Consolidating miles in airline mergers
Further capacity rationalization may come from asset purchase agreements rather than mergers, reducing the governance challenges.
However, absorbing a distressed asset or partial franchise often carries a greater near-term cost.
Service synergies To create revenue and cost synergies, European consolidations will need to work harder to realize corporate integration, operational harmonization, and centralized administration and governance.
Group-level activities will evolve from holding companies to shared-service organizations and maybe even to single commercial entities that deal with revenue.
Yet, resistance continues, despite the fact that European consolidation need not and probably won’t mirror American restructuring.
The European difference First, for even the weakest European airlines, valuations are nowhere near the distressed levels that some US carriers faced a decade ago.
For too long, some carrier groups have passed up what should be the most valuable, if challenging, points of integration.
But these solutions require substantial investment – something that’s difficult for most European carriers, given their current finances.A series of calamities – starting with the popping of the dot-com bubble and the 9/11 terrorist attacks, followed by a global recession that didn’t end until 2009 – led to as many as 20 airlines filing for bankruptcy protection.As a result, the industry shrank from 10 major carriers to four.Key corporate, commercial, and administrative functions are centralized in Bogota, Colombia, while El Salvador remains a major hub where the operations control center is housed.Most airline mergers over the past decade have realized revenue and cost synergies valued at three to seven percent of combined revenue from the merged carriers.