European airlines merging, U.S. talks to take off next?
Air France-KLM in January bought a 25-percent stake in Alitalia after a failed attempt at buying the entire carrier last year. The airline fought it out with Lufthansa, which lost the battle but didn’t sit around moping. It quickly launched Lufthansa Italia, which took its maiden flight a few days ago.
Ryanair, Europe’s largest discount airline, has withdrawn its bid for Aer Lingus after the irish government rejected the $1 billion deal. Ryanair is now expected to look for alternative targets.
British Airways remains in merger talks with Spain’s Iberia. Those talks have become complicated by the pound’s recent slide against the euro, making Iberia’s market capitalization now higher than BA’s.
It’s not just European airlines engaging in merger talks. Australia’s native carrier — Qantas Airways — is looking at merger opportunities in Asia.
The question now is – when will U.S. airline merger talks take off again? The Delta-Northwest merger last year led to a slew of other merger talks that yeilded no deals. But competing with the giant has become even more difficult as airlines struggle with a travel slump caused by a weak economy. And it’s not just leisure travelers that are pulling back: corporate travel, the main backbone for profits, is on a decline as well.
Last year, U.S. airlines were raising prices. This year, they are cutting prices to lure more travelers. With overcapacity and lower prices, U.S. airlines could probably sit up straight, tighten their seatbelts and brace themselves for another round of talks.