EU airlines take slow route to US-style shakeout

Wizz Air Holdings

07/09/2026 12:08

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Oliver Taslic
LONDON, Sept 8 (Reuters Breakingviews) - “We are definitely, post-Covid, entering a four- or five-year period of consolidation,” Michael O’Leary told Reuters in early 2023. The Ryanair RYA.I CEO’s thinking, also expressed in other interviews, has been that the European airline industry would eventually consolidate around four major groups – British Airways owner IAG ICAG.L, Deutsche Lufthansa LHAG.DE, Air France-KLM AIRF.PA and Ryanair – much as the U.S. sector came to be dominated by Delta DAL.N, United UAL.O, American AAL.O and Southwest LUV.N. The evidence so far from 2026 suggests a slower-growth, higher-fare and more “rationalised” industry is indeed coming – but it may take a while to get there.
Americans and Europeans are among the world’s foremost fliers, taking an average of around two trips per person per year, according to Airbus. But their airline sectors have evolved quite differently. Europe has been marked by relentless growth in available seats. Much of the extra “capacity”, to use the industry term, came from upstart low-cost carriers like Ryanair, Wizz Air WIZZ.L and easyJet EZJ.L. Bernstein analysts calculated a 4.6% compound annual growth rate in European Union capacity between 2004 and 2019, compared to a 1.4% growth rate for real GDP. In contrast, U.S. capacity rose at 2.2%, only slightly above the 2% compound annual increase in real GDP.
Put another way, the number of available plane seats in Europe grew much faster than the economy. This manifested itself in cutthroat competition between airlines, weakening their pricing power. That’s been good for fliers who want cheaper airfares, but less good for carriers trying to build resilient businesses.
One reason for the comparatively slow growth in American capacity is that the U.S. industry has fewer players. The top four carriers controlled around 80% of the domestic market in 2025, whereas in Europe even the top six groups only reach roughly 70%, per Cirium data. Partly to thank is an M&A wave between 2008 and 2013, which saw Delta merge with Northwest, Southwest buy AirTran, American unite with U.S. Airways, and United merge with Continental. The impact of the financial crisis on demand – including from lucrative corporate travellers – helped convince regulators and executives of the need for consolidation and scale.
Earlier this year, it looked like the Iran war could morph into a similar crisis for European airlines. By mid-March, jet fuel had rocketed up to $1,800 a metric ton, over double the level a year earlier. Investors dumped shares in the more highly leveraged Air France-KLM and Wizz, with the duo falling 30% each in the month after the initial U.S. and Israeli strikes. Particularly concerning was the risk that soaring energy prices would squeeze travellers’ disposable income, hitting airlines’ revenue just as jet fuel sharply increased their costs. Some even fretted about the physical availability of fuel.
Yet the most catastrophic scenarios haven’t come to pass. Despite the head of the International Energy Agency warning in April that Europe had “maybe six weeks or so (of) jet fuel left”, the summer has largely passed without incident, helped by increased supply from refineries in Europe, the U.S. and Africa. Unlike the U.S. – where Spirit Airlines ceased operations in May – Europe hasn’t seen a major airline collapse, though Oslo-listed Norse Atlantic NORSE.OL completed a summer rights issue and is undergoing a “strategic review”, while airBaltic’s 2029 bonds have fallen sharply as the airline seeks financing.
Perhaps the key factor is that, unlike the U.S. following the financial crisis, European travel demand has stayed relatively resilient. That has kept sales largely intact and – combined with airlines’ pre-war fuel hedging – given them less reason to cancel flights. Looking ahead to the quieter winter season, investors cheered Ryanair’s decision last week to trim its schedule between November and March, with Bank of America analysts saying they expected other airlines to follow suit. Fewer flights should help put a floor under fares, especially with increasingly fewer bookings having been made pre-war.
So what becomes of O’Leary’s expectation of U.S.-style consolidation? The evidence suggests he’s right about the destination, even if the arrival time is still up in the air. First, M&A is clearly happening, even if it doesn’t always count as consolidation. Apollo Global Management APO.N agreed a £5.7 billion acquisition of Britain’s easyJet, while Lufthansa and Air France-KLM are competing for a 44.9% stake in Portuguese flag carrier TAP. The Franco-Dutch group also expects to raise its stake in Scandinavia’s SAS to 60.5% by the end of this year, while its German rival said it was exercising an option to take its share in Italy’s ITA – formerly Alitalia – from 41% to 90%.
In many cases, such deals could lead to slower capacity growth. Though Apollo has said it “sees significant potential in easyJet’s growth path ahead”, rivals clearly see a chance of it rationalising. Lufthansa CEO Carsten Spohr told analysts last month the group would be open to enhancing its position in Berlin and Geneva if easyJet retrenched, while O’Leary speculated on a results call in July that securing a good return for a new private owner could involve raising airfares at easyJet’s main hubs or implementing “significant capacity constraints”.
Meanwhile, so-called full-service carriers like TAP, ITA and Lufthansa are leaning more towards intercontinental flying rather than shorter routes, per Cirium data. Flying long-haul, they will face no competition from Wizz and Ryanair. A TAP presentation, released last year to boost investor interest in its privatisation, called out “disciplined capacity deployment”, noting that European short-haul flying had fallen from 41% of capacity in 2019 to 32% in 2024, while flying to North and South America had ramped up.
Just as importantly, there are no signs of a flood of new entrants into the market. Wizz expects seat growth to slow to 11% a year through March 2030, compared to a “high twenties” level in the current quarter. After Wizz, it’s not clear there will be another rapidly growing upstart. It would be brave, bordering on foolish, for anyone to try. The many hurdles facing any would-be new entrants include exceptionally long waits for new Airbus AIR.PA and Boeing BA.N aircraft, stubbornly rising non-fuel costs like air traffic control and airport charges, and ever-stricter environmental rules.
With the U.S. and Iran launching strikes again, and jet fuel hovering around $1,500 a ton, this winter looks tough for European airlines. Ryanair thinks less well-hedged competitors could struggle to maintain capacity “or even survive”. Even if the threat recedes, the Iran crisis has shown the importance of being in a larger and stronger corporate group. O’Leary’s prediction of full-blown consolidation may not be imminent, but the industry has received a shove in the direction of a U.S.-style future.
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(Editing by Liam Proud; Production by Varun H K)
((For previous columns by the author, Reuters customers can click on TASLIC/oliver.taslic@thomsonreuters.com))