While I highly doubt this will actually happen in the current environment, the prospect of this is fascinating.
In this post:
Lufthansa Group’s government aid negotiations
Lufthansa Group is one of the “big three” European airline groups, and includes Lufthansa, SWISS, Austrian, Brussels, etc. The airline group has taken a rather hard stance when it comes to negotiating government aid:
- In Germany, Lufthansa is doing everything in their power to avoid giving the German government any say in how the airline is run, even if the government takes a multi-billion dollar stake in the airline; Lufthansa was reportedly even considering bankruptcy protection over government funding
- In other countries (including Austria, Belgium, and Switzerland), governments have wanted assurance that their respective airlines would grow (or at least not shrink) in exchange for any sort of funding; after all, Austria doesn’t want to give a German company aid, only for Austria’s airline to shrink significantly
Lufthansa Group has been in negotiations with several governments
Etihad & IAG express interest in Austria
Media reports suggest that Etihad and IAG (the parent company of British Airways and Iberia) have separately approached the Austrian government to express interest in expanding there.
They’re not actually looking to take over Austrian Airlines, but rather are clearly trying to signal to the government that they don’t have to be held hostage by Lufthansa Group, as they’d be happy to step in and provide major capacity in the country.
It’s unclear if they’d be looking for government aid to do this, or what exactly the basis of negotiation is.
What could an expansion from either airline in Austria look like? I’m purely speculating, but below is my take.
Could we see Austrian Airlines have more competition soon?
IAG & Austria
In the case of IAG, the airline group has long been looking to expand further east in Europe. IAG’s low cost carrier, LEVEL, already has a base in Vienna. Presumably they’d not only be looking to expand that, but potentially would be looking to go beyond that.
I could see IAG operating long haul flights out of Austria, and also having the airline based there operating as part of the oneworld transatlantic joint venture. That would likely make the airline more premium than LEVEL, though.
At the same time, I can’t help but scratch my head at IAG’s desire to grow in Austria right now, in light of current circumstances. British Airways is cutting thousands of roles, arguing it’s the only way to survive, but is also pondering expansion in a new market in this environment? I guess the planes have to go somewhere, but that still will require some capital…
Maybe Ryanair CEO Michael O’Leary wasn’t that far off when he said the following regarding the big European airlines getting state aid:
“They see this as an opportunity to get one last huge quantity of state aid so they can go around and buy up everyone when this is all over.”
LEVEL already has a base in Austria
Etihad Airways & Austria
In the case of Etihad, well, hmmm. I don’t think there’s an airline in the world with a less successful investment track record than Etihad, between airberlin, Alitalia, Jet Airways, Virgin Australia, etc.
But this wouldn’t even be Etihad taking over an airline, but would rather see Etihad somehow investing in a new Austrian airline (presumably there would be other investors as well, due to foreign ownership laws).
One interesting angle could be that Etihad has way more planes on order than they need, as the airline plans to shrink. I guess they assume they could somehow use these in Austria? But this whole thing still seems exceedingly random.
Without an airline in Austria being part of a major alliance or part of a major joint venture, I’m just not sure I get this…
Etihad is reportedly interested in expanding in Austria
Bottom line
It’s interesting to hear that both Etihad and IAG are allegedly interested in expanding in Austria. This at least gives the Austrian government more leverage when negotiating with Lufthansa Group, as there are alternatives.
At the same time, I’m not sure I totally get how this would materialize, especially in the current environment.
Or who knows, this could just be IAG trying to sabotage Lufthansa Group, and to get Austrian owned as much as possible by the government, in hopes of it derailing the airline.
What do you make of the prospect of Etihad or IAG expanding in Austria?
Austrian would FLOURISH more under the IAG Umbrella of Airlines than it ever will in the Lufthansa Group (too many partners). Munich,Zurich and Vienna are all basically competing for the Same Customer and it also has EUROWINGS to deal with as well. throw in Brussels Airlines and STAR is basically cannibalizing its own Network . SKYTEAM is not a good fit for Austrian because they will be treated like an Outsider just as Alitalia,Tarom and...
Austrian would FLOURISH more under the IAG Umbrella of Airlines than it ever will in the Lufthansa Group (too many partners). Munich,Zurich and Vienna are all basically competing for the Same Customer and it also has EUROWINGS to deal with as well. throw in Brussels Airlines and STAR is basically cannibalizing its own Network . SKYTEAM is not a good fit for Austrian because they will be treated like an Outsider just as Alitalia,Tarom and others have....that Alliance is the useful of them all.
@Stuart:
Yes, article was corrected - just checked my browser history.
It is interesting to note that this change to headings and text has been made without any notice. (E.g „On our own behalf" or "correction" or "in an earlier version of the article ...").
Anyway, content is now correct.
Austrians allowing foreigners to march in and take over? Is there any precedence for that?
IAG's expansion in Eastern Europe does not equal OW's expansion in Eastern Europe. As much as I want to see OW gets more connection in that region (Yes @Will m, S7 hardly counts towards an option since it does not fly to Americas and has no direct OW traffic from Americas) I don't think IAG has an incentive to have its development in Austria included in OW, regardless it is LEVEL or something else.
Regarding track record, how about Swissair?
A LEVEL expansion in Austria could be the precursor to LEVEL expanding more through Europe. There was talk of Vueling being rebranded as LEVEL but I don't know if there was any substance to those rumours. Michael O'Leary was right. The most financially solvent airlines will use this crisis to buy out much of the competition (IAG look set for a large price reduction at Air Europa). In Europe we have the big 5 airline...
A LEVEL expansion in Austria could be the precursor to LEVEL expanding more through Europe. There was talk of Vueling being rebranded as LEVEL but I don't know if there was any substance to those rumours. Michael O'Leary was right. The most financially solvent airlines will use this crisis to buy out much of the competition (IAG look set for a large price reduction at Air Europa). In Europe we have the big 5 airline groups, Ryanair, easyJet, IAG, Lufthansa Group and Air France-KLM (kind of Turkish Airlines as well). After this crisis is over the make up of the big 5 will be completely different. Potentially it could become a big 6 with Wizz Air looking to expand more into Western Europe. The European aviation market was overcrowded before this crisis, it will emerge almost unrecognisable from what it was in 2019.
Let’s think for a moment Etihad plan goes ahead. Wouldn’t they be required to respect the 49% cap to keep it an EU airline? Am I missing something here?
Did the article change? Because I swear when I read it before it said that they were looking to invent in Austrian. Not Austria. Could be me. But others seem to say similar.
Is there some alternative motive as to why the likes of Qatar and Etihad invest in so many airlines?; especially as non of their investments have been 'successful'.
It's quite clear what IAG is about: The bynkruptcy of airberlin left a major hole in Oneworld's connection map. They are clearly missing a hub in central Europe, while LHR, MAD and HEL are quite at the edge of the continent. And it's of course not only about connections but also about market share - keep in mind how much the Lufthansa Group is dominating central Europe. To see them losing market share in VIE...
It's quite clear what IAG is about: The bynkruptcy of airberlin left a major hole in Oneworld's connection map. They are clearly missing a hub in central Europe, while LHR, MAD and HEL are quite at the edge of the continent. And it's of course not only about connections but also about market share - keep in mind how much the Lufthansa Group is dominating central Europe. To see them losing market share in VIE would be especially good for competition on the whole continent!
I'm wondering when we might be hearing from Airfrance/KLM to hunt for some engagement in, say, Belgium or Switzerland!
I doubt they actually want to walk the talk. They just want to take away leverage from Lufthansa in their negotiations with the Austrian government. Given how poorly Lufthansa has treated Austrian this is probably deserved to some degree.
No Eastern European OW hub? Aren’t you forgetting S7?
It’s fair enough though, many people do.
This is impossible to imagine.
That said, I echo the other comments that Oneworld desperately needs better connections into Central and Eastern Europe. Right now, Air Serbia is the only non-aligned airline left in the region, and would make a great partner for oneworld. Especially as there are senior Serbian government officials on the record musing about buying back all of Etihad's shares - such a move would break that link and would necessitate...
This is impossible to imagine.
That said, I echo the other comments that Oneworld desperately needs better connections into Central and Eastern Europe. Right now, Air Serbia is the only non-aligned airline left in the region, and would make a great partner for oneworld. Especially as there are senior Serbian government officials on the record musing about buying back all of Etihad's shares - such a move would break that link and would necessitate Air Serbia forging new deals with new partners. An IAG investment there would make sense, and probably wouldn't cost the group anywhere near the amount an investment in Austrian (or any other airline) would.
@Lucky:
It’s not good that - again when it comes to Lufthansa - are spreading wrong news. Not sure if translating from German into English is not your biggest strength or if you just didn’t read the source carefully.
I am sorry to be that direct - but that’s because I do not expect this article to be corrected.
As David and Andre are saying: IAG or Etihad do not intend to buy AUA - their intention is to strengthen their own airlines at Vienna.
Would fully support it. Other than Madrid and London, IAG have no hubs in Europe, and they need one further east in central/eastern Europe.
If anyone wants to fly from the US to central/eastern Europe direct on oneworld, it's tough. A central/east Europe hub would make a lot of sense.
As I wrote a couple of weeks back, the result of Covid-19 will definitely be further airline industry consolidation. Let's hope some of these...
Would fully support it. Other than Madrid and London, IAG have no hubs in Europe, and they need one further east in central/eastern Europe.
If anyone wants to fly from the US to central/eastern Europe direct on oneworld, it's tough. A central/east Europe hub would make a lot of sense.
As I wrote a couple of weeks back, the result of Covid-19 will definitely be further airline industry consolidation. Let's hope some of these go thru, as it will result in increased competition from the USA to central Europe is very Skyteam and Lufthansa dominated, with pricing that reflects that situation.
I highly doubt this is a serious offering. More like posturing to make sure Lufthansa does not get an easy road to becoming leaner. Lufthansa/Swiss/Austrian make up a fortress together and they need each other now more than ever. Further, the costs and work involved in Austrian restructuring their entire operation to mesh with IAG would be huge during normal times, let alone now.
Lot Polish is a much better target. And probably easier to approach and align.
It would be more befitting of Austrian to be part of OW, after all *A and to a larger extent Skyteam airlines are gutting loyalty programmes to no end and don't not portray the luxury image that Austrian actually does.
There seems to be a misunderstanding. IAG is not interested in buying or investing Austrian Airlines. They are offering ramping up there own products in Vienna. Basically they are saying, instead of giving Austrian/Lufthansa hundreds of millions they want to fill the gap that a bankrupt Austrian would leave behind.
I get that it seems tough to imagine LH Group letting IAG get such a foothold in Eastern Europe, but It does seems like Austrian would be better off in IAG than LH Group. VIE has to compete with flow traffic against ZRH and MUC, at a minimum, within the JV. Throw in CPH and LO within Star alliance feed. They'd have so much more flow from North American Flow into Eastern Europe to say nothing of the feed from Spain and the British Isles.
IAG makes perfect sense! They know there’s only so much traffic for BA/Iberia/Aer Lingus so the next option to make money is invest in another small but strategically placed airline! And they too could be seeing an opportunity to offload aircraft. Yes, they have Level in Vienna plus Niki was a member of OW.
They dont want to buy Austrian but want to invest in building up Vienna as a hub and potentially becoming a new state carrier for Austria. The article doesnt say anything that they wanna takeover AUA.
Are you kidding me Ethiad. You have no place in foreign investments. Etihad continues to loose money, and should not run Austrian into the ground.
I dont think IAG should be purchasing Austrian Either, please keep with it with Lufthansa.
IAG investing in Austria would plug the hole they have in Central and Eastern Europe I imagine. Something tells me however that Brussels Airlines and Austrian won’t be in Lufthansa group any longer.