IAG chief warns blocking consolidation could ‘destroy’ airlines

The chief executive of IAG has implored regulators to allow consolidation to happen in Europe, arguing that the futures of some carriers and the competitiveness of the big groups are at risk if deals are blocked

Speaking during the Airlines for Europe (A4E) Aviation Summit in Brussels on 20 March, Luis Gallego said: “What we cannot be is small, fragmented, complying with all the regulation in Europe, including the sustainability part, and then compete with… carriers much bigger than us.

“Consolidation is needed for competitiveness.”

British Airways and Iberia parent IAG is currently attempting to purchase Spanish carrier Air Europa, while several other consolidation moves are under way, or on the cards, in the region. That is taking place against the backdrop of a European Commission that appears to be setting a higher bar for the approval of such deals.

“If we don’t allow consolidation in Europe, we are going to destroy the airlines in Europe,” Gallego warns. “That is my real worry.”

Ryanair is not currently involved in any consolidation activity in Europe, but its group chief executive Michael O’Leary concurs with Gallego that such moves are crtiical to the health of the region’s airline sector.

“It’s fundamentally important to the future of Europe,” O’Leary says. “Europe does need to consolidate towards having bigger airlines.”

O’Leary has previously suggested that Europe should head towards a US-style model, with five big airline groups dominating the region’s connectivity having hoovered up the smaller players.

The Ryanair chief highlights the government support needed for medium-sized national carriers such as ITA Airways and TAP Air Portugal in recent years, saying that situation is unsustainable.

He contrasts those examples with carriers such as Swiss and Austrian Airlines at Lufthansa Group, saying: “Those airlines have beeen much better and have much more secure futures as part of bigger airlines.”

The chief executive of Lufthana Group, Carsten Spohr, agrees, further giving the example of Brussels Airlines, which he suggests is much more financially secure under its current ownership, thereby ensuring the carrier’s home market continues to receive the economic advantages of airline connectivity.

“How would Brussels Airlines connect Brussels if it didn’t exist?” he asks. “If you lose the national carrier, you lose connectivity from that airport.”

While European airline groups are among the largest in the world by fleet size, some operators in the USA and China – which compete against European carriers on international services – are larger, while the Middle Eastern connectors boast rosters of widebody aircraft that are also ahead of those seen at European peers.