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Wednesday, 21 November, 2001, 18:52 GMT
Airlines to embrace consolidation
Different aeroplane tail fins
Consolidation of airlines will help ensure survival
Tom Symonds

When British Airways decided to repaint the tail fins of its aircraft to represent a range of international designs it was immediately condemned for no longer being prepared to "fly the flag".

It was not a popular move, but as a marketing decision, it demonstrated quite clearly that BA had realised times were changing in the aviation industry.

The European airline industry is crying out for consolidation

Lord Marshall
BA chairman
No longer was British Airways literally the national flag carrier - the airline for all British travellers, wherever they wanted to go.

It was for all the world's travellers, or more specifically, all the world's passengers who made British Airways a profit.

The Union Jack may have been restored to BA's tails, but the airline's view of itself has not changed.

'Crying out for consolidation'

In a recent speech, the Chairman of British Airways Lord Marshall pointed out the central problem facing his, and other European Airlines.

The European airline industry is crying out for consolidation - that is for cross-border merger, acquisition and joint equity venture," he said.

"No other industry sector - even our closest strategic equivalent, telecommunications - remains shackled by the notion of national sovereignty and archaic ownership rules."

Lord Marshall and others believe airlines are failing to compete globally, and that makes it much more difficult to cope with the current downturn in passenger demand.

No excuse

Airline executives reacted angrily when they were accused of using the 11 September attacks as an excuse for sacking staff and cutting back fleets.

No other industry sector remains shackled by the notion of national sovereignty and archaic ownership rules

Lord Marshall
BA chairman
"The truth is the industry was already bumping through turbulence - long before the tragedies in New York.

Two things matter to airlines - the amount of empty seats on their planes and the cost of getting those planes into the air.

Reducing those two factors leads to profits, and in recent years, the European industry has been struggling.

Several European carriers were wobbling - Swissair in particular flew directly into storm clouds as it tried to expand.

The fear of terrorism and disruption in the world's aviation system has simply made things much worse.

Safety net?

But there has always been a safety net for airlines - no country likes to see its national carrier go down.

The two in most dire difficulties: Sabena - which later filed for bankruptcy - and Aer Lingus were given support by their respective governments.

Most industry-watchers agree with Lord Marshall that only those airlines prepared to consolidate without regard for borders, will survive in the future.

On transatlantic routes current alliances may well be important, pairing British Airways with American Airlines, United with Lufthansa, Delta with Air France.

BA may also link up with the Dutch operator KLM.

The question is, will governments and the European Commission let it happen?

In the midst of job losses and route cuts following 11 September, the EU Transport Commissioner Loyola de Palacio gave minimal financial support to the airlines, but told them that national carriers were increasingly things of the past.

Budget airlines thrive

One burgeoning group of airlines is delighted at that because it confirms a view that air travel has changed for ever.

Low cost operators like Easyjet and Ryanair have thrived through the chaos since the 11 September.

While the big airlines consolidate, many of them trying to win more premium business traffic, the cheap fares airlines will fight ruthlessly for leisure traffic.

British Airways is already withdrawing from European routes where it makes a loss.

Easyjet and Ryanair are moving in - only governments and existing agreements over access to bigger airports will stop them.

Passengers seem eager to fly for as little as 10.

The future?

This, it seems will be the future of air travel in Europe.

When we are flying on business, we will "fly the flag" and go with airlines like British Airways.

When we are on holiday, we will fly Ryanair and Easyjet.

No carrier will carry everyone.

See also:

19 Nov 01 | Business
Go's profits take off
15 Nov 01 | Business
Business demand for air taxis
09 Nov 01 | Business
Round-up: Aviation in crisis
09 Oct 01 | Business
British Airways to cut workers' pay
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