Turbulence for Europe's State-Owned Airlines

Governments have long helped bankroll their national airlines, buying both prestige and guaranteed service on certain routes. But in late January, two of Europe’s state-subsidized carriers—Spain’s Spanair and Hungary’s Malév—foundered as their purse strings were tightened or cut. Analysts say they won’t be the last. “Governments don’t have the financial wherewithal to support airlines in the same way as in the past,” says John Strickland, an aviation analyst at JLS Consulting in London.

Politicians are reluctant to save ailing airlines as the debt crisis forces austerity programs in other parts of their economies. So state investors in Stockholm-based SAS, Aer Lingus Group of Ireland, Portugal’s TAP, and the flag carriers of Poland and the Czech Republic have all signaled plans to cut support and seek new investors.