Struggle for Aeronautics Leadership
COLOGNE/ROME (Own report) - With a series of significant company takeovers, the German Lufthansa and its rival Air France-KLM are continuing to pursue their struggle for leadership in the European aeronautics branch. Following Lufthansa's purchase of the Austrian AUA Airlines, Air France-KLM secured, yesterday, its merger with Alitalia, acquiring one fourth of the shares, and the option to buy more. The two rival core European aeronautics enterprises are also in competition for the Scandinavian Airlines (SAS) and are closely observing the developments in the on-going negotiations of the Spanish Iberia Airlines and British Airways, for a fusion. The rivalry, which appears to have become more intense this year, is impelling Lufthansa, in spite of its defeat in the competition for Alitalia, to try to gain ground in Italy, where it founded a subsidiary and is seeking to expand - particularly in the north of the country. There it is banking on the regionalist forces in the wealthy Lombardy region and is being supported by the political arm, the right-wing Lega Nord Party.
Decisive Phase
The struggle, that has been raging for years, for the predominance among the European flight companies (german-foreign-policy.com reported [1]) has been further intensified. The crisis-induced wave of fusions will continue in the new year. The International Air Transport Association (IATA) characterized the year 2008 as "a pitch black year" and expects that business difficulties will continue into 2009, with a prognosis that the European airlines will suffer losses nearly 10 times greater than those in 2008.[2] Because of rising costs and sinking demand, the smaller airlines' chances of survival and the struggle for predominance in the European aeronautics is now entering into the decisive phase. It is being fought out as a duel between the German Lufthansa and the French-Netherlandic Air France-KLM. The third rival, British Airways, is on the verge of falling out of the race and is already being seen as a possible takeover target.
Number One
In the aeronautics duel, it was Lufthansa that took the lead most recently. After months of tug-of-war, the German airlines bought out the Austrian AUA Airlines company last December. With the takeover, Lufthansa, which, contrary to the trend in the trade, transported more passengers in 2008 than in the preceding year, outflanked its rival Air France-KLM. With approximately 75 million passengers, Air France-KLM was considered the market leader. Lufthansa - including Switzerland's Airline Swiss - transported more than 70 million passengers last year, with another 10 million AUA passengers to be calculated in. New takeovers are already foreseeable. The Lufthansa has already expressed its interest in acquiring the Scandinavian SAS airlines company. The British Virgin Atlantic is seeking to cooperate with Lufthansa and the Polish LOT airlines would like to win over Lufthansa to be a strategic investor.[3]
Resistance
The defeated rival, Air France-KLM, is retaliating and has announced that it will resist the AUA Airlines takeover.[4] In the end, Air France-KLM was the only serious bidder for the AUA franchise. It is complaining of serious discrimination in favor of the German company. The announced lawsuit before the EU Commission could possibly drag out for years the question of the legitimacy of the AUA purchase. The Air France-KLM is also actively forging its own plans for takeovers. The Irish Aer Lingus airline has chosen it to be its "white knight", to escape from the Ryanair courtship. Air France-KLM has, like its German rival, expressed an interest in the Scandinavian SAS airlines. Still another duel could flare up between these two rivals over the Spanish Iberia Airlines. If the merger negotiations with the British Airways are unsuccessful, Air France-KLM, as well as, Lufthansa could take advantage of the new opportunity.
Duel for Alitalia
Air France-KLM has just won an important round: the duel to determine which will buy into the "new" Alitalia, comprised of what is left of the former state-owned Italian Airlines and the second largest Italian airlines company, Air One. The Alitalia administrative council voted in favor of an alliance with the French - Netherlandic airlines. For 322 million Euros, Air France-KLM has bought a fourth of the shares in the "new" Alitalia and can purchase more. The Lufthansa had had support from the highest levels. Both, the Italian Prime Minister Berlusconi and the German Chancellor Angela Merkel were unambiguously in favor of Lufthansa getting the franchise. But Lufthansa was not prepared to pay the price and in the end did not submit a final bid. Lufthansa had placed its bid on the prospects of an alliance, only to then raise new demands concerning administrative powers. This then led Alitalia to decide in favor of Air France-KLM.[5]
Open Flank
A spokesperson for Lufthansa declared afterwards: "we do not see ourselves as losers" explaining that the company is "well positioned" for Italy.[6] According to the business press, this was in reference to the Lufthansa's coming offensive in Northern Italy - "Alitalia's open flank."[7] Back in late November, Lufthansa founded a subsidiary in Milan, with which it intends to grab shares from Alitalia's market. Under the name "Lufthansa Italia," beginning in February, flight connections will be offered between Milan and several major European cities. Even long-distance and intercontinental flights are being discussed. The German airlines company is banking on regionalist forces in Northern Italy. The head of Lufthansa, Wolfgang Mayrhuber promoted the founding of the Italian subsidiary: "Milan and the Lombardy region are among the most significant business regions of Europe. It is important to have them linked to Europe through an efficient transportation network."[8]
Traditions
In fact the right-wing regionalist Lega Nord Party had been among the most vehement supporters of a Lufthansa merger with Alitalia. The Lega Nord speculated that through a close German-Italian cooperation, the Milan-Malpensa Airport could augment its amount of air traffic and become the sole air traffic hub for all of Italy.[9] The party, (whose entire name is Lega Nord per l'independenza della Padania - Northern League for the Independence of Padania), that had campaigned temporarily for the secession of the more wealthy Northern Italy from the economically weaker south of the country, has been an influential partner in the Berlusconi coalition government since 2008. In the meantime it is taking a more pragmatic course, although still demanding the devolution of Italy and autonomy for the North. It is cooperating with right-wing extremist parties from several EU nations. A representative of the Lega participated recently in Cologne in an international congress set to found a European right-wing extreme party, based on the traditions of collaboration with Nazi Germany.[10]
[1] see also Crisis and Concentration
[2] Fluglinien fliegen vier Milliarden Euro Verlust ein; Handelsblatt 09.12.2008
[3] Lufthansa bestätigt grundsätzliches Interesse an SAS; Reuters 19.11.2008. Gespräche über britische Tochter: Branson flirtet mit Lufthansa; Financial Times Deutschland 10.12.2008. LOT will Lufthansa als Ankerinvestor; www.peopleanddeals.de 17.12.2008
[4] Konfrontationskurs: Air France stemmt sich gegen Lufthansa-Vormacht; Financial Times Deutschland 21.11.2008
[5] Streit über künftige Alitalia-Partner; Frankfurter Allgemeine Zeitung 08.01.2009
[6] Okay für Einstieg bei Alitalia: Air France-KLM sticht Lufthansa aus; Financial Times Deutschland 13.01.2009
[7], [8] Alitalias offene Flanke; Handelsblatt 12.01.2009
[9] Poker um den ausländischen Partner für Alitalia; Frankfurter Allgemeine Zeitung 21.11.2008. Lega Nord fordert Lufthansa-Beteiligung an Alitalia; Dow Jones Newswires 05.01.2009
[10] see also Europe of Right-Wing Extremists (II)
