- Global: +2.9% capacity, +1.9% scheduled services year-on-year;
Global seat capacity up 2.9% in Jan-2012: OAG
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European airline consolidation Part 2: M and A potential of major groups; benefits and hurdles
Part one of this report on European airline market structure and consolidation highlighted that the top twenty airline groups in Europe hold 75% of seats. This is the same share as the top six groups in North America. This equivalence, in market share terms, between Europe's top 20 and North America's top six underlines the huge gap in consolidation progress between the two regions' airlines. It would take a large number of merger and acquisition deals to recreate North America's market structure in Europe, consolidating 20 into six.
This second part of the report is a kind of fantasy, a hypothetical. It suggests an illustrative series of combinations among Europe's top 20 that would approximately replicate the market shares, in terms of seat share, held by North America's top six.
This would require large merger and acquisition transactions involving pairings between members of Europe's smaller top six of Lufthansa Group, IAG, Ryanair, Air France-KLM, Turkish Airlines and easyJet. It would also mean several deals involving second-tier FSCs and LCCs. However, for now the larger deals in Europe remain relatively unlikely, and there are even hurdles to the smaller deals.
European airline consolidation and profitability Part 1: top 5 airline groups have only 43% share
Consolidation among Europe's airlines has always been fitful, and truly sizeable deals have ground to a halt in recent years. By comparison, North America has become the benchmark of airline consolidation progress. The announcement that Alaska Airlines is to acquire Virgin America once again highlights the differences in pace between Europe and North America.
This first part of CAPA's analysis of European airline market structure and consolidation compares market concentration in Europe with that of other world regions and looks at the link with profitability. It mainly focuses on comparing Europe with the other two large aviation markets, North America and Asia Pacific, but also gives data on market concentration for all of the other regions: Middle East, Latin America and Africa.
Europe's fragmented airline market is less profitable than its much more consolidated North American counterpart (although, on most measures, Europe is less fragmented than Asia Pacific). Europe's top 20 airline groups have the same seat share as North America's top 6.
Part two of this report considers a possible set of combinations to reassemble Europe's top 20 into six groups matching North America's top six.