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Aer Lingus - 6

Old 22nd Dec 2014, 23:49
  #2441 (permalink)  
 
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why on earth would IAG take over EI only to curb its transatlantic operation . Without it many UK and Euto routes would not survive. Willie Walsh is only too aware of this. Looking at this another way, giving more connectivity via Dublin can allow BA to build new routes at a crowded Heathrow and let's face it, it's going to be a while until new slots come up at LHR...
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Old 23rd Dec 2014, 01:59
  #2442 (permalink)  
 
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As it is late any my phone hates me, I will make my point brief.

Iberia would not affected much due to BA and IB having different markets. How many UK airports did IB serve before the sale? Never many. How many does EI serve? A hell of a lot more than IB anyway. Why BA would want to jeprodise their UK and Domestic traffic is beyond me.

If BA wanted a second airport for its TA traffic, it would use Gatwick or Glasgow/Edinburgh, not Dublin. Dublin is a very worrying competition for BA and they are growing fast.

My opinion on what BA may do is they would mess with the schedule of the T/A flights or the UK flights if possible to make them far less attractive to transfers. T/A routes may be downscaled due to lack of passenger Demand and certainly would not grow anymore. Instead of going to Dublin, many English passengers would instead drive/fly to Heathrow and further increase the loads on BA' flights.
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Old 23rd Dec 2014, 04:56
  #2443 (permalink)  
 
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AerRyan,

Is it your contention that IAG took over AerLingus this would only be in order to curb its expansion in order to bolster London Heathrow loads with pax coming from the UK regions?

IAG in my view want to make a significant investment, they will want that to grow and be fruitful, EI need the TA feed to make make many of the Dublin UK and Europe routes work, and in the face of FR competition on these routes the transfer pax are needed. Eg Dub GLA, NCL, BHX etc. IAG will see the strategic advantage that long term the Dublin operation can offer. Let's not also ignore the commerciality of the EI business, especially transatlantic, their margins are very good comparatively speaking.

I'm not at all convinced that Iberia to the UK regions is a good comparison. Iberia has been traditionally high cost and not competitive, like BA flying to the regions has been left largely to LOCO carriers, exit stage BA from the regions largely and Iberia is not cut out for such routes, hence Vueling vehicle, besides this market is crowded. Aer Lingus on the other hand is capable of successfully competing with Ryanair. IB has totally and traditionally failed to link spain ( outside of mad and BCN) with international destinations. BCN has limited operation now too . Hence BA centre on successful London routes, Iberia successful Madrid routes and Aer Lingus successful Dublin routes. Hub and spoke. The rest will be left to Vueling and to lesser extent IB express.
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Old 23rd Dec 2014, 16:13
  #2444 (permalink)  
 
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AerRyan,

Is it your contention that IAG took over AerLingus this would only be in order to curb its expansion in order to bolster London Heathrow loads with pax coming from the UK regions?
Mostly, yes. I'd imagine LHR gets alot of its transfer pax from the UK, and if EI is to take alot of this aswell as taking origin pax, than BA must either accept the competition or Stop the competition.


IAG in my view want to make a significant investment, they will want that to grow and be fruitful, EI need the TA feed to make make many of the Dublin UK and Europe routes work, and in the face of FR competition on these routes the transfer pax are needed. Eg Dub GLA, NCL, BHX etc. IAG will see the strategic advantage that long term the Dublin operation can offer. Let's not also ignore the commerciality of the EI business, especially transatlantic, their margins are very good comparatively speaking.
Why would anyone want to grow a business that would hurt another of their business'? IAG in my view want to make as much profit as they can, and if this means smothering their competition while getting the added benefit of gaining a profit from another part of EI, than why wouldn't they buy it?

A company should not own two competing Airlines that are based only a few hundred miles from eachother. It just doesn't make sense.

I'm not at all convinced that Iberia to the UK regions is a good comparison. Iberia has been traditionally high cost and not competitive, like BA flying to the regions has been left largely to LOCO carriers, exit stage BA from the regions largely and Iberia is not cut out for such routes, hence Vueling vehicle, besides this market is crowded. Aer Lingus on the other hand is capable of successfully competing with Ryanair. IB has totally and traditionally failed to link spain ( outside of mad and BCN) with international destinations. BCN has limited operation now too . Hence BA centre on successful London routes, Iberia successful Madrid routes and Aer Lingus successful Dublin routes. Hub and spoke. The rest will be left to Vueling and to lesser extent IB express.
Iberia is not a good comparision to Aer Lingus, thats exactly why IAG buying Iberia would not hurt Madrid or any other spanish airport.
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Old 23rd Dec 2014, 21:01
  #2445 (permalink)  
 
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AerRyan,

We have different perspectives on this and you see it through a different lense than I. The fact is that EI while successful are small and need a strategic partner. Technically speaking this needs to come from within the EU to get a 50% shareholding. Hence, all carriers of scale will be no different to BA in terms of competition .

For BA to invest in the model just to curb its expansion or limit there competition on the Atlantic is a nonsense. Firstly in relative terms the EI transatlantic operation is tiny. BA's don't have capacity to satisfy a ramped up demand on their domestic routes as a result of a reduction in EI connectivity via Dublin. More importantly, should EI's transatlantic business suffer significant cuts , EI will struggle, is this what IAG would want? No.

If your vision materialised you can be sure a void would be filled and the US carriers would quickly ramp up their Dublin operations. BA couldn't do much about that ... BA have bigger challenges for the connectivity that KLM offer to the UK regions via AMS to the rest of the world ...
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Old 23rd Dec 2014, 23:13
  #2446 (permalink)  
 
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"Strategic partner" is quite a euphemistic term and we should be careful about using it. It can cover a multitude of corporate "sins".

First off, what is the strategy/long term plan of the EI board and the intentions of the EI share holders?

Secondly, what partners are needed/wanted/useful in achieving those ends?

If your goal is just to sell your shares then any buyer is a "strategic partner". If you have a different view and want to grow your company then anyone who can bring resources that promote, nurture and assist in that goal fits the bill.

Do we have any clear indication from EI or any EI share holders on their position or plan? What would a "partner" look like?

A full take over buyer is only a "strategic partner" when your plan is to be bought. Of late, EI has shown it can independently survive and deliver some growth in the face of a less than favourable environment that includes very stiff competition and difficult economic conditions. IMHO, it doesn't necessairly need to be taken over in order to continue and prosper, however, additional growth options may exist with the right partner, while other avenues may severely curtail future options.

Then there's the awkward question of what if one share holder were to see subjective strategic opportunities for themselves in the disposal of their holding to a third party that might not result in with the best for the organisation and/or other stake holders? In that case, the potential buyer is most definitely a "strategic partner" for that one seller.

JAS
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Old 24th Dec 2014, 12:11
  #2447 (permalink)  
 
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SFO, YYZ and the 16.10 to BOS all cancelled today along with incoming from Orlando.

Anything going on? Seems a lot of cancellations.
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Old 24th Dec 2014, 12:17
  #2448 (permalink)  
 
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Weather is the reason being given.
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Old 24th Dec 2014, 12:33
  #2449 (permalink)  
 
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SFO, YYZ and the 16.10 to BOS all cancelled today along with incoming from Orlando.

Anything going on? Seems a lot of cancellations.
They were never scheduled for the 24th and nobody took them out of the system.

The last outbound YYZ/SFO was Monday and only one BOS was scheduled today.
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Old 24th Dec 2014, 13:48
  #2450 (permalink)  
 
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Thanks. Listed on Dublin Airport mobile app as being cancelled. Thought it was a bit odd alright.
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Old 24th Dec 2014, 20:46
  #2451 (permalink)  
 
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Do you really think BA are willing to give up on virtually all non-London based UK TA pax Frank? Because EI are targetting these pax big time ATM.
Did not actually state that. If EI are targeting BA, then it makes sense for IAG to own both.

In a way, EI is targeting KL more than BA, because BA (or any feeder carrier) does not have the reach throughout the UK, thanks to the lack of capacity at LHR.

EI is not taking away from BA because BA is not present in these areas (i.e. UK airports not linked to LHR). By buying EI, IAG as a whole gets access to this traffic.

I think from every angle EI are a great buy for IAG, either to protect the LHR slots, absorb them, or use DUB as an outlet valve for the UK regions as has been suggested. Would it be better for EI than continued independence though is questionable, since a decent chunk of their TA pax, which is their moneymaker atm, are coming at BA's expense. David and Goliath of course, but the little bit of business David is taking from the giant is crucial.
Agreed, on many levels it would be extremely foolish and a huge strategic bungle for IAG not to Buy EI if the opportunity arises.

why on earth would IAG take over EI only to curb its transatlantic operation. Without it many UK and Euto routes would not survive. Willie Walsh is only too aware of this. Looking at this another way, giving more connectivity via Dublin can allow BA to build new routes at a crowded Heathrow and let's face it, it's going to be a while until new slots come up at LHR...
Exactly, it's sort of hedging bets. The EI trans-Atlantic operation complements the existing BA/IB/AA joint venture offering.

Iberia would not affected much due to BA and IB having different markets. How many UK airports did IB serve before the sale? Never many. How many does EI serve? A hell of a lot more than IB anyway. Why BA would want to jeprodise their UK and Domestic traffic is beyond me.
BA is not jeopardising it's UK and domestic traffic. BA would not be buying EI, IAG would be, and by buying it, would ensure that if BA loses traffic to EI on trans-Atlantic, the parent group IAG (which has the shareholders) is not. This concept should not be difficult to understand.

Why could BA and EI not co-exist in much the same as LH, SN, OS, LX, etc., do in the LH group?

If BA wanted a second airport for its TA traffic, it would use Gatwick or Glasgow/Edinburgh, not Dublin. Dublin is a very worrying competition for BA and they are growing fast.
It's been done before, it no longer worked, and it was ended.

BA did trans-Atlantic from LGW, MAN, and, back in the day, GLA/PIK.

If it is the case that DUB is indeed very worrying competition for BA and growing fast, then why not get a piece of the action?

From IAG's point of view, doesn't this make perfect sense? From EI's point of view does it not also make sense?

For EI, it would be "the devil you know". Another buyer may want to "do a BD" on EI and canabalise it for LHR slots. IAG would not, as BA has enough LHR slots now.

My opinion on what BA may do is they would mess with the schedule of the T/A flights or the UK flights if possible to make them far less attractive to transfers. T/A routes may be downscaled due to lack of passenger Demand and certainly would not grow anymore. Instead of going to Dublin, many English passengers would instead drive/fly to Heathrow and further increase the loads on BA' flights.
Why do this if it's going well? Why could IAG not run the airlines independently of eachother, like the LH group does with LH, SN, OS, LX, etc.?


Why would anyone want to grow a business that would hurt another of their business'? IAG in my view want to make as much profit as they can, and if this means smothering their competition while getting the added benefit of gaining a profit from another part of EI, than why wouldn't they buy it?

A company should not own two competing Airlines that are based only a few hundred miles from eachother. It just doesn't make sense.
Why ever not? It does make sense! that's the whole point, IAG would make money from both.

It's not BA and EI in isolation. The parent company, IAG, would be buying EI, not BA.

Last edited by Fairdealfrank; 24th Dec 2014 at 20:57.
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Old 24th Dec 2014, 23:17
  #2452 (permalink)  
 
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Thanks. Listed on Dublin Airport mobile app as being cancelled. Thought it was a bit odd alright.
Forgot to add the MCO was rescheduled because of tech issues and landed at 00.00 tonight.
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Old 25th Dec 2014, 06:52
  #2453 (permalink)  
 
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Yeah, I saw that and thought briefly how awesome it'd be if that was the regularly scheduled time. I do prefer eastbound daytime flights.
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Old 25th Dec 2014, 12:07
  #2454 (permalink)  
 
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There is also one other possibility in the IAG-EI picture that should be considered ... the idea of an "inversion takeover", where one company takes over a second that's in a lower tax jurisdiction and then relocates it's head office to the acquired business's HQ.

Is it possible that IAG is viewing the Irish 12.5% corporate tax rate as a benefit of purchasing EI? Might Aer Lingus's status as an Irish company be, in and of itself attractive to a potential buyer? Could IAG become an Irish domiciled organisation for tax purposes should the purchase take place?

JAS

Last edited by Just a spotter; 25th Dec 2014 at 20:32.
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Old 26th Dec 2014, 10:51
  #2455 (permalink)  
 
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IAG approach

I was just reading a very detailed article online with compelling analysis of the competitive position on the Atlantic by carrier.

It explains that the Irish government may seek assurances on the Aer Lingus slots at LHR, as would be naturally expected. However, by simply stepping up aircraft size to 321's across the board on EI services over 320's and 319's, the seat levels could be maintained and a batch of slots in the bag.

Equally at Belfast City post a take over by IAG, there is an opportunity for consolidation and a move from 9/10 319/320 operation to say 6 321 services.

The net effect of these suggested changes to DUB LHR and BHD LHR could net BA 10+ slots per day while satisfying the Irish Government.
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Old 26th Dec 2014, 11:22
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EI-BUD

The 321s are common on LHR and at times could easily make up 5/6 daily already. Frequancy is key and not capacity which EI have demonstrated.

The only slots the Goverment wouldnt care about of those at BHD.

Remember BA could go back to 100% using EI into LHR if they really needed the slots but why don't they??
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Old 26th Dec 2014, 12:47
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What about the slots serving Cork and Shannon, surely the Irish Government will have an interest in them as well. incidentally are Aerkingus or the Government the owners of the slots. There was some debate about that back in 2007 when EI pulled out of SNN LHR and used them for BHD instead.
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Old 26th Dec 2014, 14:50
  #2458 (permalink)  
 
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J636,
Point taken re 321's on London but it's a very recent thing to see 321's back on DUB LHR at any reasonable frequency, 319's also as common in the route, of the 2 319's working out if DUB they are regularly appearing on LHR.

Also, pre BA's return to DUB LHR bmi were doing 4 daily ( down from their high of 8 and at times 9 rotations a day) and some services were Embraer. An up weighted aircraft size at frequency of 14//15 a day would be more than sufficient. 330 could do early morning services on arrival from US roures, like AGP in summer.
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Old 26th Dec 2014, 22:10
  #2459 (permalink)  
 
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Varadkar is on record as saying that any "agreement" over the preservation of slots is not worth the paper it's printed on. There is little or no legal basis to enforce them once the government sells its shares save the EU coming up with some legislation to assist little ole Ireland. Market forces will dictate where the slots will be used.
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Old 27th Dec 2014, 19:20
  #2460 (permalink)  
 
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There is also one other possibility in the IAG-EI picture that should be considered ... the idea of an "inversion takeover", where one company takes over a second that's in a lower tax jurisdiction and then relocates it's head office to the acquired business's HQ.

Is it possible that IAG is viewing the Irish 12.5% corporate tax rate as a benefit of purchasing EI? Might Aer Lingus's status as an Irish company be, in and of itself attractive to a potential buyer? Could IAG become an Irish domiciled organisation for tax purposes should the purchase take place?
Interesting idea, but probably a happy bi-product than the main motivation. Corporation tax is 30% in Spain and 21% in the UK, yet IAG is Spanish based.

IAG approach

I was just reading a very detailed article online with compelling analysis of the competitive position on the Atlantic by carrier.
Could you post the link please, EI-BUD, it sounds like an article worth reading.

What about the slots serving Cork and Shannon, surely the Irish Government will have an interest in them as well.
Yes, would imagine that these would ned to be safeguarded.

Varadkar is on record as saying that any "agreement" over the preservation of slots is not worth the paper it's printed on. There is little or no legal basis to enforce them once the government sells its shares save the EU coming up with some legislation to assist little ole Ireland. Market forces will dictate where the slots will be used.
Varadkar is history, he's now at health, but he may, of course, be right.

Last edited by Fairdealfrank; 27th Dec 2014 at 19:36.
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