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Investors shying away from saving weak airlines: IAG's Walsh

IAG chief Willie Walsh believes there is greater reluctance among investors to save collapsing airlines, and insists that a tough attitude towards weak carriers is necessary.

The company presented data during a capital markets briefing on 8 November suggesting that new European short-haul airlines which started up between 2000 and 2016 lasted an average of only six years. It also put the failure rate at around 70%.

IAG claims the market has become "increasingly difficult" for new entrants.

But Walsh also told the briefing audience that there was increasing resistance from financiers to offer rescue.

"The best form of consolidation is when the weak disappear – and we're seeing that," he says. "In the past, where weak airlines were able to convince somebody to acquire them – we're not seeing that any more."

Walsh says that IAG is prepared to investigate opportunities to acquire carriers with prospects.

"But we're not going to pursue weak airlines that can't demonstrate a sustainable path to achieving the targets that we have," he says.

He says much of the opportunity likely to present itself over the next couple of years will result from inefficient and sub-scale airlines disappearing.

"And you won't see people standing by to invest to keep them going," he adds. "We firmly believe now's the time to stand back and let the weak fail."

Walsh points out that French carriers Aigle Azur and XL Airways France collapsed without any serious offers of assistance.

IAG's budget operation Level has a presence in Paris and Walsh says the competitive landscape "didn't shake out" as fast as the company had predicted. "They lasted longer than expected," he says. "But now they're gone."

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