Zombie companies spreading

SO-called ‘zombie’ companies – those that exist merely to pay off their debts to survive – are on the increase in the aviation industry. In the UK, where the recession is still biting hard compared to other Western countries, 112 companies are now in this category.

David Pattison, of Plimsoll Analysis, said: “These companies are in a state, posting growing losses and, despite the obvious freeze in the credit markets, increasing their debts. They are zombie businesses with debts at an average of 71 per cent of turnover – they exist to service their out-of-control liabilities. Many are also using their suppliers to finance their growing losses, taking twice as long to pay their bills as the industry average of 34 days.”

Pattison also explains the other major problems these zombies are facing, “They are falling behind the rest and their productivity is well below the industry average. It’s hard for them to compete as their cost base is just too high. As a result, investment plans have been mothballed meaning their ageing assets are further restricting their ability to remain competitive.”