Consolidation of the european airline business seems to be ongoing with full pace with British Airways and Iberia finally agreeing on a merger deal. A new holding company will own both airlines with BA having 55% and IB 45% of the equity.
This is however not a full fledged merger, but actually resembles closely what AirFrance and KLM did some years ago. They kept their original identities while managing to achieve significant cost savings due to streamlining their operations as a team (some doubling routes were rationalized away).
The economies of scale required to be in the airline business nowadays appear no longer to support the existence of “national flag carriers” for smaller European countries. Historically this used to be part of a country’s national pride. Moreover, each and every self-respecting legacy airline just had to fly JFK directly. Yet the formation of airline alliances that started about a decade ago such as Star Alliance, Oneworld and Skyteam has clearly laid out the way to the utilization of common hubs and ultimately to global airline consolidation. It is now fully realistic that in less than 10 years from now, only one carrier from each alliance will be represented in Europe. Namely Lufthansa, AirFrance-KLM and British Airways-Iberia. The rest of the national legacy carriers will operate niche routes or be forced to disappear altogether.
I will be following closely the development of Austrian under Lufthansa. In my opinion their strategy should follow through, i.e. they ought to abandon any westward long haul they have left (e.g. even a presumably profitable route such as JFK) and concentrate purely on strengthening their strategic Eastern Europe and Middle East position with VIE as a main hub.
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