Should Bankrupt Carriers Be Relaunched?

It’s been an interesting year for the commercial aviation world in terms of bankruptcies and airlines collapsing. We lost Jet Airways early in the year which was followed by WOW Air, and more recently Thomas Cook and Adria Airways shut down. Some airlines aren’t staying down for long, however. In fact, WOW Air is reportedly relaunching in a few weeks as WOW 2. Which makes us ask the question: Should bankrupt carriers be relaunched?

WOW airliner at airport gate
Icelandic carrier WOW Air collapsed in late March. Photo: Wowair.com

In late March 2019, WOW Air declared bankruptcy and their assets were liquidated. However, an American investor by the name of Michele Ballarin has stepped in to purchase the WOW brand. At the start of September, Ballarin paid a reported ISK 50m (US$404,000) for all the assets of the WOW brand, according to Visir.

Ballarin is believes that all the hard work of setting up an airline is mostly done already. All that remains are the planes, crew and AOCs to find. So, what are the pros and cons to relaunching a bankrupt airline?

The pros

The biggest benefit of relaunching an airline is the branding and infrastructure setup. When you set up a new company, you would normally have to invest in branding. The cost and time involved with this may be greater than you might think.

Firstly, (good) logo design can be costly and time-consuming. Then there is the task of website registration and setup. Then there’s the uniform design and the uniforms themselves, as well as all sorts of ‘collateral’ you might see at an airport.

The biggest expense that trumps all of the above would be aircraft painting. This is assuming it’s not too late and the bankrupt carrier’s aircraft haven’t been re-painted or sold off. If you have the same aircraft as before, then you would save hundreds of thousands or even millions in livery painting.

According to Travel Stats Man, a large widebody aircraft like a Boeing 747 could cost around US$200,000 to paint. The larger your existing fleet, the more you would save.

Video of the day:

Thomas Cook, Bankruptcy, What to Do
Thomas Cook collapsed in September 2019, leaving thousands of Britons stranded overseas. Photo: Thomas Cook

The cons

The biggest downside is having a poor reputation migrating from the old bankrupt airline to the newly relaunched carrier. Sure, you’ve saved hundreds of thousands of dollars in branding and aircraft painting costs – but your brand has been dragged through the mud as your collapse stranded thousands of travelers.

Furthermore, the staff of your new airline would constantly be barraged by customers of the previous airline demanding that their bookings be honored or that they at least receive some compensation from you. That might be a lot to deal with. If the collapsed/bankrupt airline had a poor standard of service and an unpleasant flying experience, it might take some time to shake off those old perceptions as well.

Lastly, the airline went bankrupt for a reason. Some of them may be internal but may be external as well. Potential investors re-launching must consider whether or not the external factors (market saturation/competition) have changed and if they have what it takes to avoid the same pitfalls as the bankrupt airline.

Jet Airways 737
Many of Jet’s aircraft, including the 737s, were repossessed by lessors and leased out to other airlines. Photo: Jet Airways

Conclusion

Investors that re-launch airlines must think through things carefully – the above factors and so, so much more. Did we miss any pros and cons to re-launching a bankrupt airline? Let us know by leaving a comment!

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Chris

I’d hazard a guess to say it rarely works – at least based on our experiences in Oz. Ansett 2 and Compass 2 didn’t survive although Rex (which is a combo of Kendell – both Ansett affiliates) has been quite a success, in part from government contracts and regional monopolies.

It’d be good to see Wow come back to life but maybe there’ll be some Icelandic residents who don’t mind a few less tourists!

As for Jet Airways, there’ll always be another startup/existing airline that will fill the gap left by their demise.