Edition 13 | 12th July 2024 Download PDF
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In last year’s Paris Airshow outlook, my opening paragraph droned on about the issues with supply chains, ESG, rising costs, strengthening airline results, and the upcoming push towards more widebody orders. Well, surprise, surprise – not much change there then!
Read the full predictions here.
The IBA team will be sharing all the latest news on orders and activity throughout the Airshow. Make sure you are following our LinkedIn to stay up to date.
The European Commission has finally approved Lufthansa Group's (LHG) €325 million bid for a 41% stake in ITA Airways, contingent on remedial measures to mitigate competition concerns. Initially, the merger raised alarms about monopolistic practices on certain short-haul routes between Italy and Central Europe, as well as long-haul routes connecting Italy with the United States, Canada, and Japan. Additionally, the deal could have amplified ITA’s dominance at Milan Linate Airport.
To address these concerns, Lufthansa Group and the Italian Ministry of Economy and Finance agreed to several commitments. These include enabling rival airlines to operate non-stop flights between Rome or Milan and Central European airports, ensuring access to ITA’s domestic network for these competitors, and transferring take-off and landing slots at Milan Linate. The transaction is set to close in the fourth quarter of 2024, with ITA Airways joining the LHG as its fifth integrated network airline. Additionally, LHG will be able to increase its 41% stake to 90% in early 2025, which could facilitate further integration.
The European Commission has also approved the restructuring plan of SAS Scandinavian Airlines, aligning with EU state aid regulations. As part of the restructuring under Chapter 11 bankruptcy, SAS will see significant ownership changes. Air France-KLM will acquire a 19.9% stake, while Castlelake will take a 32.2% share. Norway’s state-controlled Export Finance Norway will also join as a creditor, marking its return to SAS ownership. The restructuring aims to stabilise SAS’s financial situation, with regulatory approvals expected into August 2024.
Conversely, the proposed acquisition of Air Europa by International Airlines Group (IAG) also faces regulatory hurdles. The European Commission has raised concerns that the merger would significantly reduce competition on routes between Spain and the Americas, as well as within the Spanish domestic market and short-haul international routes. IAG, which already owns Iberia and Vueling, has proposed remedies, including transferring 40% of Air Europa's flights to other airlines and ensuring no exclusive routes between Iberia and Air Europa. Despite these efforts, the acquisition faces significant scrutiny, with IAG aiming to secure approval and complete the transaction by 2024.
It seems that 2 out of 3 major consolidation proceedings are getting closer to being finalised. The question remains as to what extent will the airline consolidation in Europe continue. With more and more airlines lining up for potential acquisitions, the trend might be quite difficult to stop.
A 2020 startup that set out to prove hydrogen flight was possible within a decade, has shut down its programme after running out of funding. Universal Hydrogen, had acquired some reputable investors, including GE Aviation, American Airlines, and Airbus’ venture capital arm, amounting to over US$100m in funding, but failed in a recent eleventh-hour merger with regional airline Silver Airways.
The company’s collapse signals the difficulty in proving an experimental concept to investors while grappling with the development of a hydrogen drivetrain, developing fuel infrastructure at airports, and a severe lack of green hydrogen supply. Solving all three problems proved too much, with ZeroAvia the only company remaining looking to retrofit aircraft with hydrogen drivetrains.
Perhaps most worrying is the lack of long-term confidence in Biden’s Inflation Reduction Act (IRA) subsidies, which, along with economic headwinds, were enough for investors to cool their interest, according to Universal Hydrogen’s ex-CEO Paul Eremenko. As a large purchaser of green hydrogen, the company backed the IRA’s Clean Hydrogen Production Tax Credit to support suppliers with up to $3/kg, or around a 20% reduction in production costs. Without certainty for its continuation, investors were unsure whether Universal Hydrogen would have sufficient supply for scaling its development.
Back in January, Jeni Stanley, IBA’s ESG Manager, spoke in Dublin about the impact of elections on technology development and regulatory stringency, and it would appear that the looming US election was detrimental to Universal Hydrogen. With the US a critical stakeholder in SAF and hydrogen development, there must be certainty for investors and companies throughout the turbulence of a potential change in government.
Want more aviation ESG news from the last month?
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Our regular update looks at the key trends and market indicators using data and analytics provided by IBA Insight.
凭借由获奖 ISTAT 认证评估师组成的庞大团队以及 30 多年累积的专有数据，IBA 在全球估值市场上处于领先地位。我们为全球范围内的一系列资产类型提供独立、公正的价值意见和建议，包括飞机、发动机、直升机、货机/航空货运、降落机位和预备件等。IBA 始终致力于超越客户的期望，我们的客观意见为贷款、资产收回、商业开发和再营销提供了必要的安全保障。
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