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LOT Polish abandons Condor. European airline consolidation on hold

Premium Analysis

The withdrawal by the owner of LOT Polish Airlines from buying Condor highlights an understandable anxiety among airlines to commit any funds beyond what is needed for immediate survival in lockdown.

The European airline landscape has long been more fragmented, and less profitable, than in North America. The mega deals that could transform it face considerable barriers – regulatory, political, social and cultural.

The coronavirus crisis – deeper than any previously – might be expected to catalyse deals that overcome such barriers. Yet, even in these extreme circumstances, major consolidation is not imminent.

LOT-Condor is not a mega deal, but its abandonment illustrates how distant the prospect of a really significant takeover or merger is. Consolidation through airline bankruptcy is more likely, but state support could limit this to the exit of smaller airlines with little impact on overall European airline industry structure.

However, the depth of the current collapse in European seat capacity (down by 88.7% in the week of 13-Apr-2020) and the importance of international markets – likely to lag in the upturn – point to a slow and shallow recovery. That is likely to have a more profound impact on industry structure.

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