In case you missed part 1, it can be read here.
Back in the days when every European country had one national airline, Greece’s was more stylish than most. Olympic Airways was created in the mid-1950s by shipping magnate Aristotle Onassis. Interestingly, Greeks were particularly distrustful of air travel and Olympic operated short familiarisation flights in DC-3 piston props for free, to convince the locals of the viability of flying. Onassis was a fan of technology and ordered jets from de Havilland, placing the Comet 4 into service in 1960. By 1966 Olympic 707s were flying nonstop to New York, followed by Johannesburg via Nairobi in 1968, Chicago via Montreal in 1969, and Sydney and Melbourne via Singapore in 1972. Cabin crew wore Pierre Cardin uniforms and some flights had piano players to entertain passengers in first class. The airline was flying high.
Onassis’ son and heir Alexander, already president of island hopping subsidiary Olympic Aviation, died in the crash of a small plane at Athens airport in January 1973. By April, as a reaction to the tragedy, Aristototle had divested himself of ownership of Olympic Airways, and died of a broken heart in 1975. The airline flew on, adding half a dozen 747s for long haul to North America and Australia and a new route from Athens to Tokyo via Bangkok, followed by a fleet of Airbus A300s for heavily trafficked European routes and the Nairobi-Johannesburg run. Hints of former glories remained in the brass decorations on the bulkheads of the 747s and old school lounges in Athens, but overall the airline had taken up the feel of a stated-owned utility that had passed its prime.
Olympic might have carried on for a while, and certainly intended to, with Airbus A340s replacing the 747s in the early 2000s, but for a wind that was blowing in from the east. Emirates Airline started flying in 1985 and grew in the 1990s by leveraging its location in the Persian Gulf to create a mega hub that connected Europe with Asia, and later pretty much every continent with every other continent. Olympic couldn’t compete on the Asia and Australia runs and once Emirates took hold of the market, those links were severed.
The Greek government could have gone on writing off the airline’s debt but European Union membership made subsidy of airlines illegal, as it gave other airlines in the market an unfair disadvantage (although it is unlikely that new pan-EU start ups such as easyJet and Ryanair saw limping and sclerotic Olympic as much of a threat). With state bail-outs impossible, the airline’s future was soon imperiled, and the last Olympic Airlines flight landed at Athens from Toronto via Montreal on September 29, 2009.
Alitalia was truly the airline with nine lives. Formed after World War 2 which left Italy devastated, the airline was part of the country’s post-war reconstruction. Some of its early fleet was Italian built, including the four-engined Savoia-Marchetti SM.95 propliner. By the 1960s Alitalia was flying Douglas DC-8 jets on long range routes including North and South America, and British-built Vickers Viscount turbojets throughout Europe.
The 1970s and 1980s represented high noon for Alitalia, with widebody 747s and DC-10s flying as far afield as Sydney, Buenos Aires, Tokyo, New York, Bangkok, Caracas and San Francisco. Traffic was booming, and the industry was still largely regulated, keeping fares high and competition at bay. The airline was famous for flying the Pope on official trips abroad (on the outbound leg of the trip; it is customary for the Pope to return home on the national airline of the country he has visited).
By the 2000s, in a familiar tale, the long haul was threatened by the big three carriers in the Persian Gulf who could serve the huge market that exists between Italy and Australia a lot cheaper than a bloated state-owned airline that was paying European level wages; and short-haul was threatened by the integration and deregulation of the European Union aviation market, opening up short-haul to ambitious low-cost entrants like easyJet and Ryanair.
A lot of money and resources were wasted moving Alitalia’s hub from Rome to Milan, Italy’s industrial heart and in theory a more lucrative market than the capital and geographically closer to the rest of Europe to pick up extra connecting traffic. It might have made sense on paper but when travellers thought of Italy and Alitalia, it was the culture and romance of Rome that sprang to mind, not the factories and fashion studios of Milan. After a few years, the focus returned to the capital city, but only after a lot of wasted money and time.
Alitalia went bust for the first time in 2008 and the profitable elements of the business were taken over by Campagnia Aerea Italiana, a new company formed by buddies of then prime minister Silvio Berlusconi, including the famous brand name. The Italian taxpayer was stuck with the rest.
The new Alitalia managed another decade in the air, with a number of financial catastrophes along the way. In 2014, Abu Dhabi-based giant Etihad Airways bought a 49% stake for half a billion dollars, followed by another $150 million for Alitalia’s frequent flier program Mille Miglia (‘thousand miles’ in Italian).
Another bankruptcy followed in 2018, wiping out Etihad’s shareholding, yet the airline still continued to fly. Only Covid 19 could bring the party to an end, with the airline finally succumbing to the pull of gravity with a shutdown and liquidation in October 2021. Arrivederci means ‘until we meet again’ in Italian. Given Alitalia’s extraordinary longevity, it seems likely that we will indeed meet again. For now, Italy’s new flag carrier is called ITA Airways, with the old AZ code and Skyteam membership intact, and a suspiciously Alitalia-looking logo.
After World War 2, Germany was divided into two countries – West Germany (administered by the United States) and East Germany (administered by the Soviet Union). The former capital, Berlin, was inside East Germany, but that city was divided using the same formula, so half of it, encircled by the notorious Berlin Wall, was West Berlin, with air and road corridors linking it to the rest of West Germany. According to the post-war settlement, airlines serving West Berlin could only be from the United States, the United Kingdom or France, and the crews had to be citizens of those countries. No German airline or even a German crew member was allowed to operate a flight to West Berlin, all the way from 1945 until German reunification in 1990. So flights to and from West Berlin – including to other West German cities – were operated by the likes of Pan Am, British Airways, Air France, Dan-Air, Laker Airways, Modern Air ...and Air-Berlin USA, an Oregon-based airline founded in 1978 with two ex-TWA Boeing 707s to fly West Berliners on holiday charter flights.
In the early 1980s, Air-Berlin USA operated a short-lived transatlantic schedule from Berlin Tegel to Orlando via Brussels, but for most of the 80s they operated just one or sometimes two Boeing 737s on short-haul charter flights.
With reunification in 1990, Air Berlin became a German company at last, and with local investment bought ten Boeing 737-800s, the first 737s to receive blended winglets for increased fuel efficiency. By 2002 the airline was operating to cities such as London, Vienna, Barcelona and Milan as well as beaches, and unlike their direct competitors Hapag-Lloyd, Ryanair and Virgin Express, offered complimentary meals and seat reservations, making Air Berlin more of a full-service hybrid than a true low-cost carrier.
Air Berlin went on a buying spree, initially acquiring small airlines such as Germania and dba (originally Deutsch BA) and 75 new Boeing 737-800s, followed by the German leisure giant LTU which added a large long haul network and made Air Berlin the fourth-largest airline in Europe by passenger boardings.
While the expansion was probably overly ambitious, the biggest blow to Air Berlin came with the catastrophe of Berlin’s new airport Brandenburg International being delayed by a whole decade due to design flaws. Built on the grounds of East Germany’s old gateway, Berlin Schonefeld, Brandenburg was to have been a showpiece for the reunified nation and a high-tech hub for Air Berlin, a true rival to Frankfurt and Lufthansa. Only weeks before the planned 2011 opening, serious deficiencies in the terminal design meant Air Berlin was stuck at West Berlin’s old Tegel airport, a charming little concrete hexagon that was only ever intended to be a spoke, not a hub.
Despite the boom in commerce, politics and tourism in Berlin in the 2000s, expansion and refurbishment of Tegel was minimal and Air Berlin was operating out of tents and temporary structures. They had to rely on the LTU hub in Dusseldorf for its long-haul network which by 2017 included 78 flights each week to the United States as well as daily Abu Dhabi and Bangkok to the east. A particularly notable operation was its annual 12 hour sightseeing flights from Germany (usually Dusseldorf, sometimes Berlin Tegel) to the North Pole via Spitsbergen (aka Svalbard) and eastern Greenland which showed the airline’s technical skills and ability to innovate.
Etihad Airways bought 29.1% of Air Berlin for €73 million in 2011 and the following year, Air Berlin joined the oneworld alliance. Despite the airline’s obvious status and size, losses mounted. Restructuring efforts included shutting regional bases and unprofitable routes such as Berlin to Chicago, and cancelling unfulfilled aircraft purchases including an order for Boeing 787s.
Air Berlin lost €316 million in 2013, €376 million in 2014, €446 million in 2015, and €782 million in 2016. These are staggering numbers and were clearly unsustainable. In October 2017, the airline went bust. Lufthansa agreed to buy 81 Air Berlin planes and employ 3,000 Air Berlin staff; and easyJet took on 25 A320s and a further 1,000 staff.
Air Berlin had a likable and smart brand, some unique features such as heart-shaped chocolates for passengers, and an interesting history rooted in the postwar division of Germany. Some of the blame for its failure can be placed at the feet of the management, who persued a full service product with low cost pricing and unclear market positioning. But if Air Berlin could have moved into a fully functioning Brandenburg International in 2011 as planned, and centred their operation on one hub, who knows where they would be now?
Swissair and Sabena
Swissair is perhaps the most surprising airline bankruptcy of all time. None of the other airlines covered here known as the Flying Bank but that was Swissair’s nickname. The airline was consistently profitable for decades due to the wealth of its home country and the high yield business traffic to it from other parts of the world.
Switzerland’s national airline was founded in 1931 and quickly became known as an innovator, being the second airline in Europe to operate American aircraft, the Lockheed Orion (CSA of Czechoslovakia was first with a Ford Trimotor). Swissair employed Europe’s first flight attendant, Nelly Diener (who tragically lost her life in a crash after just 79 flights). Douglas DC-4s opened long-haul flights to New York, Johannesburg and South America in 1947, and DC-7Cs to Tokyo via Athens, Karachi, Bombay, Bangkok and Manila in 1957.
In the 1960s, Swissair joined the Jet Age with Douglas DC-8s for intercontinental missions, and Caravelles, Convair CV-990As and Douglas DC-9s for short haul. Swissair became a big fan of the DC-9 and was the launch customer for the DC-9 series -30, -50, and -80 (the latter becoming better known as the MD-80). It was later the launch customer (jointly with Lufthansa) for the Airbus A310. Switzerland’s political neutrality made it possible to serve exotic ports in Africa and the Middle East where other airlines feared to tread, and Swissair were able to charge a substantial premium on such routes. The airline was printing money.
Wanting access to other markets, and aspiring to be a major player in European aviation, Swissair embarked on what became known as Hunter Strategy, devised by management consultants McKinsey & Co. Rather than merely enter into commercial partnerships, Swissair started buying airlines outright, or taking large shareholdings. Air Europe in Italy was a profitable acquisition, but this was not the case with Belgian flag carrier Sabena (which hadn’t made a profit since 1959), LOT Polish Airlines, South African Airways, Turkish Airlines, Portugalia, and French independents Air Liberte, AOM, Air Littoral.
By the summer of 2000, Swissair and Sabena were each losing one million Swiss francs (about three-quarters of a million dollars) per day, plus another million francs per day at LTU and another million francs per day across the French portfolio (AOM et al). The situation was untenable even before the terrorist attacks in the United States on September 11, 2001. On October 1 of the same year, with no more loans forthcoming from principal banker UBS, the impossible happened. The Flying Bank was grounded forever.
The airlines in which Swissair had shareholdings survived bar one – Belgium’s flag carrier Sabena shut down on November 7 as the desperately needed investment promised by Swissair did not materialise.
Regional Swiss carrier Crossair was drafted by the Swiss government to take over Swissair’s routes and fleet. Rebranded as Swiss International Airlines, the country had a new flag carrier (and Belgium did a similar move by elevating DAT to from SN Brussels Airlines). Swiss International struggled in its early years but with new ownership by Lufthansa, was able to stabilise pre-Covid and return to some of Swissair’s former glories, flying a long-haul fleet of A330s, A340s and later, 777-300ERs to five continents.
Malev Hungarian Airlines
Hungary had airlines and air taxi operators dating back to 1910, some of the earliest in Europe. The devastation of World War 2 put a stop to these small outfits and civil air transport post 1945 was in the hands of Maszovlet, short for Hungarian-Soviet Civil Air Transport Joint Stock Company, operating Li-2s (DC-3s built in the Soviet Union under license from Douglas) and later Ilyushin Il-14s piston props. Four engined Il-18 turboprops came online in 1965, followed by Tupolev Tu-134 jets in 1968 and the Tu-154 in 1974, opening up routes across Europe and the Middle East.
Like the other airlines of the former Soviet Bloc, such as LOT Polish Airlines, Balkan Bulgarian and CSA Czech Airlines, Malev was keen to dispense with its Soviet era hardware as soon as it could. Those jets served their purpose safely, and with an efficiency that was comparable to Western planes of their era, but by the late 1980s and 1990s had fallen woefully behind, both in terms of technology and also appearance (Boeings of the era did not have fabric curtains on the windows).
The first Boeing to join Malev was a 737-200 in 1988, and the last Tu-154 was retired in 2001. Boeing 737 Classics were replaced by 737NGs, and 767s opened nonstop routes to New York, Toronto and Bangkok. The airline increased utilisation by operating back-of-the-clock flights to the ABCDs – Amman, Beirut, Cairo, Damascus, only two or three hours from Budapest and with no night curfew. The flights left Budapest late at night, landing at their destinations around three in the morning, not a dealbreaker for a price-sensitive customer, getting back to Budapest around six in the morning, in time to connect to the first wave of morning flights to western Europe.
The state-owned airline was privatised in 2007, via a holding company called AirBridge. Ironically, at one point a controlling share in Malev was owned by Aeroflot. Struggling in the newly deregulated European aviation market, Malev was renationalised in 2010. Unfortunately it was the rules of the integrated European market that brought the airline and its storied history to an end, as EU rules forbade government subsidy, to discourage unfair competition.
The authorities insisted Malev pay back $170 million, which was equivalent to its entire 2010 turnover and an impossible amount. After 66 years of continuous operation, Malev ceased flying on February 3, 2012, and Hungary no longer had a national airline. While passenger numbers at Budapest dipped by 5% after the shutdown of Malev (and aircraft movements by 20%), low cost airlines flooding in such as easyJet, Ryanair and especially Wizz Air, picking up the slack; and by 2014, passenger numbers had exceeded the 2012 peak and Hungary remained connected to the world, albeit with perhaps a little less national pride.
The narrative arc of these stories can be depressing, as the hard work of thousands of dedicated individuals isn’t enough to counteract enormous commercial forces such as the rise of the ME3 or the LCCs, or bad decisions made in the boardroom; but it’s a lot of fun to remember a different era in the airline business, when airlines were instruments of national policy and national pride, with exotic route maps and lavish onboard service (and eye-watering prices to match).
The airline business is famously hard to make money in. American magnate Warren Buffett, the world’s tenth richest person, told London newspaper The Telegraph, “If a capitalist had been present at Kitty Hawk (where the first official heavier-than-air flight was performed by the Wright Bros), he should have shot Orville Wright. He would have saved his progeny money. The airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You've got huge fixed costs, you've got strong labor unions and you've got commodity pricing. That is not a great recipe for success. I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: ‘My name is Warren and I’m an aeroholic.’ And then they talk me down.”
And yet, those investors keep coming. Even in the grip of the Covid 19 pandemic which is showing no sign of abating and has brought air travel almost to a standstill, airlines are placing orders for new planes and new airlines are starting up. So expect some new and interesting airlines to fly on – some of which will no doubt end up being discussed in articles like this.
Cover Image credit: Swissair Heritage/Dieter Ens (via Neue Zürcher Zeitung)