The largest airline in Northeast Asia is born! A review of major equity mergers and acquisitions of global airlines in 2024
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Civil Aviation Resources Network, December 4, 2024: The 1.8 trillion won (US$1.4 billion) merger between Korean Air and Asiana Airlines has passed the last hurdle.
According to relevant industries on December 2, the US Department of Justice (DOJ) finally approved the merger between Korean Air and Asiana Airlines. As for the DOJ's review, it will not announce the results separately. It is reported that the position expressed by the DOJ is equivalent to the decision not to file a lawsuit, and if the monopoly lawsuit is not filed, it can be regarded as approval.
In addition, according to previous reports, on November 28 local time, the European Commission finally approved the merger application of Korean Air and Asiana Airlines. The European Commission announced on its website that the merger of Korean Air and Asiana Airlines will end its review after all prerequisites are met.
Since Korean Air announced the acquisition of Asiana Airlines in November 2020, it has obtained approval from all 14 countries required for the merger in more than four years. After the merger, Korean Air will become the world's 10th largest airline and the largest airline in Northeast Asia.
Regarding the merger of Korean Air and Asiana Airlines, Professor Huang Yongzhi of the School of Business at Sejong University in South Korea commented: "Korean Air has long failed to gain growth momentum in the market divided by the two giants. Through this merger, the operations of the two companies have been greatly streamlined. Especially Korean Air, it has impressed the global aviation industry by increasing cargo volume to offset the losses caused by the epidemic."
So, in addition to the merger of Korean Air and Asiana Airlines, what major airline equity mergers and acquisitions have occurred in the aviation industry in other parts of the world in 2024? Here, we will take a comprehensive inventory.
The United States
Over the past few decades, the US aviation industry has undergone major consolidation, with the number of major airlines shrinking from 10 to 4, which has enabled the industry to better withstand economic challenges.
In 2024, the US aviation industry also had two important airline mergers and acquisitions, one successful and one failed.
On September 17, the US Department of Transportation said it had allowed Alaska Airlines to acquire Hawaiian Airlines for US$1.9 billion after the two airlines agreed to retain Hawaiian Airlines' main routes and take consumer protection measures. The acquisition of Hawaiian Airlines (the 10th largest airline in the United States) by Alaska Airlines (the fifth largest airline in the United States) is the largest acquisition between American airlines in the past decade and is of historic significance.
The merger between JetBlue and Spirit Airlines was not so lucky. On March 4, JetBlue and Spirit Airlines announced the cancellation of their $3.8 billion merger agreement. The two low-cost airlines said that after a US judge blocked the deal in January on the grounds of anti-competitive issues, the deal was no longer possible.
Since then, Frontier Airlines and Spirit Airlines have also restarted merger negotiations, but in the end there was no result. Faced with long-term losses, failed mergers, and huge debts about to expire, Spirit Airlines filed for Chapter 11 bankruptcy protection on November 18. This is the first major US airline to file for bankruptcy protection since 2011.
Europe
This year, the European aviation industry has also frequently exposed major merger news, and there are also successes and failures.
After more than a year of negotiations, the European Commission recently approved Lufthansa's acquisition of a 41% stake in Italy's ITA Airlines for 325 million euros (343 million U.S. dollars). The European Commission said on November 30 that the conditions required for the transaction have been met after Lufthansa submitted a remedy plan. This statement means that the last obstacle facing Lufthansa's stake in ITA Airlines has been removed.
International Airlines Group (IAG), which already owns British Airways, Iberia Airlines, Vueling Airlines and Aer Lingus, announced on August 1 that it would terminate the acquisition of Spain's Air Europa due to competition concerns from antitrust regulators. IAG currently owns 20% of Air Europa and it wanted to acquire the remaining 80% of Air Europa for 400 million euros. This is the second time that IAG's acquisition attempt has failed since it first proposed to acquire Air Europa in 2019.
However, after IAG's failed acquisition of Air Europa, Air France-KLM recently expressed its intention to acquire up to 20% of Air Europa. Air Europa owner Globalia confirmed on November 27 that Air France-KLM, as well as "other airlines and funds" have "interests" in the acquisition. According to Bloomberg, the acquisition transaction will be worth more than 100 million euros and will not require approval from EU antitrust regulators if the acquisition ratio is below the 20% threshold.
In addition, Air France-KLM confirmed on August 30 that it had completed the acquisition of a 19.9% non-controlling stake in Scandinavian Airlines, opening the door to extensive commercial cooperation between the two parties.
Air France-KLM's stake in Scandinavian Airlines is not only a strategic move, but also the latest stage in the deepening consolidation of the European aviation industry. As Scandinavian Airlines joins SkyTeam and expands cooperation with new partners, network integration is expected to become closer in the coming months.
India
On November 12, Air India Group officially completed its merger with Vistara, marking the birth of India's largest full-service airline. The merged new Air India Group currently operates more than 8,300 flights per week on 312 routes, covering more than 100 domestic and international destinations, with a fleet of 300 aircraft.
Air India CEO Campbell Wilson stressed that the merger marks the end of Air India's restructuring phase and strengthens its mission to become a leading global airline. Singapore Airlines previously held a 49% stake in Vistara and now holds a 25.1% stake in the merged Air India Group.
Australia
Qatar Airways and Virgin Australia, Australia's second largest airline, announced on October 1 that Qatar Airways plans to acquire a 25% stake in Virgin Australia from US private equity firm Bain Capital. The transaction is expected to reshape the Australian aviation industry and increase Virgin Australia's competition with Qantas.
Currently, the transaction is subject to approval by regulators such as the Australian Foreign Investment Review Board.
Africa
On August 20, Qatar Airways and Airlink, one of South Africa's largest regional airlines, announced that Qatar Airways has acquired a 25% stake in the latter. The investment will strengthen the existing code-sharing partnership between the two parties and will also boost Qatar Airways' expansion strategy in Africa.
Qatar Airways already owns 25% of British Airways parent IAG. It also holds 10% stakes in LATAM and Hong Kong's Cathay Pacific, and 3.4% in China Southern Airlines.
In addition, Qatar Airways is working to complete a long-planned investment to acquire a 49% stake in Rwanda's state-owned airline RwandAir.
Brazil
In the Brazilian civil aviation industry, the media has also repeatedly reported on the news of a possible merger between Azul and Gol. In May, Reuters reported that Gol's parent company had entered into talks with Azul to "explore cooperation opportunities."
However, on October 16, Gol Airlines issued a clarification statement stating that although there were reports of discussions with Azul about potential merger opportunities, the two parties had not started any formal negotiations.
What do you think of mergers and acquisitions in the aviation industry?
It is interesting to observe the development trajectory of the aviation industry in the past few years since the beginning of the epidemic. In some ways, the strength and speed of the recovery of the aviation industry have exceeded expectations. However, the industry has arguably undergone a fundamental change, and the only solution may be consolidation.
Because the airline industry is really a very difficult industry to make money in, even in boom times. The airline industry is one of the most cyclical, capital-intensive, and lowest-margin industries.
Consumers are clearly strongly opposed to the topic of airline industry consolidation. After all, who would want less choice and competition? But from the perspective of industry development, this path may be difficult to avoid. From the perspective of airlines, it would be attractive to become bigger and stronger and remain competitive through consolidation.
Take the US airline industry as an example. Today, the US airline industry is dominated by four major airlines: American Airlines, Delta Airlines, United Airlines, and Southwest Airlines. Together, they account for 78% of the domestic market capacity share. But this was not always the case. According to data provided by the US Bureau of Transportation Statistics (BTS), in the early 21st century, these four airlines accounted for just over 50% of the domestic market capacity share.
Since 2000, eight major airline mergers have reshaped the US airline industry. Well-known airlines including Continental Airlines, Northwest Airlines and American Airlines have disappeared among other brands, existing only in people's memories and rare retro aircraft liveries.
Similarly in Europe, it has become a consensus among many airline giants that only through further industry integration can the competitiveness of the aviation industry be maintained.
In March this year, IAG CEO Luis Gallego said at an aviation industry conference: "If Europe does not allow aviation industry integration, it will destroy European airlines."
Ryanair CEO Michael O'Leary also said that it is necessary to "clean up" those small and troubled airlines in Europe. He pointed out that these airlines need "unsustainable" taxpayer funding to survive during the epidemic, citing TAP Air Portugal as an example; therefore, the European Commission "should approve airline mergers because, ultimately, this is the way forward for Europe."