Consolidation of air transport is getting stronger with the revival in traffic

In air travel, nothing goes as planned. While some do not expect traffic to return to normal before 2024 or even 2027, many companies are on track to return to 2019 levels this summer. And while many experts believe industry consolidation cannot continue until companies recoup their losses, major M&A deals have well and truly bounced back on both sides of the Atlantic.

Seemingly low-cost merger in the United States

The US domestic market, which was the first market to emerge from the Covid crisis, was also the first market to return to consolidation. A major operation worth more than $3 billion is underway: the acquisition of low-cost Spirit Airlines. It’s nothing more than second step to the podium in the American market for low-cost airlines and fifth place in the United States, behind American, United, Delta and Southwest.

The merger project proposed by low-cost Frontier last April received a counteroffer from another low-cost company, Jetblue, which puts $3.6 billion on the table. Or 700 million more than Frontier. However, this offer of the low-cost company in New York seems to have been rejected by Spirit’s leaders due to the risk of veto by American competition authorities. Jetblue’s repeated attempts to join forces with the American and take on rival Spirit have rekindled the debate in the United States about the advantages and disadvantages of consolidation. With the increase in air ticket prices in domestic flights, the debate became even more lively.

Lufthansa model in South America

In the south of the Americas, big maneuvers started again with the announcement of a merger project between Brazil’s GOL and Colombia’s Avianca last Tuesday. Two companies that were so tested by Covid, Avianca even had to file for bankruptcy. Their union in a joint conglomerate would give birth to the second air transport group in South America at the wheel of the Latam group. And it is in a scheme reminiscent of Lufthansa with different brands in Brazil, Colombia, Peru (Viva Air) and Chile (Sky Airline) and also has a strong organic tie to United Airlines. 16.4% of Avianca’s capital and strategic partner of Lufthansa in Star Alliance.

Air France and Lufthansa fight for Italy

However, even if they don’t have the size of American announcements, the most consolidation projects are in the European sky. Among the ongoing or simply mentioned operations, let’s mention the – temporarily delayed – takeover of Spanish Air Europa by the IAG group, the rejection of Wizz Air’s takeover offer in easyJet – and the planning of Air Austral by Corsair, French. side.

But the most visible operation is undoubtedly the privatization of ITA Airways, which emerged from the remnants of Alitalia last year and which the Italian government wants to withdraw at least in part. The deadline to submit a bid is May 23. According to the latest news, three candidates are competing in the race: Italian ship and cruise operator MSC allied with Lufthansa, American investment fund Certares allied with Delta Airlines and Air France-KLM, and another American fund – Indigo Partners – shareholder Hungarian low-cost Wizz Air, American Reference by Frontier, Argentina Jetsmart and Mexican Volaris.

The result is expected by the end of June.

The Mario Draghi government should announce its choice at the end of June. Italian MSC is naturally the favourite, with a bid of around 1.35 billion. This is less than 10% of what the Italian state has lost in various attempts to save Alitalia over the past 20 years. But beyond the future of ITA Airways, which has become a second-class company with only 50 aircraft, the choice of the buyer will determine who from the Lufthansa group or Air France-KLM can seize the largest share of Italian international aviation. Traffic, which remains the third European air market after France and Germany.

The stakes are particularly high for Air France, which has always maintained its connections and a substantial market share in Italy. Even before the creation of ITA, the group and its American partner had multiplied footsteps in the direction of Rome to try to preserve the old partnership with Alitalia. But Air France-KLM is competing with a serious handicap. The group cannot truly invest in a foreign company without paying back the state aid.