Sept. 7 - With European airlines facing high fuel costs, multi-million dollar losses and strike action, analysts say further consolidation of the sector is highly likely. Edward Baran reports.
Empty terminals and cancelled flights tell a sorry story for German flag carrier Lufthansa. A twenty-four hour strike by cabin crew has grounded hundreds of its planes. The union is pressing for a 5 percent pay increase along with guarantees against outsourcing. The company says it is willing to talk. SOUNBITE: Lufthansa spokesman Klaus Walther, saying (German): "Today's strike by the cabin crew union affects more than 100,000 German customers and we regret this very much. In our view, the strike is unnecessary and we call on the union to return to the negotiating table at once." Industrial strife coupled with sky high fuel bills are nothing new for struggling European airlines. In the eye of the economic storm, losses are building. Past mergers have reduced the pressure for the big players - Lufthansa swallowed up both the Swiss and Austrian national airlines Air France and KLM joined forces, as did British Airways and Iberia. GRAPHIC But it's been a thoroughly miserable year for the minnows -- Malev, Hungary's flag carrier for 56 years, collapsed earlier in February. Spanair was the fourth largest airline in Spain until it filed for voluntary bankruptcy in January. While Portugal is trying to sell off loss-making TAP. Aviation analyst Howard Wheeldon says more merger activity is likely SOUNDBITE: Howard Wheeldon, aviation analyst, saying: "Clearly more consolidation is needed but it's consolidation against the smaller flag carriers, not the larger. I think we've seen the bulk of the consolidation that's required in the larger sector. The big three, Lufthansa, BA and Air France-KLM will continue to command the lead there. What we need to see is more consolidation in the second tier." But this argument doesn't just apply in Europe. Australia's struggling Qantas Airways has just agreed a 10-year alliance with Dubai's Emirates -- a key step in the carrier's efforts to shore up its loss-making international business. In future, an industry of far fewer national flag carriers looks likely. Edward Baran, Reuters.