In a bid to transform the aviation sector, leading long-haul airlines IAG, Lufthansa, and Air-France KLM are seeking regulatory approval for mergers that could secure them nearly 75% of the long-haul market share. This move aligns with the vision of Ryanair's CEO Michael O’Leary, who supports consolidation in Europe's airline industry.
The proposed mergers include IAG’s acquisition of Air Europa, Lufthansa’s bid for ITA, and Air-France KLM's stake increase in SAS to 20%. The trio is also eyeing Portugal’s national carrier TAP, which is currently under privatisation.
This trend of consolidation among carriers is not new and has been seen as a strategy to grow their networks amid increasing post-pandemic travel demand. IAG was established in 2011 for the purpose of consolidating regional airlines, while Lufthansa has previously acquired central and northern European airlines. Air France and KLM merged in 2004 and hold minority stakes in several other airlines.
Despite the potential benefits of consolidation, these proposed mergers face potential hurdles due to the new EU antitrust commissioner's intention to enforce tighter rules around airline mergers over competition concerns. There are also challenges due to national interests tied to airlines.
Consolidation has been slower in Europe compared to the US, which underwent rapid consolidation from 2008 to 2013. Despite this difference in pace, European executives agree on its importance for global competition and scaling up amidst limited organic growth opportunities.
The four major US airlines operate 72% of flight schedules, while Europe's four largest airline groups have a combined market share of 46%. US airlines are forecasted to report higher pre-tax profits per passenger than European airlines.
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