Lufthansa sees more consolidation on the horizon in Europe and expects to play a role in it.
Speaking to CNBC at the IATA Conference in Seoul, Lufthansa CEO Carsten Spohr stated;
There is a need and room for more consolidation in Europe. Probably looking at North America somewhat shows how the industry could develop.
Lufthansa already has Austrian Airlines, Brussels Airlines, and SWISS in its portfolio. Spohr added:
We have been active on this for many years. If there are opportunities, we surely will be ready.
But which airlines are realistically ripe for acquisition? Currently, Lufthansa is bidding for Condor, a German airline Lufthansa once owned 50-50 with Thomas Cook. Thomas Cook bought out Lufthansa in 2007, but now Lufthansa sees synergies in merging its Eurowings budget division with Condor to create a larger and more robust route network.
While Lufthansa has put in a bid for Condor, it is no rush to move quickly because it does not fear that is has competition. Speaking on an earnings call last month, Spohr explained:
If somebody would want to do it against us, I think it’s very unlikely because there is more than 30 percent feed on Condor airplanes by Lufthansa short-haul. So I don’t think that anybody could operate that against us out of Frankfurt or Munich, so we are quite relaxed.
I don’t know that I’ve ever seen Lufthansa leadership “quite relaxed”…
Beyond Condor
But what about struggling Alitalia? Or SAS? Besides a marriage of two budget carriers in Eurowings and Condor are there other viable airlines ripe for consolidation?
Brian Sumers reports that more and more European governments are seeing “renewed importance” in holding onto national airlines. As nations sees national airlines, like Finnair or TAP Portugal…or even Alitalia…as indispensable national resources, any merger or acquisition becomes less likely. For the point of a merger, in most cases, is to increase efficiency and decrease redundancy by removing overlap. Lufthansa has virtually walked away from Alitalia’s table precisely because the Italian government will not truly allow Lufthansa to meaningfully change the airline. And by “meaningfully change” I most certainly mean make cuts.
CONCLUSION
Although Spohr spoke of wider industry consolidation across Europe into a big-three like in the United States, I don’t see that happening right now. Beyond the potential re-acquistion of Condor, I do no expect further consolidation in Europe this year.
Lufthansa buying SAS? Yeah maybe when hell freezes over! SAS have already rejected purchase offers in the past and I really doubt their (very strong) unions would sign on to ownership by a German company. If there’s one country Swedes don’t like, it’s Germany.
SAS would be a complicated add for Lufthansa, given their footprint and that they don’t have one hub (which would be easier to add into the LH umbrella). Still, it’d be nice to see LH level competency come to SAS.
Actually, a “Big 3” like we have here in the USA is far from ideal for passengers, and will result in the same type service degradations; mileage devaluations; and all of the other toxic greed driven “policies” that we have seen taking place over the past 5 or so years since US Airways took over American Airlines and Southwest completed its take-over of AirTran.
If anything, the USA airline industry has made it manifestly clear, that for passengers, LESS is NOT more, and the EU would be wise to ignore calls by any of the cartelist’s who seek to emulate the crappy attitudes and behaviors implemented by our greedy, arrogant, callous and indifferent airlines that in lacking a genuine need to compete for passengers’ business have shown nothing more than contempt and hostility towards passengers, and instead “compete” over one thing, and one thing only:
Which airline can screw its passengers best – and get away with it.
For sure, the EU, and the rest of the world, would be wise to avoid copying our country’s sleazy business models where consumers be damned, and finding obscenely large multi-billion dollar annual share buybacks is the only thing that matters anymore!
That’s “FUNDING” – not “finding” as seen in the above!
It’s quite unacceptable to contemplate a bigger Lufthansa. It would be at the cost of competition and would be anti-consumer. There needs to be a metaphorical Marginot Line ( hopefully of greater effect) to nip this in the bud.
TAP. It has been improving its operations. Upgrading its fleet. And has a decent Business Class with the new aircraft deliveries. It would also come at a fairly decent price compared to SAS which I don’t see happening anyway.
More than that It has a unique geographical location. Its South America network is the best of any European airline. Especially to Brazil.
I’m not saying I like this. but it seems a good fit and would give LH Group a significant network growth in South America and Africa.
Tap South American network can’t match Iberia’s. Tap might be strong to Brazil but lacks connectivity to the rest of the continent and to Central America and the Caribbean.
I agree when taking Brazil out of the equation. But the strength of Brazil and all of their flights gives TAP a very strong showing in South America. And given IAG (Iberia/BA) having that foothold to other countries in S.A. TAP would in turn give Lufthansa a competitive leg to stand on network wise to IAG. Add in the possibility of United buying Avianca (as rumored) and the asterisk alliance would be hard to beat as a whole down there.
Lufthansa have been waiting for both SAS and TAP to go bankrupt for the last 20 years so they could walk in and take over, it hasn’t happened.
Equally, their take over of Austrian and moving the AOC to Tyrolean has been less than happy and Austrian is far from profitable. The same was done to Swissair making it Swiss with the Crossair AOC. That has been a bit more successful but mostly thanks to the very lucrative Swiss home market.
Swissair was a very viable airline until they got involved with Sabena which also morphed into Brussels Airlines. The latter is still a basket case and it would probably be better closed down.
Lufthansa only ever wants business on its own terms and only wants other *A carriers in Europe to feed its long haul network. Not all want to play like OU, LO and A3 and of course LH objects to the TK access to Germany but TK are part of the EU open skies agreement.
A3 and LO seem to be working more closely with TK these days than with LH and of course TK do present a very real competition issue to LH.
What about buying Etihad? There would be little danger of too much overlap and the mutual feed could be enormous.