European airlines expect consolidation; Boeing’s troubles continue | Maqvi News

Alex Macheras

Consolidation of Europe’s airlines is necessary to keep the industry competitive, the CEOs of British Airways owner IAG and Ryanair said on Wednesday, as the EU continues to assess a potential new deal between Germany’s Lufthansa and Italian rival ITA Airways.
“If we don’t allow consolidation in Europe, we will destroy airlines in Europe,” IAG CEO Luis Gallego told an aviation conference.
Ryanair CEO Michael O’Leary said on the same panel that consolidation “does need to be encouraged”. “(Portugal’s) TAP has only survived through Covid because the taxpayer,” he said. “Aer Lingus was acquired by IAG… those airlines have been much the better and have a more secure future as part of bigger airlines.”
The European Commission is due to say this week how it views Lufthansa’s bid to acquire a 41% minority stake in state-owned ITA for €325mn ($352.30mn).
Lufthansa’s CEO said he wanted to close the deal “as soon as possible”, and was optimistic ahead of the expected EU statement of objections.
EU antitrust regulators opened an investigation into the potential deal in January, with warnings it could reduce competition in flights to and from Italy. Potential solutions could include opening up slots, traffic rights and planes to allow a rival to operate on some routes.
Under the terms of the rescue plan, Cologne-based Lufthansa would initially buy 41% of the successor to failed flagship Alitalia from the Italian state, with an option to acquire the rest later. The transaction marks the latest attempt to resurrect the ailing Italian carrier, which officially ceased operations in 2021. While the Italian government has provided as much as €3bn in support for the new airline, the EU permitted a capital injection of €1.35bn under its state-aid regime.
Last year, Italian Prime Minister Giorgia Meloni urged the commission to move quickly on its review in order to lessen the load on Italian taxpayers. As part of an in-depth probe, which started in late January, EU watchdogs said they had concerns over both short- and long-haul flights from Italy. They also highlighted how routes between Italy and North America could be affected and whether flights provided by Lufthansa and its partners United Airlines and Air Canada should be treated as a single entity.
Potential solutions, previously reported by Bloomberg, include the disposal of slots at Milan Linate airport, which is dominated by ITA and the wider Lufthansa group, encompassing Swiss, Austrian and Belgian regional units.
Elsewhere, Boeing has warned that it will burn more cash in the first quarter than previously expected as the US plane maker grapples with the consequences of the blowout of a door panel in mid-flight from a 737 Max earlier this year.
Brian West, chief financial officer, said cash outflow would reach $4bn-$4.5bn in the first quarter, higher than forecast in January. A plan to reach a $10bn cash flow target by 2025-2026 would also take longer, said West, at a Bank of America conference in London.
Boeing has had to limit production of its 737 Max aircraft in the wake of the crisis as it seeks to improve the quality of its manufacturing and deal with increased regulatory scrutiny.
“We’re not at the moment where we can manage the near term for these financial outcomes because of the work at hand around stability,” West said. “Our expectation is that we’ll get more predictable and better positioned, but it will take time.”
Boeing’s current production rate of the 737 currently sits in the “low-to-mid 30s”, and the airframer will restrict output to “below 38” jets per month as it works through quality issues raised by two recent safety audits.
Speaking this week at the Bank of America Global Industrials conference in London, Boeing chief financial officer Brian West said the monthly figure is set to rise over the course of 2024, as the company addresses its numerous production problems.
Meanwhile, at the “Europe 2024” conference in Berlin, Guillaume Faury, the CEO of Airbus, expressed his concern over the ongoing issues faced by Boeing. Faury emphasised the detrimental impact these problems have on the entire aerospace industry, highlighting the importance of quality and safety in aviation. He said, “I am not happy with the problems of my competitor. They are not good for the industry as a whole.”
The NTSB announces plans to hold an investigative hearing on August 6 and 7 about its investigation “into how and why a door plug departed” from the passenger jet during flight. The hearing will be live-streamed, featuring investigators, witnesses and others.
On the same day, Boeing responds to the Federal Aviation Administration (FAA) audit’s conclusions announced the previous week.
“FAA inspectors went deep into our Renton factories in January and February to audit our production and quality control,” says Stan Deal, the CEO of Boeing’s commercial airplanes division.
The “vast majority” of problems, he adds, pertained to situations where Boeing employees didn’t follow the company’s processes and procedures. Deal promises to focus on improving compliance by working with employees and conducting more internal audits. Of the expert review, he says Boeing’s procedures were too complicated.
“If you spot an issue, you are fully empowered to report it through your manager or the Speak Up portal,” Deal says.
FAA chief Michael Whitaker has spoken of a recent visit to Boeing’s facilities in which he saw for himself that the company’s focus appears to be on production rather than safety and quality.
In an interview on NBC with Lester Holt, the FAA Administrator said that Boeing’s “mindset” around production needs to “shift”.
“There are issues around the safety culture in Boeing. Their priorities have been focused on production and not on safety and quality. And so, what we are really focused on now is shifting that focus from production to safety and quality,” Whitaker told the NBC show.
In a statement to NBC, Boeing said: “We are taking significant action to strengthen safety and quality at Boeing. We are focused on demonstrating change and building trust one airplane at a time. This increased scrutiny, whether from ourselves, from the FAA or from others will make us better.”

The author is an aviation analyst. Twitter handle: @AlexInAir