranded and travelers who had not yet started their trips were left with worthless tickets. Also as in the Primera case, other lines offered “rescue” fares, starting with Wizz Air.

Cobalt suggested travelers with worthless tickets contact their credit card issuer, travel agency, or tour operator. This failure probably does not impact many U.S. or Canadian travelers, but it reinforces the warnings of a financial winter looming for European low-fare airlines: Cobalt wasn’t the first, and it likely won’t be the last. Anyone planning to use a small low-fare startup should consider buying travel insurance. And buy it from a third party, not the airline: Most airline insurance policies don’t pay off if the corporation that sold them folds.

WOW Air Cuts Routes

The fast-growing Icelandic low-cost airline is dropping five U.S. routes to its Reykjavik hub: Cleveland, Cincinnati, Dallas (Ft. Worth), New York (JFK), and St. Louis. It’s hard not to conclude from this that that (A.) $99 transatlantic fares are less sustainable than they thought, (B.) a successful air hub operation requires lots of profitable spokes on either side, and (C.) connections on routes that already have nonstop competition is not an easy sell.

This situation shows how quickly low-fare lines react to unfavorable markets: If it isn’t selling well enough, they drop it. Fortunately, WOW remains fully operational, and no travelers will lose any money. But it will probably drop another route or two, and perhaps still continue to add a few new ones to test.

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Swoop Postpones New Routes

WestJet’s new low-fare airline subsidiary, Swoop, postponed its new routes into the U.S. that were due to launch October 11. Fortunately, the airline says the flights were postponed because of a delay in bureaucratic paperwork, not financial problems. And you can expect the new routes to operate by the end of October.

WestJet was able to handle some booked travelers on its own flights, and is taking care of others. But the story of low-fare airlines having to rebook stranded passengers is starting to feel all too common.

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Consumer advocate Ed Perkins has been writing about travel for more than three decades. The founding editor of the Consumer Reports Travel Letter, he continues to inform travelers and fight consumer abuses every day at SmarterTravel.

By Ed Perkins

A nationally recognized reporter, writer, and consumer advocate, Ed Perkins focuses on how travelers can find the best deals and avoid scams.

He is the author of "Online Travel" (2000) and "Business Travel: When It's Your Money" (2004), the first step-by-step guide specifically written for small business and self-employed professional travelers. He was also the co-author of the annual "Best Travel Deals" series from Consumers Union.

Perkins' advice for business travelers is featured on MyBusinessTravel.com, a website devoted to helping small business and self-employed professional travelers find the best value for their travel dollars.

Perkins was founding editor of Consumer Reports Travel Letter, one of the country's most influential travel publications, from which he retired in 1998. He has also written for Business Traveller magazine (London).

Perkins' travel expertise has led to frequent television appearances, including ABC's "Good Morning America" and "This Week with David Brinkley," "The CBS Evening News with Dan Rather," CNN, and numerous local TV and radio stations.

Before editing Consumer Reports Travel Letter, Perkins spent 25 years in travel research and consulting with assignments ranging from national tourism development strategies to the design of computer-based tourism models.

Born in Evanston, Illinois, Perkins lives in Ashland, Oregon with his wife.

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