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Spanish budget airlines at proverbial crossroads

Rumors are abound that Spanish based Clickair are in negotiation with Vueling Airlines to merge. The Spanish market is very fierce with non-Spanish airlines, mainly Ryanair and easyjet carrying the majority of passengers. The rumors have been strengthened as both airlines have commented that their financial performance is suffering due to the immense competition and pressure to keep reducing prices. Vueling as recently delayed delivery of six new aircraft and cancelled three more orders. Clickair has made similar moves and will only take delivery of two new aircraft this year. Although Spanish budget carriers have experienced over 50% growth in 2007 compared to 2006. Clickair's CEO, Alex Cruz has said that there is a very strong chance that some airlines may be forced out of business if fare prices do not increase as the margins are so small, that making an airline profitable is becoming increasingly difficult.

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