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AerCap Executive Stresses Need For European Airline Consolidation

“There are just too many airlines right now in Europe, too many hubs,” Wigmore told attendees during a panel session.

MADRID — The European airline market remains too fragmented, with 35 carriers handling 80% of traffic compared with just four in the U.S., AerCap Holdings Head of EMEA Kenneth Wigmore said at MRO Europe 2014. 

“There are just too many airlines right now in Europe, too many hubs,” Wigmore told attendees during a panel session. “This is certainly not a sustainable situation. I don’t predict that Europe will ever get to a point where four airlines can carry 80% of traffic, but there has to be mergers and consolidation and a more efficient flow of traffic over fewer hubs.”

This fragmentation seems to be benefiting AerCap and other lessors as airlines maintain fleet flexibility to be competitive, making Europe the most important market in the world in Wigmore’s view. This is played out by the numbers, which show that 50% of the European fleet is leased, compared with the global average of 40%. 

But, he noted, it will take far more than flexible fleets to keep Europe’s airlines growing. “If airlines in Europe don’t reduce their costs and continue to streamline and be more competitive, they simply won’t exist,” he said.

External players such as Etihad Airways, meanwhile, are leading the consolidation process, scooping up stakes in carriers like Air Berlin and Alitalia.

“In the case of the Etihad investments, I understand the rationale,” Wigmore said. “Berlin and Rome are huge origin-and-destination points, so to get control of that traffic flow down to the Middle East and over to Asia could be a very profitable investment that makes a lot of sense for them.” 

However, he added that the turnarounds are likely to be challenging, expensive and take a couple more years. 

Wigmore also flagged the opportunity of Airbus A330s and Boeing 777s coming off their first leases, as European carriers introduce newer twinjets such as the A350 and 787.

“There’s going to be growth in the secondary market for used widebodies in Europe. With all these replacement aircraft coming in, not everybody is going to get 787s or A350s,” he said. “There’s lots of very able, young A330s and 777s that will be coming off their first lease in the next five or six years and they’re going to need new homes. I think many of them will come to Europe and many of them will come to airlines as first of type.”

TAGS: Europe
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