"Sterling Airlines has announced on Wednesday that it filed for bankruptcy and cancelled all flights immediately. This affects its operation at Budapest Airport (BA) as well: the Danish low cost carrier cancelled its three weekly flights between Budapest and Copenhagen.Passengers are advised to check the Sterling website (www.sterling.dk) for further information.
At the same time Budapest Airport has contacted the other airline - Malév - that operates flights between the two cities and other stakeholders involved to help passengers to reach their destinations.
Budapest Airport advises the following services and routes near to Copenhagen:
Gothenburg - Malév weekly three flights and Wizz Air weekly two flights
Malmo - Wizz Air weekly three flights
Hamburg - Malév daily flights and Lufthansa five flights a week.
For further information please check Budapest Airport's winter timetable: www.bud.hu.
“Budapest Airport regrets that Sterling, a colorful player at Ferihegy went bankrupt. Despite this, the Hungarian low cost market remains strong, giving almost 30% of the overall traffic at Budapest Airport," BA said in a statement.
“In order to strengthen further this BA introduced its incentive scheme for airlines and introduced cost-sensitive terminal management at the low cost terminal at BA. BA will continue seeking measurements that would support airlines operating from Ferihegy.
Copenhagen is the 11th most favorable destination from Budapest with almost 75% load factor.
Sterling Airlines was also popular: its load factor was around 80% on average.
This is how Sterling Airlines crashed
During the last three years, Sterling Airlines A/S has been through a lot of changes and since acquired by new shareholders in spring 2005 the company has taken on a merger with Maersk Air A/S. In 2005, the total loss of both airlines exceeded 800 MDKK and both owners wanted out one way or the other. Therefore, all jobs in both airlines were at stake and so was also the competitive landscape in Scandinavian aviation since only the presence of a low cost carrier would ensure healthy competition and pricing on the market."
SA's operation was progressing positively and its finances were improving considering the massive losses that had been encountered in the preceding years.
In 2007, SA was doing very well and saw that more and more customers were choosing Sterling, and it closed the year with a positive EBITDA (operational profit) for the first time in many years.
Oil and financial crisis
With the global financial recession that started in the autumn of 2007, Sterling by winter 2007 - 2008 was seeing signs of stagnation in the market. Significant fuel cost increases, and at the same time a planned heavy expansion of our activities, made the airline more exposed than it would have been otherwise.
By spring 2008, the airline industry was hit by decreasing demand and rapidly increasing fuel prices. That led to Sterling accumulating large losses.
During summer and autumn the management of Sterling implemented a restructuring plan of the company resulting in a reduction in fleet and manpower, and a pull-out of a lot of loss-making activities. The full effect of these actions were planned to have impact start of 2009.
To get the company restructured, the shareholder of Sterling gave financial support from the end of July 2008 to the end of September 2008 transferring DKK 444.5 million to the company. The plan was to continue financial support into 2009.
On 29 September 2008, the Icelandic financial environment started to collapse. Over a three to four weeks period, the whole financial system melted down, and that resulted in SA's shareholder being “unable to continue his support to the company."
“Negotiations have been conducted with several potential investors, but it was impossible to make ends meet. The inevitable result is that Sterling Airlines A/S has no option but to file for bankruptcy," the airline said in a statement."
Source: Portfolio Online Financial Journal
30.10.2008