From today's Scotsman:
Merger warning as BA confirms KLM talks
Andrew Murray-Watson
British Airways chief executive Rod Eddington warned yesterday European airlines must merge or face ruin , as he confirmed that BA was in renewed talks with KLM.
Any commercial agreement between the two flag carriers will inevitably lead to another large jobs cull and could suffer at the hands of regulators if a merger was broached.
British Airways has already axed 7,000 jobs, but Eddington hinted more cuts could be on the way. He said: "We will survive, but we’re going to have to change the way we run our business. We are going to have to tighten our belts, we’ve begun that process already, there may well be more things we have to do."
Commenting on future consolidation, Eddington said: "We want and believe that European aviation has to consolidate. We are talking to KLM, we are talking to other carriers ... to see if there are ways we can work together more closely."
He also revealed that passenger numbers on BA’s transatlantic and Middle East routes were still 30 per cent down since 11 September and showed no signs of recovery.
"No-one really is sure when our North American customers are going to have the confidence to fly again," he said.
Eddington predicted that the majority of European flag-carriers would disappear. "There may be more than three but I think there will be three major international carriers (in Europe), rather than the 15 or so that exist now," he said.
KLM denied that a merger was on the cards, but said it was in talks with BA among other European airlines about "co-operation", emphasising it was not currently considering mergers or alliances.
Eddington’s comments echo those made last week by Lufthansa chief executive Juergen Weber, who predicted that mid-size European airlines such as Olympic would not survive the fallout from 11 September.
He said Lufthansa, Air France and British Airways would survive as the principal players in Europe.
Eddington added that BA was still interested in formalising its relationship with American Airlines, but that European authorities would have to give the deal a green light before further steps between the carriers were taken.
"We would certainly like to get together with American Airlines," he said. "We are hoping that the governments will be able to deliver that towards the end of this year."
Eddington said price cuts to stimulate the market were a possibility, but only after public confidence in flying returned and a sell-off of BA’s property portfolio was an option, but one he hoped not to take.
He added he had asked Prime Minister Tony Blair for support in meeting the additional costs of insurance and security, but insisted he did not want the government to hand out more money to the airlines.
He said: "We want to make sure our government provides a level playing field (between the UK and the United States) so that we can compete globally, but we are not looking for the government to bail us out."
American airlines have already received US$16 billion (£11.2 billion) in state aid.
Eddington denied that further cost cutting measures would include the complete withdrawal from Gatwick Airport, but refused to rule out further job cuts to add to the 7,000 already announced by the airline.
Meanwhile BA is to fly Concorde to New York this morning in its first full transatlantic flight since it was grounded, some two weeks before commercial services are due to resume.