Towards a new balance of power in European airline industry? Yes and no.

There’s a lot of talk that the consolidation underway will totally change the European air transport landscape, with a new balance of power. In practice, this is true, but there are many nuances to consider.

With IAG buying Air Europa, Lufthansa ITA, Air France’s surprise acquisition of a stake in SAS, and the battle for TAP about to begin, the long-awaited consolidation of Europe’s skies is well and truly underway, with no end in sight.

Against this backdrop, many are saying that the outcome of the TAP takeover will determine leadership in the European skies, which is why the 3 majors will be in direct competition for a takeover for the first time in a very long time.

To verify this, we took a look at the current situation, and what the future of TAP might mean.

Before going any further, it’s important to clarify a few points.

1°) We started with figures for 2022, and depending on the dynamics of the airlines, 2023 and a fortiori 2024 may look very different.

2°) We have added up the figures for acquiring and acquired airlines, and the result should be treated with caution. In general, a takeover is expected to improve the performance of the acquired airline, and to generate synergies so that in the end, 1+1 is more than 2. But if the takeover is poorly managed, 1+1 can sometimes be less than 2.

3°) Comparing figures is meaningless without analyzing network structure and complementarity.

4°) We assumed that ITA was joining Lufthansa and Star Alliance, SAS Air France-KLM and Skyteam, and Air Europa IAG and OneWorld. In fact, the first two are still awaiting approval from the relevant authorities.

These figures should be treated with caution, and should not be taken to mean what they don’t, but they do help to identify certain issues.

What’s the current situation in Europe’s skies?

The Lufthansa group continues to dominate in terms of passenger numbers, ahead of IAG and Air France-KLM, which is closing the gap with the (potential) takeover of SAS. The gaps are small, but they do exist. However, if we look at revenue, Air France-KLM is ahead of IAG.

In terms of net income, on the other hand, Air France-KLM and the Lufthansa group are neck-and-neck, with both seeing their profits virtually wiped out if the integration of SAS and ITA is taken into account.

Looking at the alliances, Star Alliance is far ahead of Skyteam and OneWorld, which are neck and neck. The figures are easy to explain: Star Alliance has two powerhouses: LH Group and Turkish Airlines.

What happens if Air France-KLM takes over TAP?

As things stand, the takeover of TAP would enable Air France-KLM to become European leader by a narrow margin, ahead of the LH Group. IAG would be left behind in terms of passengers carried, but the Lufthansa Group would remain ahead in terms of revenue.

In terms of alliances, on the other hand, this would enable Skyteam to close the gap a little, but Star Alliance would remain dominant and One World would be left behind.

What happens if LH Group takes over TAP?

In this hypothesis, nothing changes in terms of rankings, but the Lufthansa Group just accentuates its leadership.

What happens if IAG takes over TAP?

In this third scenario, IAG would become European leader in terms of passengers carried, with LH Group remaining revenue leader ahead of Air France KLM.

In terms of alliances, Star Alliance would remain far ahead, but OneWorld would overtake Skyteam.

Bottom line

In terms of passenger numbers, the takeover of TAP will determine the leading airline in Europe, but whatever happens, the Lufthansa Group will remain the revenue leader.

As far as the alliances are concerned, this will in no way call into question the dominance of Star Alliance, the issue being whether Skyteam or Oneworld will come second.

We also note that ITA and SAS will have to undergo major restructuring to return to profitability. Indeed, based on 2022 figures, they would virtually wipe out the record profits of Air France-KLM and Lufthansa Group, a situation that neither player can tolerate for too long.

Image : Lufthansa and Air France aircraft by NYC Russ via Shutterstock

Bertrand Duperrin
Bertrand Duperrin
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.

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