Barry Smith, co-founder, Skyscanner, responds to the failure of XL Leisure Group.
What impact will the XL failure have on confidence within the market?
For the third biggest tour operator to go down, will cause a lot of waves in the sector. The speed that it expanded in the past three or four years would not have helped its cause.
It was also targeting a market that was still struggling to be defined. It wanted to be considered as great value/low cost, but it still put lots of emphasis on in-flight meals and the fact that it offered more legroom than any other airline – so it was neither no-frills nor full-service.
What are the immediate effects?
There will be some levelling out, as people will still travel/fly/holiday. However, it will steer people towards the more known established brands, meaning that the newer start-ups will struggle even further.
Can you believe we’ve got to a stage where people’s consideration of a holiday is no longer ‘Where are we going? Will there be sun? What will the hotel be like?’ As you will also have to add in: ‘Will my airline still be in business at the end of the two-week period I’m away?’
What does the failure say about the fragility of the sector?
This won’t be the end of the sector by any means. Most decent hedging strategies have perhaps taken some airlines further than they would have expected, but not being able to sustain the changes in fuel costs, will still mean more casualties.
Does the failure raise questions about protection, given that non-package trips are unprotected?
It is still not clear enough who/when/what gets covered. Protection should get more exposure than aggressive travel agents punting insurance.
Also, the French and German divisions of the XL Group continue to trade as usual. I can’t say that would inspire me with confidence.
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