Need I say Moores

Is Europe in the next phase of consolidation?


Do the airberlin and Alitalia insolvency filings signal the next wave of European industry consolidation?


On Aug. 15, airberlin filed for insolvency and the German government stepped in with a bridging loan. Just three months earlier, the same scenario played out with Alitalia and the Italian government. In both cases, shareholder Etihad Airways decided it could no longer keep pumping funds into these strategic partners.


Airberlin said negotiations (with German rival Lufthansa Group and other partners) to sell some of its business units are “far advanced and highly promising” and may be finalized shortly. Lufthansa has already capitalized on its German competitor’s weakness by taking wet-leased aircraft from airberlin, depleting its competitor and supporting growth at its own airlines - a double win.


The question is whether this is the beginning of another European shake-out, mirroring industry consolidation in the US market that ultimately has been the foundation for its profitability, or another repeat of the cycle in which ‘middle seat’ European airlines (that are neither niche players, nor consolidation drivers) are simply not allowed to die.


One consolidation positive is that customers have got used to geography-neutral named airlines like Ryanair and easyJet, backing cheap travel over nationalism. This could pave the way for some brands to disappear, although national pride and the sense of having a “flag carrier” in countries like France and Italy is still extremely strong.


Meanwhile, Europe’s big three – Air France-KLM, International Airlines Group (IAG) and Lufthansa Group – would still like to get bigger, as evidenced by Lufthansa’s interest in acquiring parts of airberlin and Air France-KLM’s recent multi-faceted joint venture plan with Virgin Atlantic, Delta and China Eastern. As with Cyprus Airways, the market is poised to absorb airlines and quickly fill in the gaps without faltering.


Only time will tell if some of Europe's brands will be allowed to disappear, as a result of true consolidation, or if this is another false cycle where little will change.


Victoria Moores

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