World could be served by just “10-12 airlines”
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The world’s skies could be dominated by just 10-12 airlines in future, if ownership regulations are relaxed.
In a panel discussion at the CAPA Airline Leader Summit in Dublin, Henrik Hololei, the European Commission’s director general for mobility & transport, predicted that if airline ownership rules are opened up, the industry would undergo a period of significant consolidation, culminating with a small number of mega airlines dominating the skies.
This would represent an acceleration of a trend that has already started, especially in the West, where a small number of large groups such as Lufthansa, IAG and Air France-KLM in Europe and Delta, United and American Airlines in the US, control the majority of the market.
“The global market [could] be dominated by 10-12 global players,” Hololei said, in response to a question about the future of airline ownership.
Willie Walsh, the IAG chief executive who was also sitting on the panel, concurred, although he added that there would still be “value in brands”, so these mega airline groups would still appear to operate as multiple different carriers.
Walsh’s IAG, which currently owns Aer Lingus, British Airways, Iberia, Vueling and its new long-haul LCC, Level, would likely be one of these dominant groups. Qatar Airways owns a 15% stake in IAG.
And the Irish chief executive suggested that full mergers and acquisitions would be the preferred way forward for groups, if they were permitted by current ownership rules. The only reason airlines are currently pursuing joint ventures and alliances, he asserted, is because it is the “best we can do under the current regime”.
“I think we’ll see a very different industry [if ownership rules are relaxed],” Walsh told delegates in Dublin. “I don’t think we’ll see JVs or equity investments unless they are with a view to full mergers.” He added that he is “not a fan” of equity alliances as a rule, although he noted that Qatar Airways’ investment in IAG has been “very successful”.
With regards to new airline models, such as long-haul low-cost carriers, Malaysia Airlines’ managing director & CEO, Peter Bellew, said that Asian airlines like AirAsia X and Scoot had proved that it is possible to make them profitable, if you include a seating premium option.
“I think you have to have some business class seats up front to make a return,” Bellew said. And Walsh admitted that he had looked at existing long-haul LCC concepts when creating Level, which is due to start flying from Barcelona this summer.
“Trying to establish a foothold in a competitors’ home base is difficult,” Walsh said. “First mover advantage can work, but need to be aware of what competitors are doing. Being a follower does have its advantages.”
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