Greater government intervention in airlines amid the pandemic will limit consolidation within the industry in the next three to five years.
Foreign ownership rules and a liquidity crunch will also slow down consolidation in the industry, Alexandre de Juniac, outgoing director general of the International Air Transport Association (Iata), told the media.
“I do not believe consolidation will be very active in the coming three to five years because you still have foreign ownership limitations everywhere and because the intervention of states has increased, potentially through shareholding,” he said.
“I do not see them giving up their shares in a company in which they have invested taxpayer money to sell to a neighbouring country or partner.”
Consolidation will also be an expensive proposition for cash-strapped airlines, said de Juniac.
“I do not think airlines have the money to commit to any consolidation in the next three to five years … they don’t have a penny to do that.”
Governments have poured in aid worth $225 billion to prop up airlines ravaged by the Covid-19 crisis that has shut borders, hit revenue and grounded aircraft.
Iata has called on governments to support a restart in international travel through stimulus measures such as subsidies for air tickets, routes and domestic journeys.
The aviation industry will have fewer players operating smaller networks in the next three to five years, with the possibility of further bankruptcies given that many small and medium-sized airlines remain fragile, de Juniac said.
A shrinking industry “is not good news” for the market and it is “not good news for passengers”, he said.
“It means less destinations, less connectivity and – perhaps, in some cases – higher fares and reduced competition.”—TLTP