Anko Van der Werff om fremtiden for europas flyselskaper - AW&ST Routes

SAS CEO Articulates EU’s Competing Priorities; SkyTeam Join Date Firmed

Victoria Moores April 29, 2024

Credit: Ocean Driven Media

Scandinavian Airlines (SAS) CEO Anko Van der Werff is pointing out the EU’s apparent incongruity regarding air travel costs, observing how European regulations are pushing up air fares while EU anti-trust rulings seek to protect consumers against air fare increases.

Van der Werff’s comments came just as SAS finalized its SkyTeam join date for Sept. 1, 2024, as part of its own consolidation with SkyTeam member Air France-KLM. The Franco-Dutch airline group is acquiring 19.9% of SAS as part of a wider consortium. This means SAS will leave Star Alliance on Aug. 31, and Van der Werff is hoping to use the move to explore joint venture opportunities within SkyTeam.

However, the Air France-KLM-SAS deal must first secure EU competition clearance. During an on-stage interview at Routes Europe in Aarhus, Denmark, Van der Werff was quizzed on the European Commission’s (EC) stance on consolidation.

“On one hand, Europe as a whole wants to make flying more expensive. You’ve got EU261 [passenger rights regulation], you have all these emissions trading schemes [in the EU, Switzerland and UK] for many of the right reasons. I get it,” Van der Werff said, noting that some of the cheapest LCC fares are viewed as being in opposition with the EU’s sustainability agenda.

“Then, you talk about consolidation,” he continued. “And then it’s like ‘hold on, you can’t do that, because then flying will be too expensive.’ So, is the conclusion that the EU wants us to be so expensive that we can’t make any money anymore? That’s something that I’ve always struggled with.”

Speaking at the recent Connecting Europe Days event in Brussels, Brussels Airlines CEO Dorothea von Boxberg said European sustainability regulations mean a flight from Barcelona to Tokyo will be €200 ($214) more expensive with a European carrier by 2035, per passenger roundtrip, compared with flying via Turkey or the Middle East. “That’s a huge distortion,” Von Boxberg said. “I think it needs to be addressed.”

On the consolidation side, Van der Werff is a strong advocate. He reflected on how “at least” a million U.S. aviation jobs were lost during the decade after 9/11, the financial crisis, and subsequent restructurings. However, U.S. consolidation has given rise to “tremendous investment” in aircraft, the passenger experience, and airports, making 2010-2020 a “fantastic decade” for U.S. airlines and passengers, he argued.

“I think 80% of traffic in the United States is in the hands of four airlines, and in Europe that is still 17,” he said. “The European Commission needs to come to a conclusion about what it really wants. Without an airline industry, I don’t think that Europe will succeed.” SAS itself has been in voluntary Chapter 11 bankruptcy protection since July 2022.

Van der Werff flagged the U.S. as the “role model or template to follow,” echoing comments by Ryanair CEO Michael O’Leary at the recent Airlines for Europe (A4E) summit in Brussels. Like Van der Werff, O’Leary sees Europe “inexorably moving in the same direction” as the U.S.

Despite not being currently involved in any mergers and acquisitions activity, O’Leary called on the EC to “get on with it and approve these mergers,” referring to Air France-KLM-SAS and Lufthansa-ITA. O’Leary also tipped International Airlines Group (IAG) as the likely acquirer of TAP Air Portugal, which is slated for privatization.

Van der Werff and O’Leary are far from alone in calling for more consolidation. The CEOs of Air France-KLM, easyjet, and Lufthansa argue that it is a key ingredient for a globally competitive aviation industry.

“If we don’t allow consolidation in Europe, we are going to destroy the airlines in Europe,” IAG MD Luis Gallego told delegates at the A4E summit.

Gallego argues that a fragmented industry cannot shoulder the costs of European sustainability regulation, and at the same time compete with global carriers. “It is not going to work. That is my point of view. Consolidation is needed for competitiveness.”

IAG has been seeking to acquire full control of Spanish carrier Air Europa for five years, since 2019. On April 26, the EC sent a statement of objections to IAG, voicing concerns that the deal may restrict competition on routes to, from, and within Spain, as part of its ongoing competition investigation into the deal.

“The Commission is concerned that customers may face increased prices and/or decreased quality of service after the transaction,” the EC said in an April 26 statement.