Air Slovakia financial difficulties are related to major outstanding debt besides its business partners, its employees and insurances. Like others airlines, Air Slovakia also met troubles regarding to irregularities with unpaid taxes and health-insurance payments

After the failure of Seagle Air and Sky Europe, This is the third Slovakian company which will probably stop its activity the last 6 months. The east European aviation market is a major issue, especially for low cost airlines. Few months ago, some rumours spread about the possible bankruptcy of Wizz Air. How long it will take to Ryanair to be in control of this market?

Indeed, according to The Budapest Business Journal “The low-cost Budapest-based airline company WizzAir recorded group-level losses of 9.5m in the business year ended in March 2009”.

SkyEurope’s remake?

According to the Czech online paper Napi Gazdaság, the company never managed to post profits over the five years of its operation, and has now accumulated losses of €78 million.

The article adds that“at the same time, WizzAir has spectacularly increased the number of its passengers.” Here I think this is not a very good indicator to understand Wizzair situation. Indeed, SkyEurope was also increasing its passenger traffic several months before its end.

More strange, Wizzair manager has always declared that his company is profitable. More information will come soon I think, for now this is quite surprising.

The most important matter was the crisis lowcost airlines were facing. Airlines have to adapt to the drop in traffic and take measures so that they don’t end up filling for bankruptcy, as SkyEurope did. Michael Cawley, Deputy Chief Executive for Ryanair, announced they had a record loss of 101.5 million euros in 2008′s third quarter and the unlikeness of hisok company getting any profit for 2009.

The times will get harder for airlines as we enter winter, when holidays will end and the number of passengers will decrease. Michael O’Leary, Ryanair’s CEO, said there will be a “bloodbath” among low-costs.

Stelios Hadji-Ioannou, founder of easyJet & CEO of easyGroup, opened the conference with a presentation entitled “Low-cost: the business model must evolve to survive”. The point he made was that price is the most important for passengers and that airlines must profit while maintaining its cheap fares. According to him, easyJet’s model is “more resilient, safer and lower risk” than Ryanair’s.

Hadji-Ioannou was referring to Ryanair, which has been questioning its business moel while seeing its profits go under. Ryanair’s offers are part of a “volume strategy”, which assumes getting the highest factor load and reaching the number of passengers required by an airport. The company was also thanked by easyJet’s founder:

“Michael was the first to charge for the first bag and we followed. There is nothing wrong with following something which worked.”

Ryanair was under fire from its competitors, that criticized the way they communicate ancillary revenue (fees applied for luggage, check-in etc). Representatives of lowcost airlines fear that the way Ryanair does business might attract more restrictions to protect passengers.

“We are there, speaking about auxiliary incomes, which do not exist. All that is unreal. These people use us so that one speaks about them,” said Alex Cruz, Chairman of Vueling. “If the passengers hear everyday speak about taxes’ for the toilets on board, this is not good for the low-cost industry (…) customers’ perception is very important,” Daniel Skjeldam, CEO of Norwegian added.

This will be a harsh winter for lowcost airlines, competition will be stronger and each company will try to protect its business model. Next weeks will prove decisive for these carriers, struggling to profit in a very competitive market.

“The economy generally is a very Darwinian place. It is survival of the fittest. The airline industry doesn’t follow Darwin, unfortunately, because the dinosaurs won’t die,” Stelios concluded.