Volume of Mergers and Acquisitions in the Airline Industry Decreasing

After the slow but steady upward trend witnessed since the turn of the millennium, M&A activities in the airline industry are for the first time experiencing a downward trend again. Since the beginning of 2000, the number of M&As involving businesses in the airline industry has averaged 97 transactions per year, with global transactions between 2007 and 2015 even amounting to more than 100 per year. In 2016, however, this number went down to 86 transactions. These are the findings of studies carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

The latest prominent case was the fight to buy Air Berlin, in which numerous airlines such as Lufthansa, Easyjet and Condor lined up to bid for the insolvent airline’s assets. Having successfully acquired Air Berlin’s subsidiaries Niki and LGW (for €210 million), Lufthansa is also involved in bidding for the insolvent Italian airline Alitalia. But not only the airline industry is making the headlines: there have also been important developments with regard to the M&A activity of producers and suppliers in the air transport industry.

For instance, United Technologies has struck an agreement to acquire avionics manufacturer Rockwell Collins for $30 billion. As recently as in April 2017, Rockwell Collins itself took over B/E Aerospace, a manufacturer of aircraft cabin interior products, in a $6 billion deal. “The consolidation among aircraft suppliers is a cause for concern particularly for the aircraft manufacturers Airbus and Boeing. The increasingly strong negotiating position of suppliers will surely also have an impact on airlines,” explains Michael Hellwig, a researcher in ZEW’s Research Group “Competition and Regulation”.

Data on transaction volumes does not provide a consistent picture

With regard to transactions volumes, the information available does not provide a consistent picture. Since purchasing prices are kept secret in some cases, not all relevant data on the transaction volume is available. In the past 17 years, the average value of transactions with known volume was €150 million. This number stands, however, in stark contrast to the transaction values at the upper end of the scale. At least 24 of the over 1,500 M&As recorded since 2000 had a transaction volume of more than €1 billion.

The two largest transactions included the takeover of Trans World Airlines by American Airlines for €4.7 billion in 2001, and Alaska Air’s acquisition of Virgin America for €3.8 billion in 2016. The largest M&A transactions involving German airlines were the takeover of Thomas Cook by KarstadtQuelle in 2006 (€800 million) and Air Berlin’s purchase of LTU in 2007 (€340 million).

For further information please contact:

Michael Hellwig, Phone +49(0)621 1235-233, E-mail michael.hellwig@zew.de