With many European airlines filing for bankruptcy and given the demand for air travel, bigger airlines are set to reap in the benefits. Expect ticket prices to shoot up since fewer air seats will be available.
With some of Europe’s struggling carriers falling like dominoes, including Alitalia, Air Berlin and Monarch Airlines, the region’s biggest airlines are set to rake in bigger profits.
The collapse of these three airlines have given their rivals an opportunity to snap up pilots, the much prized airport slots as well as airplanes. With reduced airplane seats available in the market, airlines are likely to push up the price of flights, thus easing the pressure on their profit earnings, which has plagued the industry for several years.
This shakeout is likely to result in consolidation taking place in the industry and is expected to whittle down the number of European airlines to numbers more on a par with North America.
“The rationalization of financially inefficient capacity is good for the industry as a whole,” said Gerald Khoo, an analyst with Liberum.
Expectations that the challenging environment for large, traditional European airlines is starting to ease has helped their shares outperform rivals.
Shares of Air France KLM have surged by 163%, Lufthansa’s by 98% while British Airways’ shares have risen by 38%.
These airlines have already started to talk about a turnaround in ticket prices since fewer seats are available in the market. The collapse of Monarch will help them boost ticket prices even more.
As per Andrew Lobbenberg, an analyst at HSBC, the European short-haul market is set to grow by 3.2% this winter against an earlier forecast of 7.3%. The fall in growth rates have been largely attributed to the collapse of Monarch, Air Berlin and Alitalia.
“The present circumstances will be trying for Monarch staff, management and passengers, let alone former shareholders. Yet its exit will be supportive for industry unit revenues,” wrote Lobbenberg in a note.
“Europe will consolidate in the same way as the North American market has. That’s partly what the whole Air Berlin thing is,” said Michael O‘Leary. CEO of Ryanair after Air Berlin, the German carrier filed for insolvency in August.
He predicts there will be only 4 to 5 airline groups in Europe in the next five years, which include, Ryanair, Air France-KLM, Lufthansa, IAG, and possibly easyJet.