In 2013 will we really see further airline consolidation beyond a possible AA/US Air merger? There are so many airlines in the market right now looking for an investor, partner, buyer that 2013 could be the year of aviation M&A bonanza. Alas it looks far more likely that some airlines will slip further into difficulty that may well prompt governments to start lending a little bit of help once again while the regulators bow to political will and concentrate on hitting the banks. That is of course unless your airline has been thrust by management into the spotlight so many times that you now cannot get out of the regulator’s headlights – cue Ryanair and another Aer Lingus mess. Although I remain convinced that the sale of Aer Lingus to Ryanair would, in the long term, be of benefit to Ireland, after short term shocks.
We have been here before, the market will be destablised in some regions as airlines that should be left to fail are kept on government life support.
In Europe LOT Polish Airlines and CSA are receiving a bit of “extra help” from government while Alitalia searches for any help it can find and TAP searches for a non-existent buyer in a sale that the government in Lisbon really has not yet got behind. It seems that the government does not want to see a forced sale of their airline by the EU before the next election, so are happy with the lack of interest, for the moment. Finally just about every Indian airline bar Indigo is in the market for a foreign investor with Jet doing their best to tie up with Etihad. Then there is Kuwait which has its airline on the block – or does it? A parliamentary committee in Kuwait has approved the privatization of Kuwait Airways, but there were no major changes to the previously announced plans to offer a 35% stake to shareholders. This process has taken four years to reach this stage and will take another three to get any further. So does anyone really want to even think about investing in the airline in 2013 – the answer is not unless you are connected in Kuwait it seems.
The bottom line is that Indian airlines are in the market and are in many cases desperate but in Europe the potential for airline M&A activity is poor at best. In Africa though there is opportunity and Rwandair should be watched very closely indeed as it moves closer to trying to set-up an East African giant. Fastjet is also living up to its name and is doing well but SAA is in a real mess. SAA is to undergo a range of measures to improve finances and efficiencies, as acting chief executive officer Vuyisile Kona decides action is needed to save the state-owned airline.
Kona on Monday revealed that he has been developing a number of “interim measures” to turn the airline’s fate around, including efforts to streamline spending, improve efficiencies and stabilise the company overall. He stated that measures would be fleshed out by March, by then though it may be too late to save the airline. The state-owned airline has been flailing for some time now. Recently the Board requested a $480m – $720m bail-out from the government, prompting a dispute which saw eight Board members leave the airline. SAA has also burned through a $64m loan from banks just to keep flying, but this debt is due to mature in a few months so a crunch is coming.
Look to SAA as the big news problem airline in 2013: can the management save the giant? There will need to be serious changes in labour contracts if they are to have a chance of turning around the carrier, which will undoubtedly cause industrial action.
For good news in 2013 look to the Stobart Group who are doing quite well on their airport and airline ventures.
IF IT HAS A FLAG ON IT THEN IT MIGHT WELL BE FOR SALE
