Why Europe may never follow the US airline industry’s path

From 1960 to 2000, the aggregate profits of the US airline industry would have been enough to pay for the delivery of just two 747 jumbo jets. Then, after the 2008 financial crisis, things changed. A wave of mergers between US airlines resulted in rapid consolidation. As the market became less fragmented and operating models leaner, it started to appear that the US airline industry would become reliably profitable for the first time in its history. Operating margins moved from negative to positive. Shares in Delta Air Lines rose fourfold from the start of 2009 to the start of 2015. United rose by more than 5.5 times. The “Great Consolidation” had occurred. Investors came to believe that a more consolidated industry would behave in a more predictable fashion and that the remaining operators would refrain from brutal price wars that flooded the market with seats and cheap tickets. If they all kept in line, all would benefit. Over recent years, investors and analysts in European airlines have eyed the transformation in the US and started to dream that, maybe, the same Great Consolidation could be possible across the Atlantic. Unlike in the US, market share in Europe is still highly fragmented, with incumbent formerly state-owned airlines competing with big low-cost carriers such as Ryanair and easyJet, and other smaller ones. Story has more. <br/>