Will BA Return to Qantas?
For what it's worth, Stephen Bartholomeusz says
"BA and Iberia are merging in a rather complicated deal that will see the creation of a new holding company, International Airlines Group, whose name and structure provide some indication of its ambitions.
The obstacle to mergers of international carriers, apart from the anti-trust hurdles, is that access to international routes is negotiated by governments, not airlines. For the national flag carriers in particular the imperative is to protect their status and the bi-lateral access arrangements.
When BA and Qantas last discussed a merger (to be executed via a dual listed entity structure) in 2008, that issue of the bi-laterals and the then web of restrictions on foreign shareholding in Qantas would have been a major topic. As it happened the deal fell over valuation issues.
BA had been talking to Iberia then – at one point a tri-partite merger was canvassed – and continued to negotiate after the Qantas talks ended. The two European carriers have received their regulatory clearances and are now in the process of executing a merger that will see BA shareholders owning 56 per cent and Iberia shareholders 44 per cent of IAG.
To get around the issues of nationality, both BA and Iberia will continue to operate as separately-branded and managed companies. While IAG will effectively have 100 per cent of the economic exposure to the underlying businesses, the airlines are using a separate class of shares held by trustees to maintain technical local majority (50.1 per cent) ownership.
If that structure holds up under scrutiny and in practice, it would appear to be able to accommodate any number of other airlines without jeopardising the bi-laterals.
Last year the Rudd Government removed the sub-caps that prevented individual foreigners owning more than 25 per cent and foreign airlines owning more than 35 per cent of Qantas, but retained the overall foreign ownership ceiling of 49 per cent. It is possible that requirement could be accommodated within the structure BA and Iberia are using for their merger.
Qantas may not be the initial priority for IAG given that Qantas and BA already have an alliance on the ‘’Kangaroo’’ route that enables them to co-ordinate scheduling, marketing, sales, freight and pricing and therefore extract synergies.
Another BA/Iberia ally, American Airlines, might be a higher priority given the strengthening of IAG’s position in the Americas that would produce. BA is strong on the trans-Atlantic route while Iberia has a strong network in Latin America as well as its southern European base.
If Qantas and American were brought more tightly into the fold, IAG would have a very strong foundation in Europe, the Americas, the Middle East and the Asia Pacific. It would also, through Jetstar, have access to an international low-cost-carrier brand and an expanding presence throughout Asia. While there would be some weak spots in the network, it would look like a truly global airline.
Qantas’ Alan Joyce, with his predecessor Geoff Dixon, ended the talks with BA. Joyce has said a merger with another carrier is not a priority and that he doesn’t expect a major transaction involving Qantas to occur for at least a decade.
While the expansion of Jetstar offers the prospect of a meaningful Asian hub, the strategic concern for Qantas has always been that as an ‘’end-of-the-line’’ carrier it might ultimately be left stranded and sub-scale if there were large-scale consolidation of the hub carriers. In Europe some of that consolidation has occurred, with Air France-KLM and Deutsche Lufthansa’s expansions prompting the BA/Iberia response.
Qantas, American, Cathay Pacific and the troubled Japan Airlines are, with BA and Iberia, the bigger members of the oneworld alliance which India’s Kingfisher has just joined. Members of that alliance would be the easier and more obvious targets among IAG’s hit list."
Last edited by WorthWhat; 6th Sep 2010 at 08:32.
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