The interior of the business class of the Airbus A350 XWB, pictured during a presentation in Hamburg, Germany, on 7 April. Finnair is in 2015 set to become the first European airline to add the new aircraft to its fleet. While four airlines command an 85 per cent share of the domestic air transport market in the United States, in Europe a corresponding share of the market is shared by 50 airlines. That, essentially, explains why a wave of airline consolidations is expected to sweep over the continent.

The other reason is the weak profitability of airlines.

The rules of the air transport sector have been re-moulded following the emergence of low-cost airlines, which has prompted loss-making airlines with heavy organisational structures to seek consolidation or to suspend their operations altogether.

In Finland, the discussion on the ownership structure of Finnair began after Eero Heliövaara, the director of the Government's Ownership Steering Department, proposed that Finland reduce its stake in the airline from the current over 50 to 30 per cent.

After initially dismissing the proposal, Pekka Haavisto (Greens), the minister responsible for ownership steering, said later that the state could reduce its stake in the airline on the condition that the shares are sold to a domestic investor that agrees with Finnair's Asian strategy.

In general, the dissolution of state ownership and the transfer of shares to domestic investors is a preparatory step toward initiating genuine partnership negotiations.

Klaus Heinemann, the board chairman at Finnair, commented on the possible changes in the ownership structure in March, suggesting that shares in Finnair should be sold to another airline or Finnair should partner-up with another airline to establish a joint air venture.

“Companies such as Finnair have become a dying breed of air transport,” Heinemann said.

What in effect would Finnair's consolidation entail?

One plausible scenario is that both Finnair and SAS are taken under the wing of Lufthansa. In addition to owning Germanwings, Swissair and Eurowings, the German airline is a stakeholder in a number of companies and joint ventures.

The multinational airline holding company IAG, in turn, would be a natural choice as it already operates a number of national brands.

A consolidation with either IAG or Lufthansa would allow Finnair to utilise economies of scale in its procurements and to sustain its heavy central administration.

Outside Europe, Japan Airlines (JAL) could also be tempted to acquire a stake in Finnair, having selected the Helsinki Airport as its new European hub last July. In addition, JAL, British Airways and Finnair in April enhanced their co-operation on routes between Japan and Europe by sharing revenue and co-operating on scheduling and pricing.

The decisive question, however, is whether the business models of national airlines remain sustainable in today's operational environment.

Juha-Pekka Raeste – HS
Aleksi Teivainen – HT
Photo: Patrick Lux / AFP