British Airways and Amercian Airlines plan another merger!

[Buster the Bear]

BRITISH Airways has reopened talks with American Airlines to revive an abandoned £5bn merger plan.

Willie Walsh, the new BA chief executive, has met Gerard Arpey, chairman and chief executive of American Airlines, on a number of occasions in America over the past five months.

The airlines have twice attempted to merge in the past ten years, but regulatory hurdles stood in the way both times.

The latest negotiations will go ahead only if America and the European Union come to a deal on air traffic - an 'open skies' agreement that would relax laws over airline mergers.

But Walsh, 44, said he was confident that such a deal would be reached in the next 18 months. 'A right deal between the US and the EU would facilitate a closer relationship between us and American Airlines,' said Walsh.

'It's a good relationship and I have met Gerard Arpey every few months. He is an excellent guy.

'We have tried for a merger twice, but each time the price has been too high.'

Walsh insisted that Arpey was also keen on a merger. A link-up between the two would create a colossus capable of dominating the North Atlantic route.

The last time BA and AA, America's biggest airline, were poised to merge, American transport authorities demanded that BA give up at least 16 valuable slots at Heathrow, which would have made any deal uneconomic.

Walsh, who took over from Sir Rod Eddington only a week ago, also talked of placing a multi-billion pound order with Boeing to replace BA's fleet.

No final decision has been made and Walsh's fleet experts are talking to Boeing and Airbus about its requirements. But it is clear that BA is taken by Boeing's Advanced version of the 747, which has yet to be built.

[derekl]

Fascinating.

And totally at odds with the interview with Walsh in the Sunday Telegraph Business News today when he visualizes no expansion of BA or of ordering any new aircraft for years as BA's fleet is still young.

His aim is to increase margin and manage the move to T5 successfully.

He cast siginificant doubts on the economic viability of the A380. He certainly didn't want to be first in line for it.

What's the source of the story, Buster?

[Rainboe]

Mmm. Let's see. United, US Air, AA, KLM, Iberia.....I think Cathay was talked about once, Aer Lingus....wasn't Sabena brought up once? Ah do declare even Swissair was on that list somewhere.....and even more that have drifted out of one's ganglions years ago.

The important thing is not to hold your breath. Definite competition and monopoly issues here of two of the most dominant market leaders on the N Atlantic.

[HowlingWind]

I'm not sure if this was Buster's source, but it appears to be verbatim from this article at thisismoney.co.uk (http://www.thisismoney.co.uk/news/article.html?in_article_id=404217&in_page_id=2&ct=5).

So what will the emerging carrier be called? British American Airways? American British Airlines? Bush-Bliar Coalition Airways? :}

Agreed with Rainboe that it'll probably face some opposition from other carriers on anti-trust and fair trade grounds. Should be interesting...

[20driver]

According to Derekl
Avoid expanding - increase the margin - handle the move to T-5 and no rosy eyed hue over the 380- sounds like this guy might be the real McCoy - BASA and the rest better watch out
Any link to article

[derekl]

20driver et al:

The Sunday Telegraph article is at

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/10/09/ccba09.xml&menuId=242&sSheet=/money/2005/10/09/ixcoms.html


and reads:

Walsh sets his flight path
(Filed: 09/10/2005)

British Airways' new chief executive tells Edward Simpkins why expansion is off the agenda for the next four years

Shares in British Airways jumped 2 per cent on Friday when the airline released figures showing that passengers - especially high-paying business-class passengers - were returning after a summer of strikes and disruption.
Willie Walsh
Ready for take-off: Willie Walsh believes that BA staff are largely positive about the future of the company

This was a relief for Willie Walsh, the energetic Irishman who took over as chief executive last week after five months of shadowing Rod Eddington, his predecessor.

Walsh seems to have the right background for this most visible of corporate jobs. He is a former pilot who is credited with saving Aer Lingus, the Irish state-owned airline, by cutting fares, overheads and jobs.

He was surrounded on all sides by powerful unions, as he is at BA, but won plaudits for keeping the workforce largely on his side.

The most important task for Walsh over the next few years is managing the move into the vast new Terminal Five (known as T5) which is under construction at Heathrow. BA is due to move all its operations there from Terminals One and Four in March 2008.

Analysts say that it is impossible to underestimate the importance of this move for BA. The switch ito T5 is a chance for BA to shake off its legacy of over-staffing and uncompetitive working arrangements.

"Clearly, from a business point of view, the move into T5 really is the number one item on the agenda," Walsh says. "It is number one because it is both a challenge and an opportunity. It is a unique, once-in-a-lifetime opportunity for the business and we have to get it right. There is no option here; this is something that we have to get right."

Some analysts have wondered whether Walsh has the experience needed for the logistical challenges of reorganising on this scale. He thinks he does. "One of the clear advantages that I have is coming from an operational background," he says.

"I spent 18 years flying; I understand what you need to do to make an airline operate; I understand how a terminal works; I understand how aircraft are integrated to ensure they run smoothly; I know the systems, the infrastructure. I'm very comfortable in that environment."

Walsh refuses to be drawn on the number of redundancies that the move will generate, saying only that there will be "efficiencies" that arise from the changes. And he adds that he is happy to stick by the policy of no compulsory redundancies put in place by Eddington.

Some analysts think that will be a hard promise to keep. They point out, for example, that at T5 BA will no longer need teams of bus drivers to shuttle passengers and staff around.

Meanwhile, Walsh says that planning is meticulous. "We will have moved into T5 to test the infrastructure, to test the systems, to test everything that exists in T5 in October 2007, so we will have six months to pressure test everything in the real environment before we go live."

He adds that testing of other systems will start early in 2007 and that the working practices required for T5 will be agreed by the end of next year.

Walsh says he has found that BA's workforce is largely positive about the future. "People accept that there is a need for change," he says, "and that T5 means we have to do things in a different way. Everything I've heard from the staff that I've spoken to directly, the trade union reps and the officials is that they understand. They want to be part of the success and they want to demonstrate that we can move this business to T5."

Walsh has also set himself a target of improving the airline's operating margins from 6.9 per cent last year to about 10 per cent - which would be quite an achievement in the loss-making airline industry.

Over the past 10 years airfares have fallen across the board while wages in the industry have continued to rise, in part because of workers' ability to bring an airline to a halt.

Even now, two new airlines are to start offering business class-only flights from Stansted to New York, while bankrupt US airlines are redeploying their under-used fleets from domestic routes to mop up passengers on international journeys.

Walsh says: "We've looked at how we can become more efficient. We recognise going forward we have to continue with that campaign of efficiency. We've adopted and adapted technology; we are learning all of the time."

Perhaps most striking, Walsh has no plans to expand the airline until at least 2009. He points out that BA has spent lots of money on modernising its fleet and that it will not need to replace any aircraft for several years.

"At this stage, I can't see us taking delivery of additional aircraft until after we've moved into Terminal Five," Walsh says. "So realistically you are looking at probably 2009 before we would be talking about taking delivery of any additional aircraft."

And he rules out replacing any of his existing aircraft with the A380, the superjumbo being developed by Airbus.

"I'm pleased that we haven't ordered them," Walsh says. "I can say that quite genuinely. I wouldn't like to be one of the first airlines to introduce the aircraft. It is a significant change. I think any new aircraft takes time to bed in."

He points out that with a list price of $305m (£175m), he needs some convincing that the economics of the new plane will stack up.

Meanwhile, the one topic that gets him going is what he regards as unfair competition from bankrupt US carriers. He says that BA is lobbying hard to have the issue raised when the European Union and the US resume "open skies" talks this month on liberalising the flying rights across the Atlantic.

"There is no way you can go into those negotiations with the US and reach an agreement that does not address the significant imbalance that exists," he says. "You can't have free trade, you can't have open skies or genuine competition while one side of that equation is bankrupt and receives financial support from their government and the other doesn't."

[Rollingthunder]

I don't know why so much is being made over the move to T5.

It's a move. If you've done proper planning and testing (6 months?), then one night you move. It's not the first time airlines have moved to new terminals.

[Silver Tongued Cavalier]

I don't know why so much is being made over the move to T5.

Because W Walsh is going to slash and burn so many staff terms and working conditions, it won't just be changing Terminals, it'll be like changing Airlines!!!! BA to Ryanair.

This is how he is going to get his 10% operating margin target.

And he will stop at nothing.

[bealine]

http://observer.guardian.co.uk/business/story/0,6903,1587835,00.html

http://observer.guardian.co.uk/business/story/0,6903,1587822,00.html

http://observer.guardian.co.uk/business/story/0,6903,1587836,00.html

These sources may well be Buster's source!

[411A]

<<<This is how he is going to get his 10% operating margin target.

And he will stop at nothing.>>>

Seems like a good idea to me.
BA appears to have far too many unproductive staff.
Office staff mostly, altho some CC (from some of the comments here on PPRuNe) appear to be unproductive as well.
Some, not all.

How about British American Airlines?
It just might work.

Will certainly give Sir Richard a hyperactive fit.:\

[matt_pa31]

Now that I would like to watch - the bearded woolly pully throwing a tantrum.:p

[Lost_luggage34]

I vivdly recall the day when the last AA - BA agreement was ceased.

The plug was literally pulled - I was on duty at the time when a telex came in. The connection between the Res systems was quite simply turned off.

No real explanation was ever given - it was one of those things that was frowed upon if discussed.

If I recall there was discussion about the degree of freedom rights wrt to European flying. I.e. 6th degree where an airline can overfly a country, land, take passengers, take revenue. There was the Grandfather LHR slot issue too.

I think Bob Crandall was at the helm of AA at the time. He took no prisoners and I think he saw that the rights matter was never going to resolved.

So where are we now ? A united Europe with freedom of trade ?

I don't think so. From what I can see little has actually changed so I am somewhat surpised to see this idea being bounded around.

[Flap62]

It's really much more than just a "terminal change".

At present BA are crippled by effectively running two sites at LHR and the associated costs. There will be a huge restructure required of transport and baggage issues (which is frankly LONG overdue).
Undoubtably the bus drivers and baggage teams will squeal when the cuts start but, frankly, after this summers shenanigans there will be no sympathy and no support from the rest of the airline. When they get shown the door I will be one of the many saying "good riddance"

[FormerFlyer]

Coulda sworn BA flew from 3 terminals at LHR.

cheers ;)
FF

[Flap62]

You'll notice I said two sites and not terminals.

[Robert Vesco]

How about British American Airlines?
It just might work. Imagine the terrorist potential... Kill two birds with one stone! :\

[The SSK]

Curious.

EU/US air transport negotiations will resume next week after a gap of more than a year. Explicitly NOT on the agenda will be ownership and control matters, the US limits foreign ownership to 25% (EU airlines can be up to 49% non-EU owned) and the US has made it clear that this is not about to change.

So forget mergers for the foreseeable future.

[FormerFlyer]

Yeah I did notice you said sites - I consider a terminal a site. If you don't then there you go - we define things differently.

cheers ;)
FF

[TopBunk]

Was at a pilot meeting with Walsh last night where he stated that he had done 32 press interviews last week. On reading the resulting articles he remembered being at about 30 of them, one of those he didn't recollect was the one alleging a merger with AA.

THIS IS TOTALLY UNTRUE.

[Globaliser]

TopBunk: Was at a pilot meeting with Walsh last night where he stated that he had done 32 press interviews last week. On reading the resulting articles he remembered being at about 30 of them, one of those he didn't recollect was the one alleging a merger with AA.

THIS IS TOTALLY UNTRUE.Some of the other reports do quote him as saying that he'd like closer cooperation with AA. That is plausible, if it is now to be permitted in the current or future regulatory regime. I imagine that someone's misinterpreted this in the report quoted in the original post.