Thurs "The Times" (London)
Poms go home
Why has British Airways sold its interest in profitable Qantas to focus on a European aviation market where earnings are elusive? By Mike Verdin
Who says patience never goes rewarded? Edward VII was nearly 60 when he inherited the throne. Dame Peggy Ashcroft was 77 when she won her only Oscar.
In Australia, anti-British elements which 12 years ago funded a "Piss off Poms" poster at Sydney airport in protest at the sale of a quarter of Qantas to British Airways, have had their wish granted.
BA this morning said that it was selling its Qantas shares for £425 million. Why? BA can hardly have been disappointed at Qantas's performance – the airline last month announced a record annual profit of £254 million.
Nor is BA ditching its working relations with Qantas, proclaiming that the sale will have "no impact" on the airlines' joint service agreement which has allowed them, for instance, to share revenues for services on the UK-Australia "kangaroo" routes.
Instead, BA said it wished to strengthen its balance sheet to exploit "any future European consolidation" in the airline sector.
The issue of tie-ups reappeared on the radar 12 months ago when Air France and KLM announced their tie-up to create Europe's largest airline, overtaking BA, and allow at least €500 million in synergy savings to be unlocked.
Ryanair, which itself last year bought Buzz, the low-cost Dutch carrier, has kept the consolidation issue alive through repeated warnings of the disasters which await weaker airlines in the cutthroat European aviation sector (look at Alitalia's continued problems), and the rewards which can be reaped by survivors..
BA has repeatedly sought a merger to bolster its own position and fulfil a prophecy made by its chief executive Rod Eddington after the September 11 attacks that Europe would be left with international airline groups based around three carriers – his own, Air France and Lufthansa.
Yet its has found tie-up efforts thwarted by regulatory interference, as was, for example, its prospective merger with KLM 13 years ago and, later, with American Airlines.
A likely tie-up target remains – Iberia, the Spanish airline which analysts agree would be a good fit for the British flag carrier.
Yet is BA right to pursue a greater presence in the tight European market at the price of reducing its presence in south-east Asia and the Southern Hemisphere?
It is a decision which may appear foolhardy in the light of BA's failure to achieve profitability in Europe and in the improving conditions on long-haul routes. It is in providing such services, after all, that the greatest margins lie.
However, British Airways can ill-afford to fight on the long distance air corridors without a strong domestic presence. To become reliant on longhaul would open BA to disaster in the event of further geopolitical unrest, or events such as the Sars outbreak. Furthermore, the victors of the European air wars could be in line for generous rewards. Ryanair today proclaimed itself "Italy's favourite airline for Europe", turning the knife as Alitalia wallowed near bankruptcy.
There is the old Aussie joke about how to tell the BA flight at Sydney airport (it's the one which is still whining long after the engines have been turned off).
If today's share sale will be welcomed by anti-British Australians, it should not be mourned by BA shareholders who, as Mr Eddington said, have received "good returns" from the Qantas investment.
If anyone is concerned, it should be the Qantas bosses. The Poms may have gone, but who will replace their whining now?
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