there are 50 countries in Europe containing circa 250mm people
historically at least half have had a significant international airline- this provided decent services for a lot of people at the other end of the line in what used to be the 3rd or second world. Because they were seen as "national champions" there was (and still is) a great reluctance to allow mergers or takeovers
Once the guys at the other end of the line started their own decent airlines (probably starting with SQ) the competition has become serious. The new airlines aren't lumbered with historic, First world cost bases nor work practices.
Because of the high costs the LCA's have started up in the legacy airlines back yard and run rings round them as people will always choose on cost if they are paying themselves
In the States airlines have been allowed to merge and go into Chapter 11 and they are protected by the Govt but even they have been in pain for a couple of decade
Probably only 3-4 of the main European airlines have a hope of long term survival- BA , LH, KLM/AF would be my guess