Industry analysts have been keenly awaiting a first casualty among the new generation of low-cost airlines. The waiting was finally over last month as London-based AB Airlines went into administration.

AB has been around since late 1993, but came to the fore a year ago as it made a dash for growth encouraged by the low-cost pioneers. Styling itself as the "value-for-money" airline, AB listed on the London stock market, unveiled ambitious expansion plans for its fleet and services out of London Gatwick

The airline blames its demise on "increased competitive pressures and overcapacity in the market and operating into a slot-constrained airport". Others are less generous. Keith McMullan, aviation consultant, depicts AB's demise as "not so much a case of a failed strategy as having a strategy which it was almost impossible to work out in the first place. What is a value-for-money airline anyway?" asks McMullan.

AB says that it is in talks with five prospective buyers and that "the matter should be resolved by the end of September". Meanwhile, it is continuing to operate two scheduled flights from Gatwick to Shannon and Nice while it seeks a buyer and has placed three Boeing 737-700s on medium term wet leases with European airlines.

AB's demise may indicate a shake-out of the weaker players in the low-cost end of the market, hit by tough competition and huge overheads, warns Hugh Mathew-Jones, partner at UK business advisors Pannell Kerr Forster. "Go, Ryanair and easyJet are of a scale, with sufficient backing to be very successful in that market. But new airline companies are being bled dry by the big boys who have got the money behind them to survive the cut-throat price wars," he says. "Unless smaller airlines can get the levels of financial backing they need to weather the early days of their development then some of them will be heading for a nosedive before too long as well".

Source: Airline Business