Bankruptcy risk seen higher for Europe’s airlines this winter

Europe’s weaker airlines face a heightened risk of collapse this winter as nations that rescued carriers during the Covid crisis focus support elsewhere amid rising inflation, according to analysts at Sanford C. Bernstein.

While the pandemic brought few airline failures in the region amid a deluge of aid payments, carriers now face a squeeze from higher fuel and labor costs combined with a seasonal decline in travel, Bernstein said in an investor note Monday. That’s just as governments struggle to respond to soaring household bills. 

Smaller carriers in Central and Eastern Europe will be most vulnerable, Bernstein analysts Alex Irving and Clementine Flinois said, citing a new model for assessing bankruptcy risk according to levels of competition and capacity, route networks and likely costs from leasing and replacing planes.

Europe’s top six airlines face negligible risk, Bernstein said, with low-cost specialists Ryanair Holdings Plc, EasyJet Plc and Wizz Air Holdings Plc retaining investment-grade credit ratings and legacy groups Air France-KLM, IAG SA and Deutsche Lufthansa AG still able to rely on government help if required.

The most exposed carriers include one from Cyprus and two from Albania, as well as airlines based in Belarus, Bulgaria, the Czech Republic, Georgia, Moldova and Romania.

That should favor the strongest players in Eastern Europe, chiefly Budapest-based Wizz and Ryanair, according to Bernstein, which it said have the ability to rapidly allocate jets to newly vacated markets.