European airline CEOs say industry consolidation vital

By Joanna Plucinska, Julia Payne and Kate Abnett

BRUSSELS (Reuters) -Airline executives called for further industry consolidation on Wednesday as the EU weighs a deal between Germany's Lufthansa and Italy's ITA Airways and hits pause on a separate transaction between IAG and Air Europa.

Europe's airline industry has been gradually consolidating for the last 20 years but remains fragmented, with small national carriers struggling to compete with bigger rivals, often needing expensive government bailouts.

The European Commission should "get on with it and approve these mergers because, ultimately, it is the way forward in Europe," Ryanair CEO Michael O'Leary said at an industry event in Brussels.

He added there was a need to "tidy up" small-scale, struggling carriers in Europe, pointing to Portugal's TAP as requiring an "unsustainable" amount of taxpayer support to survive during the pandemic.

Others highlighted that smaller airlines have a much greater chance of success as part of larger groups, such as Air France-KLM, IAG and Lufthansa.

"If we don't allow consolidation in Europe, we will destroy airlines in Europe," IAG CEO Luis Gallego told the conference.

The European Commission declined to comment.

LUFTHANSA NEXT STEPS

The European Commission is due to say this week how it views Lufthansa's bid to acquire a 41% stake in state-owned ITA for 325 million euros ($352 million) while offering up a statement of objections to the deal.

EU antitrust regulators opened an investigation into the potential deal in January, with warnings it could reduce competition in flights to and from Italy. Potential remedies could include opening up slots, traffic rights and planes to allow a rival to operate on some routes.

Lufthansa CEO Carsten Spohr said he wanted to close the deal "as soon as possible", and was optimistic ahead of the expected EU statement of objections, with rivals such as easyJet and Ryanair vying to take over slots that could be given up in Italy as part of the deal.

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(Reporting by Julia Payne, Joanna Plucinska and Kate Abnett; Editing by Jan Harvey and Mark Potter)