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European Airline Industry Consolidation

Christine Ourmières-Widener
Former CEO at Flybe and Member of Board of Governors at IATA

Learning outcomes

  • The structural drivers leading to consolidation in the European airline industry

Executive Bio

Christine Ourmières-Widener

Former CEO at Flybe and Member of Board of Governors at IATA

Christine was the CEO of Flybe, which was Europe’s largest regional airline, from 2017-19 and has over 30 years experience in the airline industry. She started her in 1988 at Air France before joining Amadeus inu 1992 as Director of Sales and Marketing in Europe for 4 years. In 1998, Christine rejoined Air France as VP, Sales before making her way to General Manager of Air France KLM for UK and then CEO of CityJet, the regional airline subsidiary of Air France KLM. Christine is also on the Board of Governors at the International Air Transport Association. Read more

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Interview Transcript

Christine, can we take a step back and talk about the industry structure. Over the last 20 years or so, how have you seen the airline industry evolve, specifically in Europe, between the LCCs, the flag carriers and the regional players coming up?

I think the structure has been moving in the same direction, which is consolidation. Why? Because of the pressure that you have. When you are an airline, the external factors are very challenging, not only on the competition side, but also on your cost structure. The market that has seen the fastest consolidation has been the US market, with quite a limited number of players that are also controlling, in a way, the regional carriers, to feed their own hubs. The regional carriers, in the US, are flying another brand of the flag carriers, so it’s a very consolidated structure market, compared to what you can see in other regions of the world.

Europe is the most fragmented market, maybe because it’s the oldest one, with flag carriers, low-cost carriers, regional carriers, that are competing with each other. I think that’s a crisis and it’s already what you see, with airlines going into administration. Not only in Europe, but in other regions of the world. They are asking for state support. So there will be consolidation and there will also be a rationalization. Looking at the example of Alitalia and the government saying that it will definitely be smaller. You will have an evolution of consolidation mixed with optimization of capacity, which is definitely supporting consolidation, because the rationalization of the capacity will not have to be done only by consolidation, but also by some players being a little bit smaller.

When Lufthansa announces that they are going to reduce their fleet by more than 100 aircraft, it means that they are already optimizing the capacities they have in the market.

Do you think those LCCs, Wizz, Ryanair, EasyJet, will take up some of these slots from these larger carriers who are reducing their fleet and capacity?

They will take up some slots of routes, if it makes sense for them, if there is a business case. Maybe, for some routes, they are already on the routes and they will have even more success. There are strong players, who are very successful and, financially, they can afford it. I think the game on European short-haul is definitely already showing that there is the story of being the low-cost carrier model and when you see some players, like Wizz Air, who are opening a base in Abu Dhabi, that’s an even bigger change for the industry.

What’s your view on the flag carriers and how their position in the market is going to evolve and why the government is still backing these companies, across Europe? Do you think this is going to change and the view and reaction towards the government backing these companies is going to change?

When you look at the structure of some bail-outs today, it’s very interesting. It’s very different in Europe, compared to the US, for obvious reasons to do with the governance of organizations. In the US, there are conditions for the support that has been given, by the government, to airlines. If you take an example in France, there are also some conditions that have been given from the French government, to Air France, including sustainability. That’s quite interesting, because it’s really on the agenda even more than it was because the crisis has been revealing that, for some groups of activists, without any flights, nature is taking a revenge.

I think that the support of governments is definitely putting the state, as potentially stronger shareholders, in the mix, if they were already shareholders, or at least a stakeholder, to look at the governance of the company and maybe push some agendas that were not such a focus in the past. I think it’s good, because most of the time, these agendas are more long term than short term.

But for all the situations we have seen so far, it’s implying more efficient financial structure of the company and stronger margins for the organizations. It’s not only efficiency from the financial perspective, but efficiency from an environmental perspective, as well. That will be good, I think. Not only for the organization but also, long term, for everybody.

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