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Airline Giants Prep for Future Consolidation

The airline industry is poised for significant change, with consolidation being the answer to meeting new sustainability ambitions. Ryanair’s CEO, Michael O’Leary, predicts that easyJet and low-cost rival Wizz Air will be next to join the takeover trend, with easyJet potentially being acquired by IAG or Air France-KLM, or both, and Wizz Air by Lufthansa or a Middle Eastern buyer. O’Leary’s bold predictions drew a frosty response from easyJet, which dismissed the prospect of Ryanair becoming the only low-cost airline in Europe as unrealistic.

Meanwhile, IAG’s CEO, Luis Gallego, expressed a more than 90% risk that the industry will not meet a European Union mandate for the availability of sustainable aviation fuel (SAF) by 2025. The EU mandate requires flights departing from EU airports to carry an increasing amount of SAF, starting with 2% in 2025. Gallego attributed the risk of not meeting this mandate to Europe’s tougher regulations compared to other regions, which he believes will make the industry less competitive. As a result, he sees consolidation as the answer, stating that smaller airlines will need to partner up to afford the sustainability ambitions they have.

Ryanair’s CEO, Michael O’Leary (Via Michael O’Leary/Twitter)

This consolidation trend is evident in IAG’s decision to cancel Israel flights for three weeks to assess the situation after a British Airways flight was diverted due to security concerns. Gallego stressed that it is up to governments to decide whether airlines continue to fly to Israel, and that IAG had made the decision to cancel flights to assess the situation. O’Leary, on the other hand, expressed surprise at Air France-KLM’s purchase of a stake in Scandinavian SAS, commenting that “Riyadh [Air] have lots of plans, but they have no access to aircraft.” He also predicted that Portugal’s TAP would be a more likely acquisition target for IAG ahead of rivals Air France-KLM and Lufthansa.

The airline industry is under immense pressure to reduce carbon emissions and noise pollution, and consumers are demanding more sustainable travel options. As O’Leary put it, “Millions of consumers in Europe will be relieved to hear there is no realistic prospect of Ryanair becoming the only low-cost airline in Europe.” The CEOs’ comments highlight the intense competition and consolidation in the industry, with airlines forced to adapt to changing regulations and consumer demands. The question remains, which airlines will be next to partner up and merge in the name of sustainability and survival.

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