EU subsidies hindering consolidation

Consolidation of European airlines like that seen in North America will not be seen for several years partly as a result of EU subsidies, according to Michael Powell, CFO of Wizz Air. Speaking at the ISTAT Europe conference Powell cited the recent approval of the Polish government's aid for ailing carrier LOT as an example of the support that is preventing consolidation. "The EU is failing to allow market forces to play their part. Just before the summer break it waved through bail-out plans - state subsidies - for a number of airlines, most notably €600m to LOT Polish Airlines. And if you saw the business plan that is based on you would fall off your chairs. You wouldn't believe that it's something that can be delivered," he said. "This is one of the reasons why I don't believe consolidation will happen in the next couple of years because the EU allows these subsidies to go ahead." Powell argued that consolidation was needed for the European aviation industry to become as profitable as US carriers. But he said the next wave of consolidation will not happen until the next economic downturn, which will force carriers to merge to survive. A poll of the audience revealed that 58 per cent agreed that the European market will see moderate consolidation moving forward.

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