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Airline Mergers, Acquisitions and Consolidations - International - April 2012

This report provides an overview of recent consolidation in the worldwide airline industry. Progressive deregulation of the air-transport sector, which dates from the late 1970s in the US and the mid-1990s in Europe, and has since spread to much of the rest of the world, has raised the level of competitiveness, particularly as a result of the growth of budget airlines. Indeed, it would not be an exaggeration to state that most growth in air-transport capacity for the last decade has been driven by low-cost carriers (LCCs). Meanwhile, the so-called legacy carriers have been forced into a cost-cutting and restructuring mode, which has led to a spate of mergers over the past four years.

Mergers have also occurred between LCCs – the Southwest Airlines/AirTran Airways tie-up (2011) being the most significant recent example. Major airline mergers have been concentrated in the low-growth US market where the competition is the fiercest, as well as in Europe, where budget airlines have grown at a rapid pace over the past decade and a half. The Indian market has also become increasingly competitive with the rise of LCCs, such as IndiGo, now the country’s largest domestic airline. Brazil is also increasingly dominated by budget carriers. However, China, as a rapidly growing and still regulated market, has experienced relatively limited consolidation. Although Russia, like China, has yet to develop a significant LCC sector, Aeroflot, the country’s flag-carrier going back to the Soviet era, is consolidating its position as the leading carrier in the market through the integration of half a dozen smaller airlines.

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Table of contents

  1. Introduction

      • Key findings
      • Data Sources

        • Overview

            • Figure 1: Change year on year in demand and supply in the air-transport industry and load factors, 2011
          • Airlines ranked by passengers and passenger kilometres
            • Figure 2: Airlines ranked by passengers on international flights, 2010
            • Figure 3: Airlines ranked by passengers on domestic flights, 2010
            • Figure 4: Airlines ranked by passengers on domestic and international flights, 2010
            • Figure 5: Airlines ranked by passenger kilometres on international flights, 2010
            • Figure 6: Airlines ranked by passenger kilometres on domestic flights, 2010
            • Figure 7: Airlines ranked by passenger kilometres on domestic and international flights, 2010
          • Airlines ranked by air freight tonne kilometres
            • Figure 8: Airlines ranked by freight tonne kilometres on international flights, 2010
            • Figure 9: Airlines ranked by freight tonne kilometres on domestic flights, 2010
            • Figure 10: Airlines ranked by freight tonne kilometres on domestic and international flights, 2010
          • Airlines ranked by market cap
            • Figure 11: Top-ten airlines ranked by stock market capitalisation, 20 September 2011
        • Recent Airline Mergers and Acquisitions

            • Aeroflot
              • Six regional carriers acquired
                • Group market share at 33%
                  • Rossiya, the market leader in St Petersburg
                    • Vladivostok and SAT serve Russia’s Far East
                      • Anti-monopoly restrictions possible
                        • Figure 12: Seat capacity on all scheduled flights in the Russian Federation during the week of 2 January 2012 to 08 January 2012
                      • More concentrated on international routes
                        • Figure 13: Seat capacity on domestic and international flights in the Russian Federation during the week of 2 January 2012 to 08 January 2012
                      • Fleet expansion
                        • Mostly Western-built aircraft
                          • Fast growth and high margins
                            • Airlines benefiting from strong market trend
                              • Absence of LCCs boosts margins
                                • British Airways/Iberia
                                  • Structure similar to Air France-KLM
                                    • Separate management teams and head offices
                                      • BA and Iberia left behind as competitors merged
                                        • Synergies of €500 million expected
                                          • Figure 14: Details of projected merger synergies for IAG, 2011-15
                                        • IAG bags bmi
                                          • Timetable and conditions
                                            • The alliance cartel
                                              • Virgin Atlantic also interested in bmi
                                                • Aer Lingus would like Heathrow slots too …
                                                  • Etihad also interested in Aer Lingus
                                                    • Delta/Northwest
                                                      • Technological integration a colossal task
                                                        • Profits up but service delivery lagging
                                                          • The devil is in the detail …
                                                            • Coke or Pepsi?
                                                              • LAN/TAM
                                                                • Antitrust approval by the two countries
                                                                  • A 6% market share worldwide
                                                                    • LAN has spread beyond its domestic market
                                                                      • Estimate of cost synergies raised
                                                                        • Southwest/AirTran
                                                                          • Growth by acquisition
                                                                            • Figure 15: Pre-merger comparison of Southwest and AirTran, April 2011
                                                                            • Figure 16: Southwest and AirTran fleets, March 2011
                                                                          • AirTran expands Southwest network in key hubs
                                                                            • Is the merger good for consumers?
                                                                              • Some overlap, but new services too …
                                                                                • Southwest challenging Delta at its main hub
                                                                                  • United/Continental
                                                                                    • A marriage of equals
                                                                                      • Customer-level integration measures
                                                                                        • 2012 initiatives
                                                                                          • Continental and United Airlines systems merged
                                                                                            • A limited amount of confusion
                                                                                              • One website for booking from now on
                                                                                                • US$1.0-1.2 billion in annual synergies expected
                                                                                                  • Cultural differences
                                                                                                    • The world’s biggest network
                                                                                                      • Vueling/Clickair/Iberia Express
                                                                                                        • Market leader at El Prat
                                                                                                          • Figure 18: Weekly seating capacity and market shares at Barcelona’s El Prat Airport, 16-22 January 2012
                                                                                                        • Little distinction between Iberia Express and Vueling
                                                                                                          • Vueling reducing at Madrid, however
                                                                                                            • Opposition to Iberia Express
                                                                                                              • Air Nostrum too
                                                                                                                • Vueling is Europe's fourth-largest LCC
                                                                                                                  • A hybrid model
                                                                                                                    • An FFP scheme too
                                                                                                                      • Vueling is connected
                                                                                                                      • What Next?

                                                                                                                          • American Airlines and US Airways?
                                                                                                                            • Filed for bankruptcy to restructure
                                                                                                                              • Bid may still be a year away
                                                                                                                                • American-US Airways combination would be a market leader
                                                                                                                                  • Figure 19: US airline domestic market shares, December 2010-November 2011
                                                                                                                                • US Airways would be good feeder for American
                                                                                                                                  • TPG Capital and Delta interested in American
                                                                                                                                    • Europe’s legacy carriers hit from all sides
                                                                                                                                      • Gulf carriers’ expansion and LCCs
                                                                                                                                        • Contrasting governmental roles
                                                                                                                                          • Etihad pursues partnerships
                                                                                                                                            • Air France-KLM to partner with Etihad?
                                                                                                                                              • Emirates going it alone
                                                                                                                                                • Eastern European flag-carriers for sale
                                                                                                                                                  • Turkish considering acquisition of LOT
                                                                                                                                                    • Figure 20: Turkish Airlines & LOT international capacity by seats per region, 23-29 January 2012
                                                                                                                                                  • The world’s largest network by 2023?
                                                                                                                                                    • Serbia’s JAT Airways
                                                                                                                                                      • Other carriers looking for partners
                                                                                                                                                        • Figure 21: Summary of the status of Eastern European state airlines’ privatisation plans, 2012
                                                                                                                                                      • Malév has ceased operations
                                                                                                                                                        • 27 routes up for grabs?
                                                                                                                                                          • Malév’s top three monopoly routes likely to find takers
                                                                                                                                                            • Routes in Central and Eastern Europe less attractive
                                                                                                                                                              • Figure 22: Destinations scheduled to be uniquely served by Malév in July 2012
                                                                                                                                                          • Index to Travel & Tourism Analyst

                                                                                                                                                              • Index grouped by geographic area
                                                                                                                                                              • Index to TTI Destination Reports

                                                                                                                                                                • Country reports
                                                                                                                                                                • Special Reports Index

                                                                                                                                                                  Companies Covered

                                                                                                                                                                  To learn more about the companies covered in this report please contact us.

                                                                                                                                                                  Airline Mergers, Acquisitions and Consolidations - International - April 2012

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