Mergers and Acquisitions in the European Airline Sector

This thesis will examine Mergers and Acquisitions in the airline sector in the EU. The aviation industry is a unique sector in the economy. This industry is also an unstable and unpredictable business. Most empirical researches on M&A activity have looked at aggregated data and combined sectors. This thesis tries to investigate the M&A‟s in a specific sector as the airline industry is by looking into detailed information provided by a M&A database. The two rival business models (low-cost carriers and network carriers) have intensified the competition in the sector. The M&A deals by large network carriers show that they do not perform M&A‟s to adapt their company to another business model but merely for strategic reasons. There is no trend that the large network carriers try to incorporate new innovative low-cost business models. On the contrary, the major carriers are seeking to consolidate with comparable firms using the same business models to benefit from economies of scale and scope. The low-cost airlines try to seek other low-cost airlines in the same market to acquire or to merge with, this to increase market power and weaken the competition on important routes. As a consequence, these mergers are finding obstacles in regulatory boards and governments. M&A deals also reveals that having slots in large airports is very important to increase market power, therefore acquiring companies are willing to pay for this type of assets. For the future it is expected that the M&A activity is not going to stop and that the consolidation process in the airline sector will continue and that among the low-cost airlines strong M&A dynamics will continue.