European Airline CEOs Underscore the Critical Nature of Industry Consolidation
On Wednesday, airline executives advocated for further industry consolidation, urging the European Union to greenlight deals such as the one between Germany’s Lufthansa and Italy’s ITA Airways, while also expressing concerns over the pause on a separate transaction involving IAG and Air Europa. Despite ongoing consolidation efforts over the past two decades, Europe’s airline industry remains fragmented, with smaller national carriers facing challenges in competing against larger rivals and often requiring government bailouts to stay afloat.
During an industry event in Brussels, Ryanair CEO Michael O’Leary emphasized the importance of approving mergers to propel the industry forward in Europe. He stressed the necessity of addressing struggling carriers, citing Portugal’s TAP as an example that relied heavily on taxpayer support to survive the pandemic. Other executives echoed similar sentiments, noting that smaller airlines stand a better chance of success within larger groups like Air France-KLM, IAG, and Lufthansa.
Luis Gallego, CEO of IAG, warned that failure to allow consolidation could result in the demise of airlines in Europe. Meanwhile, the European Commission refrained from commenting on the matter.
Regarding Lufthansa’s bid to acquire a 41% stake in ITA Airways for 325 million euros ($352 million), the European Commission is expected to announce its stance this week. An investigation into the potential deal was initiated in January over concerns about its impact on competition in flights to and from Italy. Possible remedies might involve opening up slots, traffic rights, and planes to allow competitors to operate on certain routes. Lufthansa’s CEO, Carsten Spohr, expressed eagerness to finalize the deal swiftly, expressing optimism ahead of the expected EU statement of objections. Rival airlines such as easyJet and Ryanair are poised to seize opportunities that may arise from potential concessions in Italy as part of the deal.
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