< PrevNext > 6. Airline Consolidation Likely, But Not Immediate By Michael B. Baker / January 25, 2021 / Contact Reporter Share There have been predictions of widespread airline consolidation since the onset of the Covid-19 pandemic, but don't expect 2021 to be the year that happens.As a best-case scenario, airlines this year are facing a low-demand first half followed by a potentially swift recovery at least of leisure business in the second half, dependent on an effective vaccine rollout. Airlines' recovery of their corporate business likely faces a longer timeline."We have little hope for a rebound in corporate travel in 2021 but could see international markets begin opening in late 2021 as testing protocols [and] vaccines are adopted," Cowen and Co. analyst Helane Becker wrote in a recent research note. Business travel air volumes likely will remain down at least 85 percent at least throughout the summer, she said, using 2019 volumes as a comparison. As such, speculation already is rising about major industry consolidation, as airlines will have limited revenues to pay off costs and increasing debts. Reuters global deals editor Lauren Silva Laughlin in a recent piece predicted that the U.S. Big Four would become the Big Three, with American Airlines—facing a debt six times as high as its projected 2022 earnings—a likely candidate for consolidation. Globally, there already has been some major consolidation moves, most notably Korean Air's announcement in November that it had reached a deal to acquire and consolidate with rival Asiana Airlines, and the International Air Transport Association said more consolidation is likely, at least for airlines within the same country. News reports have indicated that the Japanese government, as it prepares financial support for its largest airlines, Japan Airlines and All Nippon Airways, could push for a merger there as well.Consolidation will not be a fast-moving process, however. Palatable deals can be more difficult to reach when both parties are in their worst possible financial positions, particularly when the recovery timeline remains unclear. The increased stake some governments have taken in airlines as a result of stimulus packages make deals murkier.There's also the regulatory aspect. In the United States, for example, President Joe Biden has not yet said a lot specific to the airline industry, though the Democratic administrations typically have been a bit more wary of competition implications of mergers than their Republican counterparts. They will be more amenable if they can make the case that a merger is an existential necessity, as Korean and Asiana are doing, but even so, it will not be a quick process.As such, expect to see more cooperation to emerge this year—in the vein of American's new partnerships with Alaska Airlines and JetBlue last year—but larger merger activity probably remains a bit further down the road, depending on how the recovery pans out for airlines.Over the course of the next several years, however, it's become clear there will be fewer players left in the game, one way or another."Covid-19 is not going to go away in 2021," CAPA founder and chairman emeritus Peter Harbison said at a CAPA Live summit late last year. "It's not going to be solved quickly by a vaccine. Many airlines themselves have shrunk already and will stay smaller. There'll be ongoing financial losses. Airline consolidation is inevitable, including airline departures and restructuring."