State bailouts will stall airline consolidation, says IATA boss
GOVERNMENT bailouts of airlines might stall post-pandemic consolidation in the sector, the CEO of the International Air Transport Association (IATA), Alexandre de Juniac has warned.There’s an expectation amongst some airline bosses such as Ryanair’s Michael O’Leary that the Covid crisis that has bludgeoned the sector will lead to acquisition and other opportunities.
Mr de Juniac told the virtual Airline Economics Growth Frontiers Dublin conference yesterday that about 50 airlines around the world have gone bust since the pandemic began last year.
“Government presence in many airline shareholdings may stall or slow down consolidation because governments, having injected public funds in airlines will be reluctant to sell it or sell part of it to new partners,” he said.
“I’m not sure that consolidation will accelerate,” he added. “The financial situation of many airlines is so weak that they have no means to buy anything. They have to survive.”
Globally, governments have pumped about $160bn (€132bn) into the aviation sector since the pandemic began.
But it’s reckoned the Chinese government has also injected an additional $40bn, bringing the total to $200bn.
Mr de Juniac’s tempered view on consolidation is at odds with that of other aviation executives.
At yesterday’s conference, the chief executive of aircraft lessor Gecas, Greg Conlon, said he believes there will be consolidation amongst airlines. He said the fact carriers have also taken on more debt during the pandemic will also benefit the aircraft leasing market.
“There’s going to be, certainly, less operators than there were before,” he said of a likely shake-out amongst carriers around the world.
“We’re starting to see that,” he added. “There’s going to be some consolidation in terms of the number of airlines out there.”
Gecas is one of the world’s largest aircraft lessors.
Gus Kelly, the chief executive of Dublin-based AerCap, the world’s biggest jet lessor, said it’s not in the interest of governments to see airlines fail.
“Airlines are a vital part of global infrastructure,” he said at yesterday’s conference, which is typically held physically in Dublin at this time every year.
It and another event held annually at the same time in the city, the Airfinance Journal conference, usually lure thousands of delegates from around the world.
“And airlines are a vital part of specific economies and their infrastructure,” said Mr Kelly. “I do believe governments will continue to support airlines. They’re not going to support every airline. That’s not going to happen. We will no doubt see a few more casualties over the winter, but governments realise that airlines have to survive.”
Mr de Juniac said he’s broadly optimistic for the airline sector.
“There is still a very strong appetite everywhere in the world, particularly in developing countries, and also in more developed countries, to fly,” he said. “The long-term growth is still there for air traffic.”
At IATA, Mr de Juniac will be succeeded in the spring by Willie Walsh, who retired as chief executive of Aer Lingus owner IAG last year.
Mr de Juniac said he hopes Mr Walsh will “successfully boost and encourage the restart of the industry”.
“I fully trust him to do that perfectly,” he said.