European Airlines Seek Increased Profitability and Potential Consolidation to Support Sustainability Initiatives
European airline executives have recognized the need for greater profitability and potential industry consolidation as a means to fund their sustainability goals. This trend may result in higher ticket prices for passengers, coinciding with a growing demand for air travel.
During a CEO roundtable, the head of International Airlines Group (IAG), the parent company of British Airways, expressed concerns that there is a more than 90% risk that the industry will not meet the European Union’s mandate for the availability of sustainable aviation fuel (SAF) by 2025.
The European Union has implemented regulations that stipulate flights departing from EU airports must gradually increase their usage of SAF, starting with 2% of total fuel by 2025.
Luis Gallego, the CEO of IAG, emphasized that Europe’s stricter sustainability regulations, in comparison to other regions, could make its fragmented airline industry less competitive. This has put pressure on airlines to seek partnerships and engage in further consolidation to achieve their sustainability ambitions.
Gallego stated, “The problem we have in Europe is we have a small group or a small airline competing in a global war with mandates of sustainability that are ahead of others. We are not going to be competitive. So we need to consolidate the industry, in order to afford all these sustainability ambitions that we have. That’s why we are striving to become bigger, more efficient, and to develop better platforms for our customers.”
On the sidelines of an event in Brussels, Ryanair’s Chief Executive, Michael O’Leary, predicted an increase in consolidation, with IAG being best positioned to acquire Portugal’s TAP, potentially ahead of rivals Air France-KLM and Lufthansa. He expressed surprise at Air France-KLM’s recent stake acquisition in Scandinavian SAS.
O’Leary reiterated his belief that low-cost carriers such as Wizz Air and easyJet would undergo consolidation, with the possibility of easyJet being acquired by IAG or Air France-KLM, or both, and Wizz Air being purchased by Lufthansa or a Middle Eastern buyer.
These remarks drew a cool response from easyJet, while other airlines were not immediately available for comment. An easyJet spokesperson commented, “Millions of consumers in Europe will be relieved to hear there is no realistic prospect of Ryanair becoming the only low-cost airline in Europe.”
