MOUNTAIN VIEW, Calif., June 13, 2013 /PRNewswire/ -- Historically, industry participants in the global airline industry have expanded capacities and networks and have also engaged in price wars in an effort to gain market share. Currently, however, the industry is characterized by slackening passenger demand and soaring fuel prices. The industry is cyclical and its performance is closely linked to gross domestic product (GDP). Given this scenario, merger and acquisition (M&A) activity is expected to gain momentum, as industry participants increasingly focus on cost cutting and excess capacity reduction in a bid to improve profitability.
New analysis from Frost & Sullivan (http://www.financialservices.frost.com), Merger and Acquisition Trends in the Global Airline Industry, finds that over the past five years, close to 446 deals with an approximate value of $54.19 billion have been struck across the four major sub-sectors of the global aviation industry, including commercial airlines, private or business aircraft services, helicopter transportation services, and rescue and safety aircraft services. The commercial airlines sector has been the most active sector by both deal volume (at 48.4 percent) and total deal value (at 87.3 percent).
If you are interested in more information on this study, please send an e-mail to Jeannette Garcia, Corporate Communications, at email@example.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.
"Instead of engaging in price competition and turf wars, companies in the airline industry are currently focusing on improving their profitability, especially in markets where they already have a strong presence," noted Frost & Sullivan Financial Analyst Bharath M. "Mergers, joint ventures, and other strategic alliances are slowly becoming the norm for airline industry participants who are focusing on cost cutting and excess capacity reduction in order to combat declining load factors, rising fuel prices and recession."
While overall M&A activity was suppressed in 2011 and 2012, the recovery of global markets is expected to renew M&A activity, led by cash-rich companies, especially in the European region. In recent times, while Europe has been the most active region in terms of deal volume, North America has been the most active region when it comes to deal value.
"North America has witnessed several high value M&A transactions in the past and has the most concentrated airline industry in the world," stated Bharath. "The scope for further M&A activity in the region is lower compared to Europe and Asia-Pacific given the level of consolidation that has already occurred. However, opportunities for cross-border collaboration exist."
A high level of M&A activity in Europe is anticipated to continue for the next five years, with the key driving factor being the need to cut excess capacities and increase load factors. Cross-border deals are expected to gain dominance as reflected by one such deal between Etihad and AirBerlin.
Frost & Sullivan forecasts carriers in Asia-Pacific, the Middle East, Latin America, and Africa to increasingly enter into alliances and code-sharing networks with European and North American carriers.
"Europe and North America's combined share of total value in transactions from 2007 until December 11, 2012 has consistently remained over 50 percent. However, upon excluding deals with values of over $1 billion, we observe that after 2008, the dominance of Europe and North America has reduced and regions such as Asia-Pacific and Latin America have gained momentum in M&A activity in terms of deal value," said Bharath. "The involvement of these emerging economies in M&A deals is expected to rise in the next 12 to 18 months. The airline industry in Africa is still in the early stages of its life cycle with M&A activity in the region likely to be limited."
Merger and Acquisition Trends in the Global Airline Industry is part of the Business and Financial Services Industry subscription, which also includes research services in the following markets: Financial Assessment of the global airline industry, Funding patterns adopted by airline industry participants, merger and acquisition trends in the global aerospace and defense industry. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
Frost & Sullivan's Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.
Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.
The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation. The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.
For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organisation prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?
Merger and Acquisition Trends in the Global Airline Industry
SOURCE Frost & Sullivan