BA KLM alliance

[N380UA]

LONDON, (Reuters) - British Airways boss Rod Eddington said on Sunday he was talking to Dutch carrier KLM and other airlines and expected the European airline industry to consolidate sharply.

we're just one happy family!!!

[The Guvnor]

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.

[Saab 2000 Driver]

The previous flirt between BA and KLM ended because KLM wanted too much according to some newspapers.

Now, with BA in a weaker position, let´s see what happens.

[redfield]

Assuming that BA and KLM do ultimately merge, does this mean that KLM Uk's aircraft will appear in BA colours?

[Herod]

No.

[The Guvnor]

... but BA's aircraft might be painted in silver, white and blue :D :D :D

[Davaar]

Saab 2000:

"KLM wanted too much". Nothing new, really:

"In matters of commerce the fault of the Dutch
Is offering too little and asking too much"

Canning, 1826.

[The Guvnor]

Given the state of BA's finances at the moment, I suspect that the next press release from Waterworld may well read: "We wanted to do a deal but they offered too little..."

[Saab 2000 Driver]

Well, I had the impression that KLM is sitting on a pile of cash, so (with BA´s cash situation/problems in mind) it might be that KLM is in a much better position then it was in one year ago.

[raitfaiter]

KLM's staffing makes BA look like easyjet, guv....theres only one way this is going.

[RogerTangoFoxtrotIndigo]

with qantas moving closer to AA and BA doing the same slow dance with KLM a QF AA KLM BA global aliance though unlikly to happen surely makes commercial sence. each airline has something worthwhile to bring to the party.

[ 29 October 2001: Message edited by: RogerTangoFoxtrotIndigo ]

[yaffel1]

As far as I understand it (and I could be wrong) one of the problems with European consolidation has always been that bilateral rights require that the majority of each airline is owned by shareholders from the home nation of the carrier concerned.

If a carrier is majority owned by shareholders outside of the home nation then the right to fly to (for example) the US can be revoked. Does anybody know how Swissair/Sabena were going to get round this difficulty had SR upped their stake to 85% as had been originally envisaged?