Primera Air blames ‘several unforeseen misfortunate events’ for its collapse, but did it take a risk too many in entering the competitive trans-Atlantic market?
October 3, 2018 – CAPA
The European carrier Primera Air surprised everybody when it burst into the trans-Atlantic market earlier this year. After over a decade serving mainly Mediterranean markets from the Nordics and Baltics, the airline launched flights this summer from new bases in Birmingham, London Stansted and Paris Charles de Gaulle to destinations in North America. In recent weeks it had revealed plans to also introduce trans-Atlantic flights from Berlin, Brussels and Madrid, but instead it has this week filed for bankruptcy, certainly a victim of external factors, but also perhaps of an overambitious business strategy.
Primera Air and Primera Air Nordic ceased trading on 01-Oct-2018 after failing to secure long-term financing;
It describes ‘several unforeseen misfortunate events” for leaving it with “no choice” but to file for bankruptcy, leaving passengers stranded across Europe and North America;
The company had historically served Mediterranean leisure routes from the Nordics, Baltics and Scandinavia, but this year entered the trans-Atlantic market;
The two airlines had a combined fleet of 15 aircraft, but with more than 20 more on order.
The fact that CAPA’s team of analysts were this week debating whether the airline should be classified as a ‘Low Cost’ or ‘Mainline’ carrier due to its ‘low fare, high quality’ model perhaps helps explain why almost a year on from the collapse of airberlin and Monarch Airlines that we are discussing the collapse of another European carrier. While known within the industry having first been established as JetX in Iceland back in 2009 and latterly operating with Danish and then Latvian licences as part of the Primera Travel Group conglomerate of Scandinavian travel agencies and tour operators, it unfortunately had limited brand recognition outside of its core markets.
Therefore, when it revealed ambitious plans to acquire a small fleet of modern generation short-haul airliners and utilise them on flights across the trans-Atlantic, it was met with surprise. Unfortunately, and despite strong marketing, the ambitious strategy to be one of the first movers in this marketplace and deliver its own interpretation on the emerging low cost long haul model, did not translate into bookings and low demand quickly saw flights from Birmingham reduced and then cancelled entirely.
Its strategy was brave and The Blue Swan Daily questioned earlier this year if its low fare, high quality model would stimulate demand enough for it to compete some well-established operators in the highly competitive market. While easier to fill an Airbus A320 or A321 than a widebody, the airline was restricted to heavy point-to-point markets without the strength of the feed enjoyed by its network rivals. APD out of the UK would also have been a factor as it endeavoured to provide the low fares required to stimulate the market, and rising costs, including fuel may not have been factored correctly into the plan.
But issues outside of its control also weigh heavily on its closure, especially the delay with deliveries of its new aircraft from Airbus and the additional and unexpected costs incurred by leasing equipment to maintain flight schedules. The airline says “several unforeseen misfortunate events” over the past two years “severely affected the financial standing” of the business. These included the EUR10 million loss of one aircraft due to severe corrosion problems, the “severe delays of aircraft deliveries” that were “incredibly problematic” and resulted in “operational issues, cancelations of number of flights, loss of revenues” and cost over EUR20 million to overcome.
“The company has been working relentlessly during the last months to secure the long-term financing of the airline. Not being able to reach an agreement with our bank for a bridge financing, we had no other choice than filing for bankruptcy,” it explained in a statement on the evening of 01-Oct-2018 after news on its collapse was leaked.
“Without additional financing, we do not see any possibility to continue our operations. This is an enormous disappointment after the incredible hard work and dedication put into building the airline,” it added.
So what now? Much of Primera Air’s fleet has already been impounded at airports as debtors seek renumeration. Staff – many of which may have previously been employed by Monarch Airlines – once again find themselves out of work in October.
The CAPA – Centre for Aviation Fleet Database lists Primera Air (IATA: PF; ICAO: PRI) as operating a fleet of eight aircraft comprising five new A321neos and three Boeing 737-800s. It also had outstanding orders for more than 20 aircraft, including a couple of A321neoLRs and 737MAX-9s. Its sister operation, Primera Air Nordic (IATA: 6F), had a similarly sized fleet of 737s, comprising two 737-700s and five 737-800s.
TABLE – While only a small carrier in terms of fleet size, Primera Air (top) had ambitions to grow its model, especially in the trans-Atlantic market, while its sister carrier Primera Air Nordic (bottom) remained focussed on the company’s historic markets
Source: CAPA – Centre for Aviation Fleet Database