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Europe’s big five airlines pass 50% market share

The bigger airlines “are using the crisis among smaller carriers to entrench their positions by gaining taking market share”.

Europe’s five biggest airlines crossed the 50% threshold in their combined share of the region’s passenger traffic in 2018, new research says, as low prices and overcapacity put smaller carriers under intense financial pressure.

Lufthansa Group took the biggest extra slice of the market, growing its share by 1.6 percentage points since 2016 to an estimated 12.3% of the European market, taking it ahead of Ryanair’s 12% share.

International Airlines Group has 9.8% of the market, Air France-KLM 8.8% and easyJet 7.7%, according to calculations made by Berlin-based credit rating agency Scope Ratings.

The gains in market share by the main players are closely linked to the collapse or takeover of other carriers, the research says.

“The prolonged period of cheap money has allowed entrepreneurs to set up airlines across Europe to take advantage of sustained growth in passenger traffic, but in [so] doing, it has also created excess capacity which makes it hard for all but the biggest airlines to cope with rising costs when there is such downward pressure on ticket prices,” explains Sebastian Zank, an analyst at Scope.

“And it is the big airline operators which are using the crisis among smaller carriers to entrench their positions by gaining taking market share.”

Filling the gaps
While the European airline sector remains fragmented – other airlines retain 49.4% of the market – the larger carriers have filled the gaps left by the exit of Monarch, Primera, Small Planet, Azur, Cobalt, VLM, PrivatAir and other airlines in the last two years.

A recent near-collapse and rescue of budget carrier Germania illustrates how smaller airlines remain under pressure into this year.

Some medium-sized airlines have also succumbed to market pressures, again to the benefit of larger airlines. Lufthansa Group and easyjet picked up the assets of insolvent Air Berlin, which had a market share of 2.8% in 2016.

IAG has already acquired landing slots from Flybe, a regional carrier that is up for sale, and the fate of Alitalia, Italy’s bankrupt flag carrier, may finally be decided soon. A future for Slovenia’s Adria Airways has yet to be mapped out.

“We believe that the shake-out will continue as long as interest rates remains low and the larger – more creditworthy – airlines can benefit from their better cost profiles,” says Zank.

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