/About Bankruptcies, Monopolies and Qatar

About Bankruptcies, Monopolies and Qatar

Last week, after Alitalia and Air Berlin, the third European Airline collapsed into bankruptcy after facing struggles caused by the tough European competition and political issues in their destination countries. The British low-cost carrier Monarch Airlines drew the line and stopped operating any flights, leaving over 100.000 passengers stranded. Looking at those developments on the air transport market, the question rises how they are affected and whether we are heading for a monopoly on the long run.

The investors reactions were obvious, the German Airline Lufthansa grew by over three percent last week and therefore hit the highest market price since more than 16 years. The British/Irish low-cost competition Easyjet and Ryanair experienced growth between 3.6 and 5.3 percent. There are multiple reasons for this, one of them is the simple economic thought on supply and demand, especially the German market has almost no domestic competition left for Lufthansa. Another reason could be, the believe that the booking behavior experiences a shift to more established airlines and less price sensitivity on the buyers site.

A big winner on Monarch’s bankruptcy is Qatar Airways. The state-owned airline had lots of its short haul fleet on hold, because of the restrictions in its area, initiated by Saudi Arabia. British Airways, part of the International Airlines Group, in which Qatar Air holds a 20 percent stake, is going to operate the aircrafts, bringing back stranded passengers. Indeed, this is an effect, which has been observed in July this year already, when Qatar operated some of British Airway’s flights affected by a strike.

How the national markets are behaving after the bankruptcies, happening this year, is not clear yet. But the comparison of supply on domestic routes in Great Britain and Germany, raises one major difference, which is going to affect the future situation. Where having a healthy competition in the United Kingdom with British Airways and a few low-budget airlines, in Germany those routes were dominated by Lufthansa, it’s daughter Eurowings and Air Berlin. After the bankruptcy of Air Berlin and Lufthansa’s plan to buy at least a part of the previous competitor, the concern about a monopoly position for the oldest German airline may rise. Whether prices will increase for the end customer and to which extend German cartel authorities are going to be involved, will be seen within the next few months.