While it quickly became apparent that January 2024 would be remembered as an inauspicious start to the year for airline safety, from the mid-point of the month onwards it was clear that the same would be said regarding consolidation.
All of the biggest M&A deals theoretically remain on the table – most tenuously in the case of JetBlue Airways and Spirit Airlines, who are pushing for an expedited appeal to the blocking of their tie-up – but recent developments do appear to confirm suspicions that regulators in the European Union and the USA have come out of the Covid-19 pandemic with heightened scepticism about the benefits of airline M&A activity.
The case of Lufthansa’s bid for stake in ITA Airways shows that it is difficult to second-guess a regulator’s concerns. It submitted a document on 8 January with proposed remedies to address any reduced competition that might result from the tie-up, but the European Commission on 23 January said these were “insufficient, in terms of both scope and effectiveness” and launched an in-depth investigation into the deal. It did so without testing the remedies with market participants.
Two days later, the Commission launched a similar in-depth investigation into IAG’s move to acquire Spanish carrier Air Europa – a tie-up it had already rejected in a previous form over concerns about competition on routes from Spain.
“We want to make sure that the transaction does not negatively affect the prices or the quality of passenger air transport services in and out of Spain,” says competition commissioner Margrethe Vestager.
Elsewhere, this week Japan cleared the merger of Korean Air with compatriot Asiana Airlines, on the condition that the Korean carriers cede some slots to other airlines.
At face value it is good news for that deal that 12 of 14 regulators have cleared it so far. The less-good news is who the remaining two regulators are: the EU and the USA.
Other deals, such as Air France-KLM’s stake in SAS and Alaska Airlines’ move to acquire Hawaiian Airlines, are in the works and will further test regulators’ mettle.
Regulator scrutiny of airline M&A activity is nothing new. But 2024 carries the potential to be an inflection point, where such deals become harder to get over the line – and less attractive even when they are cleared, due to the harsher remedies involved.
