BA ‘may merge with Iberia’

[U/S President]

BBC: BA 'may merge with Iberia' (http://news.bbc.co.uk/1/hi/business/3165488.stm)

According to the BBC, Eddington had dinner in MAD with some people from Iberia and afterwards told El Pa's newspaper that the two flagship airlines “may finish in each other's arms” (El Pa's article (http://www.elpais.es/articulo.html?xref=20031005elpnegemp_7&type=Tes&anchor=elpnegemp&d_date=20031005)).

[AIRWAY]

I wouldn´t be surprised if a merger of BA and Iberia would go ahead, i mean BA already own 9% of Iberia if im not mistaken...

[Crash1]

Wow two chief execs from two one world airlines have a meeting and all of a sudden everyone thinks it must mean there is going to be a merger.

[orange_bubble]

Would seem a good move for BA, it seems that in 5 years from now we wont recognize our European national carriers whom I'm sure will be tied up in new alliance super brands.

Its all big change ahead and KLM/Air France have got the ball rolling!

[colossus]

Given that the EU has indicated that transatlantic bi-lateral agreements must be undertaken in future on a pan-European basis (and that will doubtless be followed by additional meddling round the globe), Surely the key issue at the moment for any international European carrier, such as BA is that simply of access to slots at key gateway airports?

On this basis, the proposed KLM/Air France merger makes a lot of sense giving the new airline access to GDC and AMS, however a BA merger with Iberia would presumably not bring the same benefits.

[ojs]

Colossus, you're right that a BA-IB tie-up won't bring the airport advantage that a CDG-AMS tie-up does for AF and KL. However that's not the only reason for a tie-up...

One of AF's traditional strengths is that it has a good presence in a number of key world markets. Problem on N-Atlantic, no problem: they've got links to Africa, Middle East and Asia. SARS comes long? AF don't care: it's returned focus to Europe and N and S America.

IB, while not quite in AF's league, certainly does have a good network with a strong and respected brand for the Spanish market (wherever that is in the world). I think that, combined with the concern of the strength of the AF-KL tie makes an IB link quite likely, despite the cold water that's being poured on talk of the deal by both boards.

BA's failed to court AA, it's failed to tie up with KL, can it now be seen to fail again with IB? Would certainly be a good way of Colin M to bid his farewells (finally!).

[PAXboy]

orange_bubble: "...it seems that in 5 years from now we wont recognize our European national carriers whom I'm sure will be tied up in new alliance super brands."

Yep! And we already know their names:
One World
Star Alliance
SkyTeam
etc.

Lufty will grab Swiss and get closer to Austrian etcetera. This move is long overdue and is going to mean a lot of jobs being lost. Most of these will be back office and (hopefully) management. :rolleyes:

However, there is overcapacity in many routes. As they merge, this will affect operational staff and then it will have some effect on both the new and second hand aircraft market. Not enormous as this is only Europe, but more than enough to remind the manufacturers of the bad old days after 9/11.

[GOLF-INDIA BRAVO]

I though that Swiss were aligning with BA in the Oneworld group

Golf India Bravo

[Jet A1]

Well - what's the story with GB then cos I thought they operate to more Spanish destinations than mainlne under the BA banner ??

[PAXboy]

G-IB: "I though that Swiss were aligning with BA in the Oneworld group?"

They are but LH are buying up shares. There was a thread a couple of weeks ago. Hence my wild rumour mongering.

The suits have seen SN and SR go down and reckon it's time to save their sorry @rses! So we shall see more mergers and partnerships. It may well be that SAS are in a strong position, having been a three way company for many years. I doubt that the Finns will want to join them but there are enough little startups in Northern Europe to go round. (He rumoured)

[AJ]

Wouldn't hold your breath. I think people are getting over-excited here...the KLM/AF deal was NOT a merger in its strict sense...a complete merger (with all the route, fleet & job cuts that would inevitably entail i.e. "rationalization") would be and is still forbidden as both airlines' governments have signed separate air service agreements with the USA; these only remain valid when the respective country's airline is majority owned by native groups/institutions.

Once the EU and the US sign a more liberal air service agreement (talks have recently started), THEN we can expect to see a flurry of mergers/acquisitions.

As many commentators have already observed, with elections coming up in the US next November, the 'jobless recovery' and most US airlines up the spout, there is little chance of any new pan-Atlantic air service agreement being signed...the EU has a very long & ambitious set of demands which Congress has already balked at (removal of ownership caps, which would make it easier for Branson to set up a LCC in the US, for instance) cabotage rights, the 'Fly America' policy (whereby people & cargo travelling on Govt business must only travel on US airlines) etc. etc.

Until all that gets sorted out, I'm not holding my breath.
In any case, the KL/AF agreement hasn't been approved by the EU or US regulatory authorities.

Not being pessimistic or cynical, just realistic.

As some have already mentioned, this week's Economist has some interesting articles concerning this topic.

[HZ123]

The word collossul (large) do not know the spelling but that is about the size of the problem. IB is a very different culture very over staffed in the homeland and very resistant to change. They should an excellant marriage to BA.

[orange_bubble]

Down the aisle or out the door?

By Suzy Jagger (Times on line)


The Air France-KLM tie-up presents huge opportunities to the French and Dutch flag carriers but all manner of headaches to British Airways


Prepare yourselves, aviation buffs, for an ad in the classified section of sector magazines reading, more or less, as follows.

"Respected suitor, with rich history but fallen on hard times, owns plenty of accommodation in West London, seeks partner(s) for long-term relationship. Own transport essential. Preferably European. Dutch and French nationals need not apply."

If answering the attached box number, prepare to meet a certain Rod Eddington who, while himself respected for the path he has navigated for British Airways, now faces yet further turbulence. As if the aviation hangover from the September 11 attacks was not enough. Or the follow-on shocks wrought by Sars and the Iraq war. Or the strike by Heathrow check-in staff. Now British Airways faces competition from, on its doorstep, the world's biggest airline by turnover – the merged Air France-KLM.

Remember when BA advertised as the world's favourite airline? Air France-KLM will boast a combined network of 228 destinations, a fleet of 540 aircraft and about 106,000 staff. It will be Europe's biggest airline, and the world's fourth-ranking by traffic volumes. BA, employing 50,000 staff, has 343 aircraft.

Through merger, the French and Dutch flag carriers will be able to offer seamless passenger service. Why this matters is that Amsterdam's Schiphol airport and Paris Charles de Gaulle are just short feeder flights from the UK's planning-restricted airports.

Furthermore, Air France and KLM are forecasting synergies sufficient, eventually, to boost income by up to €500 million a year, allowing the new force in aviation to compete on improved terms with BA for full-service traffic. All this as BA, in particular, faces tough price competition from the low-cost carrier sector which has made the UK its European home.

Which is why BA needs partners, wedded in relationships stronger that the tie-up with Swiss announced last week. While this deal will offer benefits to passengers, operationally it fails to give the cost-cutting scope afforded Air France-KLM.

Mr Eddington has long been aware of the need for mergers. Even before the September 11 attacks, BA was attempting a KLM tie-up in talks which floundered on a dispute over control (in Anglo-Dutch business terms, relations between executives from the two nations proved more Corus than Unilever).

After September 11, he foresaw a Europe with only three major international carriers – grouped around Lufthansa, Air France and BA.

With a merger precedent now set, the time has come for BA to deliver. To scour the Continent's runways for partners with which to take off on a voyage of consolidation, growth and, one hopes, prosperity.

It was the collapse of an attempt to merge with American Airlines which, ostensibly, did for Bob Ayling as BA chief executive. It would be iniquitous to see his successor, who has fought so hard and capably for BA's wellbeing, suffer too through a failure of marriage.

[PAXboy]

studi: It was a thread in PPRuNe! In Passengers & SLF, we were discussing the Swiss move into OneWorld and this was posted:

QUOTE
11th September 2003

Swiss is burning 2-4 million francs a day, and will run out of cash eventually, possibly during October. I am using my FF miles as quickly as possible, but so many people are doing so that it is tricky.

Currently in takeover talks with Lufthansa. LH offer allegedly conditional on injection of 500 million more from the current shareholders. LH offer allegedly motivated by LH board members who have personal interest in Swiss paying for their Airbus fleet.

Current serious cash problems do not take two things into account. First, the restructuring costs for the layoffs that have already taken place are allegedly not yet in the accounts, and second, there is a 100 million judgement in favour of Air Liberté or one of the other French companies which has allegedly not yet been taken into account.

Momo
Genolier, Switzerland

UNQUOTE

To me, it looks as if Swiss are grabbing at everything they can, LH in Star Alliance and One World for whatever they can get. This is pure speculation on my part but, I suggest, the Swiss have more in common with LH than with BA - in the nicest possible way, of course.

[Notso Fantastic]

OrangeBubble- it all sounds so familiar, these stories of 'huge synergies', 'opposition will be wiped out', 'fantastic savings' blah blah blah. AOL-TimeWarner were the last big people to point out with a megaphone the loud advantages of it- whatever became of them?
My guess is the Dutch personalities will not sit well under the French style. Air France can never be called an example of efficiency. The Dutch will become increasingly resentful of perceived work getting transferred to Paris. From assurances being given, I don't think there will be any opportunity to make the takeover any more efficient than the two individual companies have now. True routes may be slightly rationalised, but that will mean KLM chopping in real life. Am I alone in being convinced it will all end in tears?
As a BA employee, I look on it with interest. If they can make a go of it, good. There is no kudos in being biggest in Europe. What's more important is not calling yourself the best, but earning the accolade from others- something BA publicity departments could learn!

[Jordan D]

I have a strange sense of deja vu, when BA-KLM was a thing, and when KLM-AZ was a thing, and ....

wait til it happens, then we'll see how it pans out.

Jordan

[Airbus Unplugged]

Rumour has it this may well coincide with a buy out of GB. The advantages are:

- nature of GB’s operations is work that could be done by IB

- releases large Airbus fleet at LGW for when the 737 finishes (son of Euro Gatwick)

- bolster LHR operation with crew/routes/aircraft so save recruitment

This may well be one to watch.

[HZ123]

Good thought out points but disagree. The Iberian routes plus N Africa / Portugal are saturated with low cost and every week a new outfit is intent on setting up. I must assume that IB has lost a lot of traffic in the last 5 - 10 years in their homeland to / from the UK.

BA has done well to limit the loss by handing it in the main to GT only retaining a couple of the main routes. Bear in mind that via the franchisse (Not sure of the spelling) BA earn somewhere in the region of 15% of GT's business plus a large amount of onward and transfer passengers.

If IB took this over BA would earn next to nothing out of the deal. I cannot agree with the extra a/c either has there are any number of cheap a/c availible for immediate rent / hire in addition to a number that BA still have parked awaiting work. I am sure that the first routes BA will gain will be the S American as they have not been large earners for a number of years now and I can see BA being glad to see the back of them rerleasing larger a/c and crews for higher earners.

Regarding crew transfer in such an event if past history is anything to go by it causes a considerable number of costly problems and GT staff that would happily choose to join BA now but if compulsorily transfered will resist to the maximum effort. BA have seen this to may times BCAL, DANAIR, TAT, the list is endless.