Flight International - 04

Market Strategy
Colombian budget airline Viva Air has suspended
operations while it tries to merge with Avianca
“We allege that the proposed
merger [between JetBlue and
Spirit] would lead to fewer seats
and higher prices for travellers”
Vanita Gupta Associate attorney general, US Department of Justice
the highly competitive North
American discount airline market.
ULCCs play a critical role in
the American economy by making
air travel more affordable,
says Vanita Gupta, US associate
attorney general. She adds that
the US government’s complaint
“rests on well-established theories
of anti-competitive harm”.
“We allege that the proposed
merger would lead to fewer seats
and higher prices for travellers,”
she says. “And we allege that the
proposed merger would heighten
the risk that remaining airlines
would co-ordinate to raise prices.”
Thriving market
JetBlue says the ULCC market will
“continue to thrive” if it successfully
purchases Spirit: “Because many
Spirit aircraft will continue to fly in
their current configuration during
the retrofitting process after the
transaction closes, there will be no
short-term change in capacity.”
Despite the challenges in progressing
consolidation, more
activity is in the works. In Europe,
Lufthansa remains in talks with the
Italian government over its planned
acquisition of ITA Airways, driven
by a desire to add a base in southern
Europe.
“The five hubs we have are fairly
northern positioned, which has its
advantages when you think about
the North Atlantic, Japan and
China,” explained Lufthansa group
chief executive Carsten Spohr
during a full-year results call in
early March.
“When it comes to the – in my
view – relatively small but growing
southern hemisphere markets, being
further north is a disadvantage because
a certain share of our European
passengers need to backtrack.”
ITA is one of two southern European
airlines openly in the market
for investors, the other being TAP
Air Portugal. While Spohr does not
rule out a move for the Portuguese
carrier, he outlines a key benefit of
ITA and its Rome hub.
“The difference between TAP and
ITA is TAP would be new markets
for us. They only serve two markets
that we serve ourselves in Latin
America,” he says, noting that as
the group covers many of the same
destinations as ITA, this would enable
it to increase its market share
and reduce backtracking time.
“Now we focus on ITA. Then we
will look at TAP, as probably my two
best friends in the industry will, and
we take it from there,” Spohr says,
referring to rival European airline
groups Air France-KLM and IAG.
Political controversy
Air France-KLM chief executive
Ben Smith recently reiterated
the group’s interest in TAP, while
Gallego has said IAG’s move for
Air Europa does not rule it out
from also considering other acquisition
opportunities.
TAP’s attempt to position itself
for sale has been complicated by
the removal in March of the airline’s
chair, Manuel Beja, and chief executive
Christine Ourmieres-Widener.
That followed publication of a report
into a controversial severance payment
to a former TAP administrator,
with Portugal’s finance minister
Fernando Medina seeking to “turn
the page” at TAP after a political
scandal that had already seen two
government officials resign. ◗
April 2023 Flight International 25