World Economy

Troubled European Airlines Flying Towards Consolidation

Troubled European Airlines Flying Towards ConsolidationTroubled European Airlines Flying Towards Consolidation

A dogfight over the assets of troubled Alitalia and Air Berlin heralds a new shake-up in the European airline industry—but unless other carriers cut costs they may meet a similar fate themselves, analysts warn.

Facing insolvency after key investor Etihad threw in the towel after years of trying to keep them flying despite losses, both airlines may now be snapped up whole or carved up by rivals interested in getting a hold of their planes and airport landing slots, AFP reported.

But the overhaul is unlikely to end there. “The sector will continue to consolidate because the business models are in the process of changing,” said Stephane Albernhe, managing partner at Archery Consulting.

“It is an underlying trend in Europe and the United States, where four ‘consolidators’ are in the lead: American, Delta, United, and low-cost Southwest.”

For Europe, consultant Jerome Bouchard at Oliver Wyman believes that eventually “there will be an oligopoly centered around Lufthansa, IAG and Air France-KLM”.

International Airlines Group is the parent company of British Airways, Aer Lingus, Iberia and Vueling.

Before major consolidation can take place, however, Bouchard believes the airlines need to find a business model where they are no longer operating on the brink of bankruptcy.

Alitalia and Air Berlin had both been operating at losses for years. Low-cost airlines had eaten away at Alitalia’s market share in particular, with Ireland’s Ryanair having eclipsed it as the largest operator in Italy.

They were spared by Etihad, which took equity stakes in both as the flush (Persian) Gulf airline tried to buy its way into Europe, but it lost its gamble that it could turn them around.

“Etihad’s exit from Alitalia’s capital will contribute to the acceleration of consolidation,” Albernhe said. “Alitalia will very likely join, either in whole or in part, Air France-KLM, Lufthansa, IAG, or even easyJet or Ryanair.”


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