Global Airline Industry Shifts Focus From Market Share To Profitability | Aero-News Network
Aero-News Network
RSS icon RSS feed
podcast icon MP3 podcast
Subscribe Aero-News e-mail Newsletter Subscribe

Airborne Unlimited -- Recent Daily Episodes

Episode Date






Airborne On ANN

Airborne 10.17.16

Airborne 10.18.16

Airborne 10.19.16

Airborne 10.20.16

Airborne 10.21.16

Airborne Hi-Def On YouTube

Airborne 10.17.16

Airborne 10.18.16

Airborne 10.19.16

Airborne 10.20.16

Airborne 10.21.16

Fri, Jun 14, 2013

Global Airline Industry Shifts Focus From Market Share To Profitability

Analyst Frost & Sullivan Finds Merger And Acquisition Activity Expected To Gain Momentum

Historically, industry participants in the global airline industry have expanded capacities and networks and have also engaged in price wars in an effort to gain market share. Currently, however, the industry is characterized by slackening passenger demand and soaring fuel prices. The industry is cyclical and its performance is closely linked to gross domestic product (GDP). Given this scenario, merger and acquisition (M&A) activity is expected to gain momentum, as industry participants increasingly focus on cost cutting and excess capacity reduction in a bid to improve profitability.

New analysis from Frost & Sullivan ... "Merger and Acquisition Trends in the Global Airline Industry" ... finds that over the past five years, close to 446 deals with an approximate value of $54.19 billion have been struck across the four major sub-sectors of the global aviation industry, including commercial airlines, private or business aircraft services, helicopter transportation services, and rescue and safety aircraft services. The commercial airlines sector has been the most active sector by both deal volume (at 48.4 percent) and total deal value (at 87.3 percent).

"Instead of engaging in price competition and turf wars, companies in the airline industry are currently focusing on improving their profitability, especially in markets where they already have a strong presence," noted Frost & Sullivan Financial Analyst Bharath M. "Mergers, joint ventures, and other strategic alliances are slowly becoming the norm for airline industry participants who are focusing on cost cutting and excess capacity reduction in order to combat declining load factors, rising fuel prices and recession."

While overall M&A activity was suppressed in 2011 and 2012, the recovery of global markets is expected to renew M&A activity, led by cash-rich companies, especially in the European region. In recent times, while Europe has been the most active region in terms of deal volume, North America has been the most active region when it comes to deal value. "North America has witnessed several high value M&A transactions in the past and has the most concentrated airline industry in the world," stated Bharath. "The scope for further M&A activity in the region is lower compared to Europe and Asia-Pacific given the level of consolidation that has already occurred. However, opportunities for cross-border collaboration exist."

A high level of M&A activity in Europe is anticipated to continue for the next five years, with the key driving factor being the need to cut excess capacities and increase load factors. Cross-border deals are expected to gain dominance as reflected by one such deal between Etihad and AirBerlin.

Frost & Sullivan forecasts carriers in Asia-Pacific, the Middle East, Latin America, and Africa to increasingly enter into alliances and code-sharing networks with European and North American carriers. "Europe and North America's combined share of total value in transactions from 2007 until December 11, 2012 has consistently remained over 50 percent. However, upon excluding deals with values of over $1 billion, we observe that after 2008, the dominance of Europe and North America has reduced and regions such as Asia-Pacific and Latin America have gained momentum in M&A activity in terms of deal value," said Bharath. "The involvement of these emerging economies in M&A deals is expected to rise in the next 12 to 18 months. The airline industry in Africa is still in the early stages of its life cycle with M&A activity in the region likely to be limited."



More News

Airborne 10.21.16: NIMBYs Out Of Control, SMO Evictions On Hold, New Race Class

Also: CVR/FDR Expansion, Focusing On Santa Monica, NASAO Boss, GE9X Engine, 1000th H-60M, Verizon Drones, New LAS ATC A Transportation Safety Board of Canada team is currently inve>[...]

Aero-News: Quote of the Day (10.23.16)

Aero-News Quote of the Day "Think of this transition as changing an engine on a plane when it's inflight. Rolling out STARS in our nation's busiest airspaces, without disrupting ai>[...]

ANN's Daily Aero-Linx (10.23.16)

Aero Linx: The Society of United States Air Force Flight Surgeons (SoUSAFFS) SoUSAFFS was established in 1960 to more specifically support the USAF FS than AsMA at large could. Sin>[...]

ANN's Daily Aero-Term (10.23.16): Final Approach Point

Final Approach Point The point, applicable only to a nonprecision approach with no depicted FAF (such as an on airport VOR), where the aircraft is established inbound on the final >[...]

ANN FAQ: Q&A 101

A Few Questions AND Answers To Help You Get MORE Out of ANN!>[...]

blog comments powered by Disqus





© 2007 - 2016 Web Development & Design by Pauli Systems, LC