Airlines seen facing winter survival battle

By Tim Hepher and Helen Massy-Beresford

PARIS (Reuters) - European airlines face a cut-throat battle to survive the winter as recession threatens the recipe many have used to ride out a spike in oil prices -- sharing the pain with consumers by slapping on fuel surcharges.

Airline bosses at a conference ending on Friday heard warnings that the slump in confidence after the banking crisis left no choice but to cut costs, merge or go bust.

"Consolidation will be very strong in coming months either through players merging or disappearing. That's overdue," said Air France-KLM (AIRF.PA) Chairman Jean-Cyril Spinetta.

Delegates at the World Air Transport Forum said the only question was whether a major flag carrier would fold. Small Danish low-cost carrier Sterling this week joined a list of more than two dozen carriers that have gone bust this year.

"Everyone is saying I will wait for my colleague to collapse first, just to give me a bit of oxygen for a few months," said Marc Rochet, head of all-business-class airline l'Avion, recently swallowed by British Airways (BAY.L).

Still, some airlines put a brave face on the crisis with upbeat growth targets, saying the rebound may be strong if they can hold on until 2010. One expert accused them of bluffing.

"Nobody wants to be the first to give bad news. Everyone is lying to each other," Ralph Kaiser, head of corporate travel payments system UATP, told delegates.

Air traffic historically tends to grow at twice the level of gross economic product, but global international traffic fell in September for the first time in five years.