How Will Spanair Collapse Impact Europe's Skies?

Businessweek is reporting that Spanair’s collapse after the withdrawal of state funding suggests that Europe’s debt crisis "may spur airlines from the Mediterranean to the Baltic to consider mergers or risk failure." The story also notes that Europe’s biggest carriers may be reluctant to enter a bidding contest for unprofitable companies with rivals from emerging markets due to their own uncertain economic outlooks, and inter-continental deals could offer better value.

The first collapse of a scheduled European airline since the last recession comes as cash-strapped governments mull disposing of at least half a dozen other carriers in auctions pitting Qatar Airways Ltd., which had been in talks with Spanair, and other emerging-market bidders against Air France-KLM Group, Deutsche Lufthansa AG and British Airways parent IAG.

Governments are becoming reluctant to save ailing airlines as the debt crisis forces austerity programs in other parts of the economy. State investors in Stockholm-based SAS AB, Aer Lingus Group Plc of Ireland, Portugal’s TAP and the flag carriers of Poland, Hungary and the Czech Republic have all signaled plans to reduce direct support and seek new investors.

While no one could argue that the loss of airlines—even flag-carriers—would be destructive to Europe's tourism scene, it may not wreak the destruction the article suggests. As a continent, Europe has a finely tuned international high-speed rail network that has been growing in recent years as short-haul airlines cut back on service. If these airlines do fall, do you think that rail service will increase to compensate, or will the continent's tourism scene not recover? Will airlines merge to stay afloat or try to hold on to their independence? Sound off in the comments below!
 

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