There has been plenty of speculation on whether the European airline landscape could be ripe for more consolidation following COVID. And while some deals may have been thrown a little off course, such as IAG’s acquisition of Air Europa ending instead with a 20% stake, that does not mean that the group has lost its appetite for expansion. The Anglo-Spanish group is coming off of a strong summer, which its Chief Executive says constitutes “a platform for consolidation.”
According to The Times, Luis Gallego, IAG’s Chief Executive Officer, said the group would “only do what makes sense,” but that it does see opportunities to grow stronger. Gallego stated,
“We are a group that wants to consolidate the industry.”
IAG has bounced back following the crisis with something of a vengeance. Revenue for the third quarter was 1% higher than before the pandemic in 2019. Operating profits are now predicted to come in higher than initially estimated and land somewhere around €1.1 billion ($1.088 billion). Cash liquidity sits at €13 billion ($12.8 billion), meaning the group has more than enough to snap up a smaller competitor.
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Could it be rival easyJet? The market seems to think so. The budget carrier’s shares rose 5% on Monday following speculations that IAG could have it in its sights. It would not be uncommon for the group to want to cover both full-service and low-cost in the markets where it operates, after all. easyJet has had a worse time of it coming out of the crisis. It is expected to report losses of around $200 million this year, despite a good performance over the last few months.
The US saw consolidation in the airline market between 2000 and 2010, with carriers having lost $55 billion and cutting 160,000 jobs in the wake of the dot-com bubble, 9/11, and the global recession. However, consolidation in Europe has moved significantly slower and with a slightly different tone as airlines brought into the fold of larger entities have retained names and branding – but that does not mean it is not moving.
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IAG and the competition
IAG was first formed in 2011 following the merger of British Airways and Iberia. It currently owns British Airways, Aer Lingus (2015), Iberia, Vueling (2013), and LEVEL (low-cost long-haul airline brand established in 2017), as well as IAG Cargo. It is currently in the process of fleet modernization, expecting deliveries of several Airbus A320neo series aircraft, more Airbus A350s, Boeing 787s, and 18 Boeing 777-9 aircraft.
With ITA Airways in all probability going to one of IAG’s European competitor airline groups and Air France-KLM having declared interest in purchasing a large share of Portuguese flag carrier TAP, it is no wonder the group may feel the heat in the race for snapping up struggling airlines across the continent.
Source: The Times