Why Do Carriers Want to Get Bigger and Bigger?

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I ask myself this question every time I see a company buying another. It may be the rule of life but, to tell the truth, I don’t always see the point of it. Recently, the Turkish company Pegasus Airlines bought the Czech national carrier Czech Airlines after having acquired the country’s “low cost” airline in the past: Smart Wings. Of course, the Turkish carrier is doing well and its government is doing everything to develop its air transport, in notable contrast with the European authorities.

This is not the only example. Not only are we seeing large companies ready to devour smaller ones, but we are also seeing that good-sized operators are looking to be bought out by larger ones. ITA has been sold to Lufthansa, SAS is in the process of being absorbed by the Air France/KLM group and TAP is making eyes at the three European majors. What are the players looking for in this desire for rapprochement even if they don’t really need it?

ITA, the Italian company born from the disappearance of Alitalia, which, for once, could not hope to survive given the way it was managed for the sole benefit of its employees and friends of the government, has demonstrated its capacity for healthy and rapid development. We do not see why the Italian state did not simply let its national carrier continue its growth, which was virtuous and profitable. There is no doubt that the Lufthansa group has made a good deal.

The Portuguese government has launched a search for buyers for its company TAP Air Portugal. After a bit of a difficult few years, the Portuguese carrier has made a spectacular turnaround and is now in good health. Its size is respectable and it sits on a southern transatlantic network that is just waiting to grow. Why then want to sell what is profitable and bears the colors of the country? Because make no mistake, the buyer, whoever he is and whatever his promises, will only act for his own benefit, even if it means limiting the development of his new subsidiary.

The trend towards rapprochement, or consolidation, which means nothing, has never shown its virtues, neither for the companies it buys nor for the buyers, except in the case of a defensive strategy as is the case for Air France/KLM. In the United States, we have witnessed the demonstration of this phenomenon. The merger of most regional airlines, some of them of good size, into three major groups, United Airlines, American Airlines and Delta Air Lines, has not proved to be a success. It should be remembered that the three groups that finally won the competition all went through Chapter 11, i.e. the bankruptcy filing.

We must also remember the disastrous strategy of Etihad Airlines, whose bulimia almost proved fatal to the company. By wanting to grow too much, we end up creating disparate and ultimately ungovernable ensembles. Of course, I can always be opposed to the undeniable success of the IAG group, but for this to happen, the major carrier, British Airways, had to agree to leave the general management to a Spaniard, and it is difficult to see a German operator doing the same with an Italian, for example. And let’s add that the IAG group has a real international connotation where each component can be found, whereas this is not the case for the Lufthansa group.

And we can also ask another question: wouldn’t the companies of the same group achieve just as good or even better results if they were independent? One thing is certain, however, that countries that sell their national carrier lose in one way or another a formidable tool for the promotion of their country. This is what some states such as Qatar, the Emirates or Turkey have understood for example. Their national carrier and even for Turkey their “low costs”, largely supported by their government, have demonstrated their capacity for development. And the more their carrier develops, the more the country’s image carries estimable values.

Of course, some states are too small and too weak economically to support a company capable of carrying their image on an international level. This is what is happening in West Africa, or in certain Asian and South American areas. But there is always the possibility of creating and developing domestic and regional air transport for the best benefit of their populations.
An airline is valuable not only for its economic contribution, but also because it is a powerful cultural vehicle.

These Abuses That Penalise Air Transport

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All air transport customers are well aware that certain practices seem curious, even useless.
Interactions between the actors are parsimonious, to say the least, each of them wanting to preserve some small advantages over others and legislators sometimes meddle in what does not concern them. All these little abuses make air travel strewn with small irritations that we could do without. Each component of air transport suffers the inconveniences caused by the other players and the same ones are a source of difficulties towards their respective environments.

Airports
Crossing a major airport is perhaps the most difficult moment for a passenger. Access is often complicated, signage is sometimes incomprehensible or even completely absent and the spaces seem to be more dedicated to shops, which are largely drained by the airports, than to facilities reserved for passengers. Let’s add to this the famous PIFs (Screening Inspection Posts) set in an incomprehensible way, and often different from one terminal to another in the same airport. Should you keep your seatbelt, put down your watch, open your toiletry bag, take off your shoes? In short, all these small frustrations are a source of stress that passengers would gladly do without.

Airlines
Nor are they free from abuse. Take pricing for example. Who can explain the basis on which fares are multiplied, up to more than 100 for a long-haul flight in the same class of service on the same day? This is a first source of frustration felt as an injustice when a customer realizes that his seatmate has been more favored than him. And that’s not all, the boarding procedures are sometimes similar to the gathering of sheep before they are sheared. Customers are made to wait in the bridges, sometimes for nearly half an hour while waiting for the aircraft to be ready. Why this procedure when passengers could just as well have waited in the airport. Moreover, without knowing if the difficulty comes from the airlines or the airports, there are few terminals where the boarding queues are clearly delimited and where passengers do not mix.

Governments
Curiously, the administrative authorities have a great tendency to interfere in the functioning of air transport. Flight delays are punished outright and strongly and companies sometimes have to pay compensation much higher than the fares paid by customers. In fact, some of them can make a profit by not only traveling for free, but by making money. The practice of “overbooking” is punished as a deterrent. We even see the European administration taking a close interest in the way luggage is handled. It must be said, however, that many rules had to be enacted because the companies had not agreed to solve the well-known problems between them. IATA should have played the role of referee, which it has never done, except in terms of safety with the IOSA (IATA Operational and Safety Audit) program. And let’s not forget the repeated taxes that each state sees fit to impose on air transport because, after all, customers can afford to use this type of travel and can therefore pay well without revolting.

Customers
Let us not forget them. They are also a source of multiple abuses. The behavior of some of them can make the trip unpleasant for others. Of course, these erratic behaviours can sometimes be explained by the stress to which passengers are subjected, particularly those who are less familiar with air travel. But finally, how can we explain certain jostling during check-in or boarding, how can we justify that some customers systematically put their cabin luggage in the first racks of the plane when they have decided to pay only for seats at the back of the cabin, how can we accept that some, in order not to pay for excess baggage, arrive on the plane with multiple packages and occupy a space much greater than what is allocated to them? And then there are those who claim undue compensation for a yes or no, because you never know…

It can never be said enough, air transport is a complex activity. It puts into operation a multitude of players and each of them can seize the machine. So it would be wise for each player to look for ways to simplify and streamline a mode of transport that is still magical.

Communication in Air Transport, Still Progress to Be Made

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It is always interesting to attend international conferences, especially if, like the recent World Connect, they bring together participants from 92 countries, i.e. from all over the world. This avoids always revolving around the same subjects.

The first observation is that the European continent stands out from the others by its attraction to environmental issues. For several years now, this subject has been strongly permeating air transport communication. It is underlying all the press releases and no serious intervention can avoid mentioning it. This is not the case for other continents, which are happy to free themselves from this constraint. The explanation is probably due to geography. Europe is a small continent, largely equipped with efficient land transport. The railway has become a real competitor to the plane and we recognize that this mode has been widely supported by governments against the air force. We even see some countries draining carriers with taxes that will be intended to improve the economy of its main land competitor, all in the name of ecology which has become the major reference and the supreme argument for the choice of mode of transport.

This aspect of communication is little used outside Europe. It is striking to see the extent to which air transport has become a real necessity elsewhere while it is denigrated on this continent. Its main use is freedom, as the President of Georgia has put it. Without air transport, countries are landlocked and at the mercy of more or less well-intentioned neighbours. So ecology really takes a back seat to this absolute necessity. In all other countries outside Europe, air transport is a factor of safety and economic prosperity, even if it is still used by only a small part of their population.
Of course, the environmental aspect cannot be set aside in communication, but it is still necessary to see who you are addressing. Governments can at any time be drawn into the demagoguery that consists of using air transport to preserve the planet, which is very practical to avoid confronting much more polluting sectors. Food waste is said to represent 6% of pollution, and clothing 7%, but confronting practices that are widespread among the population is not very electoral. So, instead of having a defensive communication, air transport would be well advised to insist on its technical progress and its practices that constantly aim to emit less CO², if only because the less air pollution pollutes, the more profitable it is. It should be noted that despite global growth of around 5% for half a century, while global growth is almost half as low, it manages to remain below 3% of total CO² emissions.

In fact, it would be wise for the aviation group, made up of manufacturers, airports and carriers, to speak with one voice by emphasizing the considerable progress made and those on which it is working successfully. I am thinking of traffic regulation and a much better use of airspace, which will be effective in the next few years. On the other hand, it would be better not to lie by announcing carbon neutrality by 2050 when all professionals know that it is impossible, which is not a reason not to work on it.

And then one day we will have to stop communicating about rates that do not cover the costs. Even if they are very little used in practice and if they are built so that customers are led to buy additional services, they do a real damage in the communication of air transport by giving the impression that it has no or little value since you can buy a London-Seville for 29 € for example. This race to see who can announce the lowest price is stupid and it is not by filling planes beyond what is reasonable that we will ensure the sustainability of air transport. It will have to make a colossal technological leap to face the next century. It will cost fantastic amounts of money in the hundreds or even thousands of billions of dollars. And who will pay for these investments? Simply the customers for whom the rates will certainly increase.

So we might as well address the general public, explain the issues and seriously start to make them aware of the financial constraints that will have to be faced in exchange for an ever-improving aerial product.