EasyJet: regulatory barriers to a rival airline bid are a missed opportunity for consolidation

The bidding war for easyJet has not yet come to a conclusion, but it could be a missed opportunity to achieve significant consolidation in the European airline industry.

So far, two private equity investors - Apollo Global Management and Castlelake - have made indicative offers for Europe's second biggest low cost airline. EasyJet currently favours Apollo, whose offer has a higher price and which backs the airline's existing strategy. The process is not yet over and further bids could change the outcome.

Nevertheless, it seems unlikely that a rival European airline will make a bid. Competition regulators would likely impose remedies that would make such a meaningful step towards an improved market structure economically unattractive.

For the European airline industry as a whole, market fragmentation means return on investment typically does not cover the cost of capital for most participants. Regulatory disincentives to airlines bidding for easyJet are a chance squandered.