Severe Turbulence Hits Europe

September 19, 2008
Fares from Washington DC:

    As Europe's two weakest national airlines topple, a cluster of only slightly stronger second-string players totter toward an uncertain future.

    The shakedown of Europe's ailing legacy airline industry that has been anxiously anticipated since the European Union deregulated air transportation over 10 years ago has finally reached full force. Stoked by surging--albeit now falling--fuel prices and further fueled by the fallout from global financial turmoil, stock market meltdowns and general political pandemonium, a perfectly awful storm has formed in the skies over Western Europe. The chaotic situation changes almost hourly, but the overall consensus seems to be that once this all blows over only a handful of survivors will be left standing without crutches, as the number of national airlines gets whittled down from a dirty dozen or so to the all-too-familiar Big Three multinational groupings.

    Most dramatically, the long-running soap opera of Alitalia's drawn-out downfall seems to have sputtered to a dead end as last-ditch rescue efforts faltered on Friday. This appears to seal the Italian flag-carrier's fate by leaving it no other options but to pack up and fly blind from bankruptcy straight into insolvency. Of course, nothing in Italy is truly over until the famous fat lady sings, and while the Pope prays in earnest but to no apparent avail for the Vatican's official airline which might actually be cursed, as its former chaimain seems to think, Prime Minister Berlusconi may yet engineer an eleventh-hour miracle in the shape of yet another batty bailout. At this point, however, the company is so deeply mired in debt and controversy that not even divine intervention will likely save it from certain death.

    Around the same time, a stage across the Adriatic went dark as the final curtain fell on a Greek melodrama starring stodgy state-owned Olympic Airlines. Unlike the tangled webs and tortuous plots of Rome, full of conspiracies, betrayals and a few assassination attempts, this is more a tame tale of benign euthanasia in Athens. An agreement has been put in place to put the airline out of its misery and put a stop to years of wrangling and illegal subsidies. Nevertheless, even after numerous privatization failures, a fairly Olympian optimism still prevails that in the spirit of classical tragicomedy has the airline staging a comeback some time next year after a much-needed makeover, armed with a better script, a respectable repayment plan and a preposterous new name--Pantheon Airways. Airline to the Gods? Yes, the Gods must surely be laughing right now!

    Entirely unrelated to the unrelenting gush of orders, threats and fines pouring forth from the hard-nosed, stony-hearted bureaucrats of the European Commission in Brussels, the hometown flyboys at Brussels Airlines have thrown themselves into what may best be described as an arms-length embrace of two reluctant partners as they rushed to sell a sizable stake to Lufthansa. Not the whole caboodle, mind you, not even half, but just 45% for now, as proof of prudent German salesmanship--or brinksmanship--in these tumultuous times.

    Brussels Airlines is itself the child of previous failures and mergers, the drastically downsized reincarnation of deregulation's first victim, Belgian's venerable but troubled Sabena, that somehow ended up with Sir Richard Branson of Virgin fame as its new stepfather, thanks to a messy but presumably immaculate conception. Earlier in the decade Swissair made an ill-advised attempt to rescue Sabena from the abyss but was instead dragged down with it and has since been taken over by none other than Lufthansa, somehow bringing everything full circle. Just as Swiss International, or simply Swiss, as it is now called, continues to operate independently under the new ownership, Brussels Airlines is expected to do much the same, proving that even when Lufthansa makes a whole-hearted commitment it's still a rather hands-off arrangement.

    Meanwhile, down Vienna way the pending sale of Austrian Airlines is proceeding in a more orderly fashion as befits such solid and stolid Central European merchant traditions. Merely because it's looking to make a good deal and a handsome profit doesn't mean that it's necessarily going to sell itself to the highest bidder. Currently topping the short list of suitors, Russia's S7 Airlines, formerly known as Siberia Airlines and known to few people outside Novosibirsk by any name, have emerged as the dark horse of the dating circuit. It's no secret, though, that Lufthansa is viewed as just the right white knight in shining livery that everyone hopes will ride in at the last moment with a wandering eye and a fat wallet to deliver the Austrians from tough love in a much colder climate.

    Circling high above this mating dance like a voracious vulture, Air France seems to have successfully digested KLM Royal Dutch after swallowing it wholesale a couple of years ago and could be getting hungry for another winged tidbit. It actually tried to chow down Alitalia before it realized the old crow was mostly skin and bones and too many feathers, so it will take a lot of little sparrows to fatten up this lovebird for the future. Merging with merging Delta-Northwest to make a really big Franco-American omelette is reportedly Air France's favorite pie--or quiche--in the sky, but so far Congress is not about to crack the ostrich egg and make that wet-lease dream come true.

    Far up north, another hastily arranged winter wedding is in the works as Scandinavian Airlines, the struggling semi-privatized, semi-comatose carrier of Denmark, Norway, and Sweden, and the fourth-largest airline group in Europe that includes ill-fated Spanair among others, tries to cozy up to Lufthansa, these days everyone's Casanova of choice who may itself be getting a bit bogged down in the role of Big Daddy to its booming brood of aviation and travel-related companies, already the size of a small army.

    Containing all the makings of modern-day Nordic mythology, this is a complex family drama worthy of the ancient sagas with the three fretful governments, like way too many overprotective parents, weighing the pros and cons of a shotgun marriage for an old maid trying her very best to look like a blushing bride. While management is at great pains to find an even modestly suitable match, other shareholders, including the illustrious Wallenberg dynasty, squabble like jealous in-laws over the dowry, leaving the militant trade unions to stand firmly on the sidelines like a bunch of bitter bridesmaids in tattered dresses just itching to crash the party and ruin the honeymoon. An uninvited guest, much smaller Finnair, has made a cheeky, unwelcome offer to buy the few remaining long-haul routes of the airline that pioneered them, a move that would be akin to stealing the wedding cake before the ceremony and slipping out the backdoor of the church.

    Finally, back down where the sun really does shine in happy-go-lucky Spain, Iberia is getting close to tying the knot with British Airways. The idea is to then make another trip to the alter and set up a comfy if controversial ménage-à-trois with American Airlines, pending an application for a marriage license in triplicate and antitrust immunity for a joint-venture operation similar to what rival alliances, Star and SkyTeam, have been quietly granted and merrily doing for years.

    In fact, those long-betrothed behemoths have been scrambling to shack up to for so long that the wedding bells are turning more than a little blue and American has impatiently started a good old all-American letter-writing campaign to members of Congress on your behalf, urging them to approve its plans for One World peace and, if at all possible, domination. Noble Sir Richard Branson, Our Virgin Savior always happy to act in your best interest, is once again up in arms and ready to foil the flirtatious plot. With a slush fund of sorts flush from recent dealings, he is dead set against this particularly devious deal and, much like Dustin Hoffman in The Graduate, determined to stop the union at all costs.

    What all this means for travelers is impossible to predict. Alitalia ticketholders should definitely monitor the situation closely and contact the airline for information. Passengers of Olympic Airlines may be a bit more fortunate if the airline continues to operate during reorganization. As for the other candidates mentioned, they will mostly likely muddle through for the foreseeable future, flying their own flags regardless of corporate ownership, but many other carriers are still deemed to be at risk.