A Year Of Steady Progress For Airline Consolidation

In the evolution of many industries around the globe, consolidation has a role to play, and there is no shortage of movement among airlines looking to grow amid significant headwinds in the post-pandemic marketplace.

But 2024 began on a tough note for some proposed mergers. In January, a federal district judge in Boston sided with the U.S. Justice Department and  handed down a ruling to block the combination of JetBlue Airways and Spirit Airlines. The carriers had argued in court that a merger would be key to achieving planned growth. Both had seen profits dwindle in the wake of the COVID-19 pandemic and sought a way to compete better with larger legacy carriers. Initially the airlines launched an appeal to contest the decision, but the two officially terminated their agreement in March.

At the same time, a decision on another U.S. airline merger was pending as Alaska Air Group sought to acquire Hawaiian Airlines for $1.9 billion, a deal it had announced in December 2023. For months, industry waited to see whether the antitrust decision blocking JetBlue and Spirit’s deal would set the tone for Alaska’s case. Despite a U.S. administration wary of consolidation, the fifth- and 10th-largest airlines in the country closed their deal in September, becoming the first merger of major U.S. carriers since 2016.

• Some carriers are making progress in long-sought mergers
• Certain deals require concessions

Alaska CEO Ben Minicucci told investors on an earnings call on Dec. 3, 2023, that the combination was an opportunity the airline had “looked at for a while” and would create a stronger competitor to network carriers. “While we do not view this combination as an imperative for the continued success of Alaska, we do see this as a unique opportunity at this moment in time to accelerate and enhance the strategy that we’ve been deliberately cultivating over the past several years,” he said.

More broadly, industry consolidation efforts have progressed over the past year, in part because some transactions were still pending at the end of 2023 (AW&ST Dec. 25, 2023-Jan. 14, 2024, p. 95). Two of the industry’s most significant consolidation efforts have been playing out in the Asia-Pacific region: Korean Air’s takeover of Asiana and Air India’s merger with Vistara.

Korean Air first proposed acquiring Asiana in November 2020 and over the past four years steadily worked its way through the necessary approvals. The acquisition was finally completed on Dec. 11. Gaining sign-offs from several overseas competition authorities took longer than expected, as many of them raised concerns about the merger’s effect on competition in both the cargo and passenger arenas.

To assuage these concerns, Korean agreed to a range of concessions, including slot transfers and the leasing of widebodies to smaller carriers to help them get established on certain routes. On the cargo side, Korean proposed divesting Asiana’s freighter unit; Air Incheon was the successful bidder.

While regulators have extracted considerable concessions, the merger remains a very positive move for Korean Air. Together, Korean Air and Asiana accounted for 35.8% of weekly seats in South Korea’s international market for the week of Nov. 25, according to data from CAPA – Centre for Aviation and OAG. Korean Air currently ranks 22nd among global carriers in international seat capacity, and combining with Asiana would kick it up to 11th place.

Air India formally completed its takeover of Vistara on Nov. 12 after receiving the remaining approvals from Indian and Singaporean authorities. The process, which began in November 2022, stemmed from the Tata Group’s desire to streamline and consolidate its various airline holdings. Tata acquired Air India in January 2022 and jointly owned Vistara with Singapore Airlines. Under the merger deal, Singapore Airlines gained a 25.1% share in the enlarged Air India.

Tata Group has also consolidated its low-cost carrier (LCC) brands. In October, it completed a merger between Air India Express and AIX Express, which was formerly AirAsia India.

Despite the merger, the Vistara brand will not be disappearing yet. Air India will allocate Vistara’s narrowbodies with the same crews and service product to the busiest domestic trunk routes. This will ease the transition, as Vistara has established a popular brand since its launch in 2015.

According to data from CAPA and OAG, the post-merger Air India Group—including Air India Express—holds 28% of weekly seats in the Indian domestic market, giving it the second-highest share behind IndiGo. The group accounts for 23% of seats in the international market, the highest share among Indian and overseas-based airlines.

Important Steps For Europe

The long-planned privatization of TAP Air Portugal is almost certain to progress in 2025, as Portuguese Prime Minister Luis Montenegro said in October that the process should commence in the first half of the year. The government has been speaking to many potential bidders and wants clarity on their plans for the carrier before privatization goes ahead, Montenegro said during a TV interview.

Air France-KLM, Lufthansa Group and International Airlines Group (IAG) have expressed interest in TAP, coveted for its Lisbon hub and South American network—not to mention its fleet of new-generation Airbus aircraft. For IAG, taking over TAP would enable it to expand further into Southern Europe after its plans to buy Spanish leisure carrier Air Europa fell through due to regulatory hurdles.

Potential bidders for TAP—there are more than a dozen, according to Montenegro—will want to know exactly what the Portuguese government would require of them before they launch formal bids. Keeping the airline’s hub in Lisbon and retaining strategic routes are likely priorities.

Elsewhere, other important consolidation steps are already taking place. Lufthansa overcame a last-minute hurdle in November in its deal to take over ITA Airways, successor to Alitalia, when the Italian Ministry of Economy and Finance signed an agreement confirming European Commission (EC) concessions, including slot remedies, that cleared the way.

After final validation by the EC and the closing of the transaction, Lufthansa plans to start integrating Airbus operator ITA beginning in early 2025, seeking synergies and turning Rome-Fiumicino Airport into a hub dedicated to African and Latin American destinations.

Smaller carriers may also have further consolidation roles to play. Aegean Airlines in September agreed to invest an initial €25 million ($26 million) and potentially as much as €50 million in Volotea as part of an overall capital increase alongside the Spanish LCC’s shareholders. The two carriers are looking to deepen an existing partnership through more commercial cooperation and to grow their networks.

While Lufthansa will be focusing on ITA, its signing in September of an expanded wet-lease partnership with AirBaltic has given new momentum to rumors that the German group could be seeking a stake before the Latvia-based operator launches its long-planned initial public offering.

Air France-KLM is also interested in TAP and had a “very positive meeting” with the Portuguese state, CEO Ben Smith said in November. For now, the Franco-Dutch group is focusing on SAS Scandinavian Airlines, having bought an initial minority stake in 2024 and signed a codeshare agreement, while SAS has switched to SkyTeam.

More To Come?

Roughly a decade after Avianca and LATAM Airlines Group emerged as regional powerhouses from the combinations of Avianca with TACA International Airlines and LAN Airlines with TAM Linhas Aereas, respectively, momentum is growing in Latin America.

In the aftermath of the pandemic, Latin American operators have turned to consolidation to ensure they can compete effectively. GOL gained approval from Brazilian regulators in early 2022 to acquire MAP Linhas Aereas, paving the way for expanding its presence at Sao Paulo Congonhas Airport, one of Brazil’s most strategic hubs.

Avianca attempted to purchase Colombian ultra-low-cost rival Viva, but government foot-dragging ultimately derailed the purchase, and Viva ceased operations in early 2023. In the meantime, Avianca was forging consolidation elsewhere. Shareholders of Avianca and GOL formed the Abra Group in 2022, and the holding company completed its acquisition of Spanish wet lease and charter operator Wamos Air in October 2024.

More cooperation could occur between Avianca and GOL once the latter exits bankruptcy protection in 2025. GOL announced in November that Abra had agreed to convert $950 million of its secured debt in the Brazilian carrier to equity.

The question going forward is whether more consolidation is on the horizon in Latin America. GOL and Azul launched a domestic codeshare in May after reports emerged that Azul was interested in acquiring GOL. Azul and Abra, meanwhile, have discussed business opportunities.

A potential wild card is Aerolineas Argentinas. Argentinian President Javier Milei has been aggressively working to privatize the loss-making flag carrier. But it is not clear if he will succeed. Aerolineas Argentinas has not fared well financially under government ownership, while newer ultra-low-cost carriers Flybondi and JetSMART Argentina continue to grow, representing 17% and 14% of the country’s system departing seats, respectively, according to CAPA and OAG. Aerolineas Argentinas’ share is 47%.

Aerolineas Argentinas and Abra agreed in October 2023 to strengthen collaboration and explore commercial, operations and technology cooperation opportunities. The holding company is “interested in Aerolineas [Argentinas],” Abra Group Chief Commercial Officer Joe Mohan said at the Skift Aviation Forum in November. “But what exactly Aerolineas represents at this point, we’re in the due diligence to figure out.”