09 September 2008

The Sharks are Circling - European Consolidation

The survival of the fittest - law of the jungle - the metaphors could just keep right on coming. So now we have a fairly interesting game shaping up in the master consolidation of European carriers that seems to be going on.

The story so far has the bigger players, lets call them the sharks, being identified for us by Mr O'Leary. They are:

AF/KLM group
British Airways

The fresh prey consists of the following:

Brussels Airlines

Just for fun there are several other players who want to play in the field. S7 (the former Sibir or Siberian Airlines), Aeroflot (who is denying everything), Turkish THY, and Virgin Atlantic for god measure.

At this point nothing can be taken for granted and now all bets are on. So clearly the stakes are going to rise. What do we know for sure? Nothing!!!

However if you are a gambler - here are some easy bets.

BA gets IB. Actually that is the only easy bet.

Here are the other bets:

LH should get Austrian but is being greedy and going after SN as well. They do have a call on BD.

AF/KL is the likely leader in the AZ battle but that one is far from over. Surprisingly they are keeping quiet about SN.

LH and BA are both making noises about AZ just to piss off AF.
SU is keeping its powder dry but Putin's long term goals have resulted in a semi serious bid for AZ before. SU will have enough trouble keeping the rest of the Russian domestic carriers afloat though. S7, TK,AF/KL are all making a run at OS - just to tweak LH's nose. VS wants BD, which is also coveted by BA.

The correct natural order of things should be LH gets OS. AF/KL are welcome to AZ, BD should stay independent, and the interlopers should probably stay out of it.

And just for good measure - there are other players who need a partnership of some sort. SK is in trouble for example.

So where is the European Commission in all of this? Remember that they approved AF/KL but disallowed EI to be acquired by Ryanair. And also remember that the current EC commissioner for Transport is - an Italian. So don't expect much out of Brussels.

This is guaranteed to play for a while and will be messy. If you are a conspiracy theorist - then perhaps you can think that there is some backroom with lots of smoke that has a few players deciding on the future air map for Europe.

Hang on for the wild ride folks....

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