Qatar Airways is looking to advance the process of consolidation in the airline sector with a declared ambition to create a “mega-carrier”, having just completed another move in its strategy of investing in other large long-haul carriers.
The ebullient CEO of Qatar Airways Akbar al-Baker is quoted by Reuters as seeing “a lot of synergies we could bring as a group…..I hope that one day in the not too distant future we all, these four groups, get together and exchange shareholdings in each other so that we will become a real mega-carrier. That is something that some people have tried, but not successfully”. An element of this strategy was to establish cross-shareholding between the different airlines.
He was speaking just after Qatar Airways announced that it had taken a 9.61% stake in Cathay Pacific, complementing the 20% stake it has in IAG and the 10% of LATAM that Qatar Airways already holds.
As Mr al-Baker admitted, in all these cases he is a minority shareholder and therefore has limited room for action in terms of corporate strategy. What he seems to be doing is manoeuvring himself into a position where he can benefit from any further mergers.
The airline sector is going through a period of consolidation. The agony of the North American airline sector appears to have abated and with fewer airlines and less competition the sector is making higher profits. In Europe, a series of smaller airlines have failed and the sector appears to be consolidating around a few large budget carriers. In Asia, in contrast, there are many new entrants and the incumbents are feeling the pain of severe price competition. It is this that is likely to drive a wave of rationalisation, a wave that Mr Al-Baker appears hopeful to ride.
The process of consolidation in the container shipping sector is well advanced. Consolidation in the air-transport sector has some similarities. What would be the implications for cargo? Certainly, there is unlikely to be a shortage of capacity in terms of belly-freight as the number of aircraft available continues to rise. However, in the not so distant future it is possible that the cargo sector will be composed of fewer, better integrated, providers.
Author: Thomas Cullen
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