Alitalia has tentatively agreed to merge with Wind Jet and Blue Panorama Airlines. According to AGI reports, Alitalia has signed a MoU with both Italian carriers to this effect. Wind Jet is a LCC operating short haul European services and Blue Panorama operates charter and scheduled services from its Rome and Milan bases. According to Innovata data, Wind Jet and Blue Panorama hold 10.6% and 2.9% of Italy’s domestic capacity, respectively.
Alitalia to merge with Wind Jet and Blue Panorama Airlines
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Alitalia's network benefits from Etihad partnership. Time now to shed the dependency culture
Since Etihad's Dec-2014 investment in a 49% stake in Alitalia the Italian airline has enjoyed much positive change. It has worked to move its brand and product more upmarket to differentiate itself from fierce LCC competition in Italy, where Ryanair is the biggest airline by seats.
Alitalia's long haul offering has benefited from its partnership with Etihad. This has mainly been due to codeshare access to a much wider range of destinations in the Middle East and Asia Pacific. However, this summer's launch of a Rome-Beijing service indicates growing self-confidence too. Alitalia has also shown renewed confidence by growing its small niche to Latin America, the main region where it takes the lead over Etihad. On short/medium haul the LCCs still provide a strong challenge, although Alitalia's European offering has been fortified by closer commercial ties with other Etihad investments (in particular airberlin).
However, Alitalia continues to be loss-making (to the tune of EUR199 million in 2015). This is a hard continuing habit to kick, even if the airline still insists that it will break the habit in 2017. The rest of the industry is collectively experiencing record profitability in 2016; an airline that cannot be profitable in such conditions still has much work to do.
European airline consolidation Part 2: M and A potential of major groups; benefits and hurdles
Part one of this report on European airline market structure and consolidation highlighted that the top twenty airline groups in Europe hold 75% of seats. This is the same share as the top six groups in North America. This equivalence, in market share terms, between Europe's top 20 and North America's top six underlines the huge gap in consolidation progress between the two regions' airlines. It would take a large number of merger and acquisition deals to recreate North America's market structure in Europe, consolidating 20 into six.
This second part of the report is a kind of fantasy, a hypothetical. It suggests an illustrative series of combinations among Europe's top 20 that would approximately replicate the market shares, in terms of seat share, held by North America's top six.
This would require large merger and acquisition transactions involving pairings between members of Europe's smaller top six of Lufthansa Group, IAG, Ryanair, Air France-KLM, Turkish Airlines and easyJet. It would also mean several deals involving second-tier FSCs and LCCs. However, for now the larger deals in Europe remain relatively unlikely, and there are even hurdles to the smaller deals.