Walsh expects up to 30 airlines to collapse this winter

British Airways chief executive Willie Walsh has described the current economic circumstances as “exceptional” and said he expects up to 30 airlines to go bust this winter.

Addressing a business breakfast meeting organised by The Irish Times' monthly Innovationmagazine in Dublin's Shelbourne Hotel this morning, Mr Walsh said the turmoil in financial markets would soon flow through to consumer spending.

"I believe that what we are seeing today is unprecedented . . .this is not like anything we have seen before."

He admitted to being surprised at the number of "consumers out there still spending as freely as they are" although Mr Walsh said there was evidence of passengers switching from long-haul to short-haul bookings. 

Over the next three to five years he predicted significant changes for the airline sector through a mixture of consolidation and collapse.

He jokingly referred to competitors going out of business "as the best form of consolidation" but said most of the 20 to 30 airlines he expected to go bust this winter would simply disappear.

"In three to five years time there will be fewer airlines, there will be more bigger airlines and I suspect it is the airlines that take steps today to secure their position and strengthen their position that will survive.

"I don't know how deep this is going to go but I believe it is going to go deeper than it has already. I don't know how long it is going to be but at BA we are certainly looking at a planning scenario where we have a difficult economic scenario for at least the next two years," he said.

Long-term Mr Walsh said this process would be positive for the airline sector as it would allow it to "start generating a return for their shareholders on an industry basis".

The former Aer Lingus chief executive also restated his opposition to government investment in airlines.

"The airline industry is brutally competitive. I don't believe we need government's to be involved. In fact I think government intervention has been one of the reasons why the airline industry has not been profitable, [and] has destroyed shareholder value."

He said as shareholders governments often pressurised for options that did not make commercial sense.

"At least when you are working for the city you tend to be able to justify your decisions because they are rational and commercial and they are designed to make shareholder value and to make a return on your assets," he said.