European airline consolidation set to continue at pace

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Airline consolidation will carry on in Europe and other carriers’ are at risk of liquidation due to pressure on costs as the market continues to prove challenging, delegates heard today at Routes Europe in Hannover, Germany.

The panel debate on consolidation and competition in Europe included senior decision-makers from the likes of easyJet, Eurowings, Austrian Airlines, and Vienna Airport.

easyJet’s head of network, Bence Szabo was frank in his assessment of the marketplace: “The strong are getting stronger and the weak are getting weaker,” he explained. “Growth has been strong over the last few years and that’s putting intense pressure on yields.”

Earlier this year, Ryanair boss Michael O’Leary forecasted that only five airline groups will exist in the future – IAG, Air France KLM Group, Ryanair, Lufthansa Group and easyJet.

Panellists were not sure it would be so low due to the differing markets and cultures that exist in Europe but they all agreed there would be more consolidation in the market in the future.

Austrian Airlines senior director of network management, Alexandra Goldschmidt believes that there will be ongoing consolidation. “Consolidation will pick up pace as there is going to be say seven to 10 groups. It will continue until we have a healthier level for the customers, airports and airlines.”

Eurowings vice president of network management and airport relations, Heiko Reitz agreed there would be more consolidation but not as low as five like in the US market. “The US is one market. Europe is several markets so there will be several players,” he said.

Reitz added: “Europe is going to look really different in five years’ time and consolidation is going to pick and be even faster and we will see something.”

easyJet pulled out the deal to takeover Alitalia as Szabo said the acquisition “did not make sense”. He noted how the LCC had a history of growth through acquisitions and added that that some sale today in the industry were “fire sales”.

“EasyJet continues its strategy of ensuring it can be number one or two in the bases from which it operates. “Going into a market, it’s about doing it well and doing it big,” he said.

Vienna Airport has seen much upheaval in the recent years’ and strong growth after the demise of Air Berlin and Niki, which is now Lauda and owned by Ryanair, but that capacity has been taken and competition has been fierce and growth strong.

The airport’s vice president of aviation marketing and business development, Belina Neumann said: “It has been the craziest 18 months I have seen in terms of competition and growth with airlines coming in.”

She said prior to that Vienna’s low-cost competition share was low but that has ramped up with the expansion of Wizz Air, Lauda and other airlines who have entered the market. “Now, we are watching to see who will be the number two after Austrian Airlines,” she added.

Neumann cited one example of where the airport has five airlines operating on one route as LCCs have flooded Vienna with capacity.

Delegates also heard how ATC strikes across Europe have had a big impact on operations of airlines on the European continent and they all agreed that is the biggest issue that is constraining growth and is heavily impacting costs.

Goldschmidt said: “We cannot grow as we want as we have to have stand-by aircraft due to the ATC issues. ATC is the first issue that needs to be solved, renewed and improved.” She added: “There are growth opportunities that we cannot step into due to infrastructure issues with ATC issues.”