What now for the European airlines?

 The latest events in the expected direction in which the market was heading gives us new food for thought. 

 

The European Commission has nodded through both Lufthansa´s purchase of 41% of ITA and AF/KLM ´s purchase of 19% of SAS with conditions not talked about. On the other hand IAG´s bid for 80% of Air Europa, which it did not possess, was refused despite the airline group acceding to major limitations on its operations at Madrid Barajas, in Europe and on routes to Latin America. This has proved "too much to ask" by the shareholders of IAG. Thus the bid was withdrawn with a €50 million penalty to Air Europa´s owners. So that changes the future prospects from now on.

 

One person pointed out that IAG was the most profitable airline group in Europe aiming for a 10 to 15% return on capital which the bond markets appreciated through the increased shareprice. What was not mentioned was that as long as the (other) airline groups remained just profitable, their real owners do not insist--- in the case of Lufthansa (the German Government is the decider(the governments of Belgium,Switzerland, Austria have no say in the matter). The Italian government (for ITA) will be included in that list in the not distant future. 

As for AF/KLM, it is the French government which is the decision-maker. The Dutch have little say. For example, not long ago the Dutch government increased its share in the group up to near that of the French. This action irritated the French. The Dutch do not want to be left out nor be camp-followers --- but the real strategic decisions are taken by the French. For them and the Germans it is a question of power not profit. IAG has to satisfy the stock markets.

Why are things like this. The main countries to finance the European Union are the larger ones with greater economic power. That means in the EU advice is listened and adhered to from the Germans and French.  Thus the operations of those countries´airlines were given the go-ahead. In the question of IAG the Spanish government does not have enough clout, while the Brits. do not count any more having decided to be outside the EU community. Thus the conditions under which IAG could purchase Air Europa became unacceptable. The only airline which would have benefited, at all, was Volotea, with routes transfered from Iberia in Spain. However, it would still have remained a minnow.

I suspect that the deal(behind closed doors) which was being brokered was that Air France received Air Europa while Lufthansa got TAP. 

The rumour mill now states that IAG will make an effort to buy TAP to compensate its loss. Not only does the rumour mill say that Lufthansa is interested but also that the Portuguese government is thinking of not selling 100% as originally planned but a lesser share (unmentioned). We shall see.

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At this point, I would like to show a small graph. This indicates population size with the subsequent suggested economic power of the country, but also the potential for "home created" passenger traffic.................. 

List of European countries by population
Source    UN (World Population Prospects 2024)
Date    21 Aug 2024

Russia is the most populous country in Europe and the only one with a total number of humans above 100 mn.
This is a list of the 18 largest countries in Europe by population. Turkey is not included in the list.
.
 Country/Region                    Population    
                                  2023            2024        
Russian Federation    145,440,500    144,820,423      wants other allies
Germany                   84,548,231      84,552,242      LUFTHANSA group
United Kingdom          68,682,962      69,138,192       IAG
France                     66,438,822      66,548,530       AF/KLM
Italy                        59,499,453      59,342,867        
Spain                       47,911,579      47,910,526       IAG,  Air Europa, Volotea  
Poland                     38,762,844      38,539,201        LOT        
Ukraine                    37,732,836      37,860,221        at war  
Romania                   19,118,479      19,015,088        Tarom    
Netherlands              18,092,524      18,228,742        AF/KLM
Belgium                    11,712,893      11,738,763        
Czechia                    10,809,716      10,735,859        CSA goes to Smartwings    
Sweden                    10,551,494      10,606,999        
Portugal                   10,430,738      10,425,292       TAP
Greece                     10,242,908      10,047,817       Aegean    
Hungary                     9,686,463       9,676,135        
Austria                       9,130,429       9,120,813            
Belarus                      9,115,680        9,056,696         allied elsewhere    

In simpler terms this now indicates that the regular passenger airlines of the top 18 largest European countries which remain to be possibly taken over are 

LOT                 Poland       38.5 million 

Tarom              Romania     19.0 million

TAP                 Portugal     10.4 million 

Aegean            Greece       10.0 million

plus Air Europa  (Spain)       47.9 million

and Volotea  (Spain)            10.4 million

and a selection from smaller countries like Serbia, Croatia and Bulgaria.

So IAG has few options in Europe, apart from Finnair. TAP should not even be considered as a target, however interesting the Portuguese language markets in South America and Africa might be. The EU will be sure to put very strong conditions on any possible union with TAP as it did with Air Europa. Why waste the time and effort?

 

The obvious choices are LOT or Aegean.

 

 The Greeks have an interesting home market which by necessity is very active (island hopping). My bet, though, is LOT.

 This airline is run by (nationalistic) Poles who can fix anything from leaks upwards and are being very ambitious. They already operate flights from Prague and Budapest, as well as Poland, to the disporas in North America. The Poles are already building a modern new hub in the centre of the country which would be excellent to complement London LHR and Madrid Barajas. Help them build up their markets, just as Aer Lingus has been helped to gain market share in North America by BA/IAG. IAG with such a merger(or takeover) would gain stronger presence in Eastern Europe, the Baltic area and South Scandinavia  --- with Finnair, even better. It would be impossible to encounter with the EU authorities the same difficulties as would have to be shown to Lufthansa and AF/KLM were they rivals in any such merger/takeover.

List of largest airlines in Europe   (Wikipedia)

https://en.wikipedia.org/wiki/List_of_largest_airlines_in_Europe

 

Apart from the "legacy" airlines mentioned there are other airlines which might not want to form part of any airline group. The biggest "low-cost" airline in Europe is Ryanair which has its subsidiaries including Buzz (Poland), Lauda Europe and Malta Air (Malta), and its UK subsidiary RyanairUK. The passengers flown in 2023 reached 181.74 million for the whole group.

The next biggest "low cost" carrier is Easyjet with its subsidiaries in the UK, Switzerland and Austria at 82.8 million passengers which it flew in 2023.

The third "low-cost" airline is Wizzair based in Hungary (60.3 million passengers in 2023) but with subsidiaries also in the UK and the United Arab Emirates. This seems to suggest that they see their principal area for expansion in the Middle Eastern countries, outside Europe. They might even have ambitions to fly to Pakistan, India and Bangladesh from the Persian Gulf as people from those countries provide the backbone of the labour force in the Gulf. The Arab states have also started up their own low-cost airlines so the competition should be fierce.

After those three airlines the other big low-cost airlines form part of the three big airline groups Vueling (short haul) and LEVEL(long haul) (IAG); Eurowings (short-haul) and Discover(long-haul) under Lufthansa;

  

Transavia is the subsidiary low-cost airline for both KLM and Air France. Vis a vis the public this is just one operating company but legally there are two, a subsidiary for each of the parents. These airlines of the three groups seem destined to be the vehicles for their expansion.

 

Apart from these six aforementioned airlines there are others eeking out a niche for themselves in the market. The biggest of these is Norwegian Air Shuttle (short haul)

 while a new airline has arisen to take over the long haul services which that operator could not make work called, Norse Atlantic Airways. This flies from Oslo and then differing services from Paris, London and Rome, and sometimes Berlin. They mostly go to the west and east coasts of the USA together with some Caribbean islands and Bangkok as alternatives.

Norwegian flew 20.6 million passengers in 2023 while Norse Atlantic flew 980.000 passengers in 2023. The future for these two airlines is not clear as they will find it hard to maintain a presence in a highly competitive market. The best bet for Norwegian would be to link up with Easyjet to provide a stronger competitor for Ryanair.

For Norse Atlantic we will have to look at the other candidates in the long-haul low-cost market. Discover is Lufthansa´s candidate. LEVEL would be IAG´s candidate flying from Barcelona. In France we have two possibilities which fly mostly to France´s overseas possessions, in the Caribbean, the Pacific and the Indian Ocean as well as other former possessions in Africa.These are Frenchbee and Corsair both are attractive partners though might choose difficult to court.

The remaining airlines of any stature might well be Tarom, Air Serbia, Croatia Airlines, and Bulgaria Air but these are really minnows  who add little or nothing to any grouping. The only two which remain, of any substance are Volotea and Air Baltic. Volotea we have seen before in this article. It is a Spanish airline which operates mostly in France, Italy and Spain from minor airports and has grown to 10.4million passengers(2023) which would be an interesting morsal for any airline. The remaining airline to mention is Air Baltic. This is based in Riga (Latvia) but has grown to serve all three of the Baltic States, plus Tampere (Finland) and Las Palmas (Gran Canaria). Its passengers carried in 2023 came to 4.54million.It is a very agressive airline seeking to maintain costs by only using A220 aircraft and extending its reach throughout the whole of Europe with particular emphasis in Eastern Europe. This is an interesting candidate for IAG to set up another low-cost carrier for the Northern half of Europe to complement Vueling in the Southern half.

 Thus I see the European airline  market for consolidation. Will it turn out the way I suggest - who knows? It will, however, still take some time to achieve and a lot could happen in that time, including game changing disasters. Let us see.

The Star that is Birmingham

Then what needs to be done on the ECML and (East) Midlands Main Line (MML) railway.

It has always been said that the line up the east coast of Britain was the better one for connections to Scotland from London. This was put down to the terrain which tended to be flatter than the west coast with the possibilities of more straight stretches of line facilitating the greater possibility of achieving fast speeds. In fact in the 1930s(3rd July 1938), the fastest speed still standing for a steam engine (LNER Mallard), was achieved on this line at 126 mph (203kph). There were also no great lengths of line in England that were impeded by hills and mountains. That was only the case in Scotland where the route had to go more slowly along the coast between Newcastle and Edinburgh.

The WCML has a length of 642kms. which is 10 kms. longer than the ECML but has almost always tended to have more traffic using it, long-distance, commuter rail and freight.  

I cannot give you the length of the whole west coast line from London to Scotland after my proposed new lines,renewals and up-grading. However, I can do so on the length of lines from Lancaster to Glasgow (west coast) and from York to Edinburgh (east coast) which start at roughly the same latitude, 54º02´ versus 53º57´ .

Under my proposals, as seen in my previous article, the west coast line (HS2) from Lancaster to Glasgow would come in at 254.5kms.while the east coast line (HS3) would come in at 286kms. A difference of 31.5kms.That is a very similar distance considering the differences between the routes.

The ECML (East Coast Main Line) was the name given to the main rail route from London Kings Cross to Edinburgh via Doncaster, York, Darlington and Newcastle. However, it cannot be taken in isolation as the East Midlands Line is part and parcel of the same route up to Leeds. It runs through Bedford, Leicester, Loughborough and Chesterfield to Sheffield. Up to the present that is considered the end of the line while logic demands it be extended to Leeds(and/or Bradford). That is not the case because of the atrocious network of railways between Sheffield and Leeds, inherited and never up-dated, from the original constructors in the 19th Century.

 

If the ECML is split in three parts we find that each length comes out as follows....

Kings Cross - York                303kms.     

York - Newcastle                  129kms.

Newcastle - Edinburgh          200kms.

TOTAL  ECML                      632kms.

 

If we look at the up-dated, improved, straightened line, we can call it HS3 (High Speed 3 - as an extension of HS2). Then each length comes out the following way....

Kings Cross - York                297kms.

York - Newcastle                  121kms.

Newcastle - Edinburgh         165kms.

TOTAL HS3                         583kms.

Saving on new route           49kms.

 Let us look at the line in its three stages.

1- Edinburgh - Newcastle

This is the worst part, and slowest because of the terrain.

The present ECML runs along the coast from Edinburgh to Newcastle (white line).Constructing the fast line (HS3 - the blue line) will save 35 kms. on that part of the route, while still avoiding all designated areas of natural beauty. Surely this should be a must in the usually difficult terrain of Scotland. It is shorter, more direct, and with more gradual inclines to pass over the intermediary landscape. A two-track system would be quite sufficient to accommodate High Speed trains, fast freight trains and fast regional trains which could have `passing loops at intermediate stations, such as Newcraighall, Mayfield, Coldstream, Newcastle Airport. These stopping trains would be similar to the Javelin services out of St. Pancras to the Kent coast.  In fact all the HS trains could stop at Newcastle Airport as a matter of course.

  2- Newcastle - York

 The section from Newcastle to York is one of the easier ones to bring up to scratch. The most important part is between the towns of Chester-le-Street and down to Northallerton, or further down to Thirsk. There are some sections which can gain a lot of line speed by straightening. The terrain is no big problem so probably could provide us with two fast tracks within a year. The saving in track distance would be 8 kms. which is not too great but could make a big difference in line speeds.

 

 3)- York - Kings Cross

There are several stretches along this stage which require either, straightening or increasing to four tracks. They are not difficult to achieve as was the line from Newcastle to York. The markers point out the most important sections. The most notorious section, however, is that between Knebworth South and Welwynn Garden City North. It is less than 4.5 kms in length but is a bottleneck. There is no excuse which can justify leaving this problem for so long. Four-tracking the section is a must though somebody will feel badly treated as a result. I do not offer a solution as the people on the ground in that area can perhaps offer better and more satisfactory solutions. I only have to remind you that there are three solutions --- over, under or round --- whichever is the most satisfactory.

The rest of the line into London offers no great problems except for the volume of traffic. This is inevitable in a big city, and might make a new line construction the only solution for future expansion. 

Along the whole section from York to London the distance saved only comes to 6kms. but it would improve the service substantially. 

The (East) Midlands Main Line(MML): 

Initially the MML is considered to go from London St.Pancras to Sheffield. It has been electrified to Corby and Market Harborough which are just south of Leicester. Since the whole line is going to be electrified, at some point (we do not know when) we will look at this line from south to north The next stage being electrified is the short section up to Wigston just south of Leicester.

I cannot make much comment on the stage from here to Sheffield as we do not know the specific plans. I can only speculate as I have done on the map. There are various parts where line straightening could be made, especially in the part from Old Whittington (just north of Chesterfield) to Sheffield.

From Sheffield logic dictates that the line continues north from Sheffield to Leeds (and Bradford). As the lines between these cities are very windy I can only propose a solution as shown on the map. This should solve the problem of the slow, windy line, offering a much faster alternative through Barnsley to Wakefield. There one branch would continue to Leeds while another would branch off left to Bradford. I should point out that the section from Wakefield to Leeds would be the same as the one that forms part of the ECML from London Kings Cross to Leeds.

 

These improvements to the ECML/HS3, and the MML are so important yet not so significant in distance or works, that I cannot understand why they have not been attacked before. The gains are tremendous and could alter the balance between west and east to the benefit of the latter -- which is something politicians  have been aiming for during decades. Now is the time to go ahead.