Introduction to airline mergers and acquisitions (M&A)

Global M&A transactions in aviation have experienced a remarkable surge, as witnessed by the number of deals over the last 20 years, and reached a peak in 2021, fueled by the global disruption of the
COVID-19 pandemic. This growth is evidence of a cultural shift in how airlines approach merger and acquisition strategies, utilizing them both as an opportunistic response to crises and as an essential lever to boost growth. The aviation industry remains highly fragmented, with many small airlines operating independently, creating a strong need for consolidation. This necessity is increasingly being realized as companies seek to scale operations, enhance efficiencies, and strengthen their market positioning. As a result, the volatility in aviation markets is providing a runway for market realignment and consolidation.

The aviation industry is known as a challenging business with historically low margins, where airlines must balance competitive pricing with high service standards due to increasing customer expectations for connectivity, while also managing constantly rising operational costs. The competitive nature of the market, combined with traffic rights and slot restrictions, limited fleet and infrastructure capacity, and connectivity complexity, makes it difficult to achieve profitability through organic growth alone. In this environment, by aligning resourcing, integrating networks and operations, and leveraging synergies, M&A can help aviation companies to improve their market presence, enhance competitiveness, and create long-term business value.

However, airline M&A also present unique challenges, including global operation management, regulatory requirements, and the complexities of partnerships and alliances. Some common examples include harmonizing maintenance operations, negotiating intricate lease agreements, and ensuring seamless network compatibility, all of which require specialized expertise from experienced aviation professionals. Successfully navigating these complexities demands deep understanding of both the M&A process and the intricacies of the aviation industry. Therefore, professional support along the entire M&A journey is crucial to ensuring that the initiative turns into a profitable investment rather than a financial, operational, and reputational risk.

Definition and role of synergies

A critical component of a successful M&A deal is the accurate identification of synergies early on in the process as well as their realization and tracking later on in the integration phase. Synergies refer to the added value (in the form of productivity, efficacy, and performance) derived from combining the efforts and resources of two companies. This combined value is greater than the sum of their individual parts – the concept known as “1 + 1 = 3.” In airline M&A, synergies can also be classified into operational, commercial, and corporate. The following examples illustrate potential areas of synergy realization (not exhaustive):

• Operational synergies may result from integrating core operations, such as fleet management (leasing, maintenance), fuel procurement, and ground operations (handling, airport services).
• Commercial synergies focus on increasing yield and the number of passengers transported. This can include pricing and revenue management, network consolidation, joint marketing, and combined product offering.
• Corporate synergies involve administrative streamlining, standardized processes, and best practice sharing. Examples include centralized administrative functions, process harmonization, and joint training and development programs.

These synergies provide a framework to optimize the potential of an M&A deal and contribute directly to the enhanced financial and operational performance of the combined entity.

Understanding the M&A process from an acquirer’s perspective

An M&A project requires a planned strategic approach by the acquirer to identify, evaluate, and realize synergies. The process typically involves four major phases:

Exemplary cases of airline M&A

In recent years, the airline industry has witnessed a number of significant mergers and acquisitions that demonstrate benefits but also complexities of the M&A transactions:

The merger of Alaska Airlines and Hawaiian Airlines, completed in September 2024, was a strategic expansion aimed at strengthening Alaska Airlines’ presence in the Pacific region. This M&A deal is intended to enhance the acquirer’s global presence and generate USD 1.5 billion in revenue on international routes. Also, through synergy gains, the companies have estimated that they will achieve at least USD 500 million in savings. These changes should strengthen the competitive position of Alaska Airlines and contribute to USD 1 billion in additional profits by 2027 according to a Reuters report.

Another example is the recent acquisition of ITA Airways (ITA) by Lufthansa Group. Although the deal has just been approved by antitrust authorities, the synergies are already being realized. A codeshare agreement enables passengers to combine flights across the Lufthansa Group carriers, while the transition of ITA’s operations to the Lufthansa Group terminals at hub airports and harmonization of flight schedules will enhance connectivity and ease passengers’ transfer. Additionally, an agreement between the loyalty programs will allow frequent travelers to earn and redeem miles across both programs as stated in a Lufthansa Group press release.

Lufthansa Consulting’s four-step approach and best practices

Lufthansa Consulting brings a wealth of experience and strategic intelligence to navigating the complex phases of mergers and acquisitions, serving as both an advisor and integration management office. This section highlights our recommended strategies and best practices for a successful M&A process, leveraging our deep industry knowledge and structured approach across all phases.

Step 1: Initial study

Prior to initiating any M&A transaction, it is crucial to develop a clear strategic framework. This involves conducting comprehensive market analyses, industry network evaluations, and aviation M&A strategy development to understand potential synergies and the strategic fit of the target company. Applying expertise in business planning and synergies modeling ensures a data-driven and informed decision-making process.

Early engagement with key stakeholders, including potential partners and financial advisors, is essential to gauge the feasibility of the merger and align strategic objectives. Aviation-specific challenges such as airport slot management, fleet strategy, and traffic rights must be carefully assessed to ensure a smooth transition. Lufthansa Consulting provides support in structuring strategic frameworks and ensuring that industry complexities are addressed from the outset. Our strength lies in orchestrating the different players in this complex process, ensuring alignment across all involved stakeholders and facilitating an efficient, well-coordinated transaction.

A dedicated M&A consulting team should be assigned, incorporating key areas of expertise such as finance, legal, and operations, along with external advisors. A structured approach to technical due diligence helps to identify risks early on in the process and prepare for the complexities of integration.

Step 2: Transaction

The heart of the M&A process is conducting thorough due diligence. A comprehensive due diligence process covering financial, legal, and operational aspects ensures that the target’s commercial viability and operational efficiencies are assessed.

Once the due diligence confirms the initial assessments and valuation, the negotiation phase begins. Structuring agreements and navigating complex sale and purchase agreements (SPA) ensure compliance and mitigate risks.

Additionally, planning for post-merger integration will commence at this stage. Outlining an operations integration plan, structuring airline commercial integration, and aligning product design strategies help to maximize long-term value.

Step 3: Merger control

A structured approach to merger control is critical to securing regulatory approval while maintaining deal momentum. Pre-filing engagement with competition authorities, strategic stakeholder management, and robust governance structures help to streamline the process. Lufthansa Consulting supports merger control with practices such as clear RFI handling, remedy planning, and centralized coordination across jurisdictions. Proactive risk management and stakeholders’ engagement ensure regulatory compliance while increasing the efficiency of the process.

Step 4: Integration

As the transaction moves toward closure, strategic rationale alignment becomes essential. A post-merger integration process focuses on such aspects as organizational development, fleet strategy, and network planning to drive long-term success. Lufthansa Consulting supports post-merger integration by providing structured planning that aligns stakeholders and optimizes operational transitions.

Following the closure of the transaction, effective post-merger integration is crucial for realizing the envisioned benefits. Ensuring seamless operational and cultural integration through a structured approach that includes steering committee support, governance structures, and data management processes facilitates a smooth transition. Regular performance reviews and fine-tuning strategies help to achieve sustained value from the merger.

What we offer

• Deep industry expertise: We specialize in addressing aviation-specific challenges, such as AOC approvals, airport slot management, fleet and infrastructure integration, and operational processes.
• Comprehensive M&A support: From due diligence to post-merger integration, we guide our clients through every step of the M&A life cycle, ensuring that risks are mitigated and synergies realized.
• Tailored solutions: Our hands-on approach combines strategic and operational expertise, which allows us to both see the big picture and address specific areas like traffic rights, customer base cannibalization, and loyalty program integration.
• Proven best practices: Drawing on extensive project experience, we implement effective project management methodology, an M&A toolbox, and stakeholder alignment strategies to ensure a smooth and efficient M&A process.

This article is part of the Lufthansa Consulting M&A editorial series. In the next episode, we will explore the topic of “Navigating Merger Control in Airline M&A,” addressing key regulatory challenges and best practices for ensuring compliance while maximizing deal success.

To learn more and discuss how your organization could benefit from our expertise, please contact Vincent Hütte, Leader of the Solution Group Strategy and Organization or Tim Noack, Consultant in the Solution Group Strategy and Organization.

Authors:
Tatiana Pavlova is Consultant in the Solution Group Strategy and Organization at Lufthansa Consulting.
Valentin Schrod is Consultant in the Solution Group Strategy and Organization at Lufthansa Consulting.

   
Tatiana Pavlova                 Valentin Schrod

Disclaimer – This article offers general information on aviation M&A as of July 2025. It is not a substitute for professional legal advice and does not claim completeness or ongoing accuracy. We are an aviation-management consultancy, not a law firm; no attorney-client relationship is formed. Always consult qualified counsel for before making any deal-specific decision.