BA & Iberia to merge

[Squealing Pig]

Just on BBC BA & Iberia in talks to merge.

[wiggy]

Don't hold the front page..the News is that the talks continue as they have done for months, and there may be an announcement:bored:

BBC NEWS | Business | BA and Iberia hold merger talks (http://news.bbc.co.uk/2/hi/business/8356780.stm)

Despite the banner thats been running on Sky for a while, seemingly claiming that "El Pais" claim it's a done deal, it would appear that there's nothing new to report.....at this time.

[JW411]

I actually doubt that this merger will ever take place but could someone out there please explain to me what attraction this deal actually has to Iberia and BA?

If I were Spanish, I would not touch this idea with a bargepole. I, for one, was very grateful that I was banking with Santander and not with one of those good-old "cast-iron" British banks like RBS or HBOS in recent times.

Anyone who wants to merge with a company whose pension fund deficit exceeds the total possible value of the airline should think very carefully indeed. (It's "Follow the yellow brick road" stuff.)

Mind you, a Spanish takeover of BA might just be interesting and would make up for the losses they sustained in 1588.

[Dairyground]

From the BA Shareholders web site:


Further to recent market speculation, British Airways confirms that the British Airways and Iberia Boards are holding separate meetings today, 12 November, to consider a potential transaction. However, no decisions have been taken and, at this time, there can be no guarantee that a transaction will be forthcoming. A further announcement will be made in due course, if appropriate.

[Walnut]

I should think a merger of BA & IB cabin crew will be the kiss of death.

[Evanelpus]

Crikey, talk about the blind leading the blind!

Mind you, the Spanish are taking over our airports, they might as well take over our national carrier as well.

[ORAC]

AIRLINES: "EL PAIS", IBERIA BOD SAYS YES TO BA MERGER

(AGI) - Rome, 12 nov. - The Board of Directors of Iberia Airlines has green lighted a merger with British Airways according to the online edition of Spanish daily, "El Pais" (http://www.elpais.com/articulo/economia/Consejo/Iberia/aprueba/fusion/British/Airways/elpepueco/20091112elpepueco_7/Tes).

According to the agreement, the HQ of the new company will be in London, while the President will be Antonio Vasquez, current head of the Spanish airline. Representing BA, Willie Walsh will occupy his current role in the new BoD, in which both companies will have an equal number of representatives. The current President of BA, Martin Broughton, will become VP of the new company.

According to El Pais' source, Iberia will retain 45% of the new company while British Airways will keep the remaining 55%: both companies will retain their own brandnames.

[FlyMD]

Merging the fiery British temperament with the Spanish rigorous sense of organisation... this can only be a roaring success, one would think... :ok:

[Torquelink]

iBAria?
:)

[Evanelpus]

Merging the fiery British temperament with the Spanish rigorous sense of organisation... this can only be a roaring success, one would think...

I was thinking more along the lines of ailing British company and manyana culture, so no, I wouldn't think so.

[Carbon Bootprint]

Quote:
Merging the fiery British temperament with the Spanish rigorous sense of organisation... this can only be a roaring success, one would think... :}

I was thinking more along the lines of ailing British company and manyana culture, so no, I wouldn't think so.Oh dear, yet another one chokes on the irony test...:rolleyes:

[HZ123]

As if we need your help? I think not!

[wideman]

IBAria?

Or BArium enema.

[Neptunus Rex]

Torquelink

No relation to Torquemada?

How about "BArmada?"

The BA part could have an exclusive "Drake Victor" approach with the hold over Plymouth Ho.

The Spaniards could be held at Cape St Vincent, as they were in 1797.

:E

[toro]

These are such typical whinging 'British' comments..... How about a change in the thread for positive. There have been years of complaints about BA not sorting its self out and needing to consolidate with another European carrier. Now it seems to be happening you lot are whining..!!! I do work for BA (not a Manager) and think its great news, just look at the share prices of both companies. But of course all those on here know so much more than Investment banks etc etc.... :ugh:

[Wing Commander Fowler]

Time will tell Toro - and I suspect it will tell a sorry tale......... :bored:

[gordonroxburgh]

Deal pretty much done

New holding company to be formed

55% BA owned
45% Iberia Owned

Walsh to be CEO
Vazquez (Iberia) to be Chairman
Broughton to be Vice chairman

HQ to be in Madrid (Tax benefits)

Operating HQ to be at LHR

[bermudatriangle]

merger may take upto 12 months from today and Iberia reserve the right to walk away from the deal......I hear the BA 3 billion pension deficit is a real hurdle that may well scupper the deal.Add to that Iberia cabin crew taking industrial action and BA crew balloting for similar action,I would not put money on this being a done deal....lets wait and see....see you in 12 months then !

[cessnapuppy]

Biggest safety threat is in times of transition, whether it be switching to/from cruise or employee shift changes at a Nuclear Power plant.. real interesting to see how two separate language organizations merge cultures.

at the least, it'll be fun flipping through the Spanish language text of everything before getting to the English part.. like setting up a bloody DVD player! :)

[ETOPS]

Al contrario

Just like AF/KLM the operating airlines will remain separate entities. There will be a joint holding company (set up to encompass other airlines as well in the future) but I doubt I will be using my Spanish anytime soon.

Hasta mañana amigo......

[StoneyBridge Radar]

Hey, look on the bright side.....no more 180kts 20 miles out going into AGP, MAD or BCN, number 2 to the ATR 5 miles behind you ! :}

[G-CPTN]

iBAria?
No, BriberiA . . . :E

[ExSp33db1rd]

I think Drake has time to finish his game.

[Sunfish]

Basil and Manuel together in the cockpit??????

[frangatang]

It will never happen as the french wont permit it...funny how AF/KLM went ahead without a whimper from the EU competition watchdog!

[DarkStar]

Who'll be teaching who about Spanish practices's? :E

I'd be surprised if the EU Commission don't scupper the deal with punitive slot demands aided and abetted by VS

[zomerkoning]

I think it'll be interesting to see how this one plays out. If they get the deal done and that is by far a done deal (anyone remember the Alitalia KLM merger talks in the '90s?), they could stand to benefit a lot.

If you ask around in the business world, the KLM/AF merger is nearly a picture perfect example in how to merge to businesses and make money, while keeping their own identity and brand image. But then I think the Dutch and French are a lot closer in "the way they do business" than I think the English and Spanish are.

Other problem is the financial situation both airlines are in at this moment in time and the problems with a workforce who (like the management) are playing "hardball".

I'm going to be sitting by the sidelines and enjoying the show, where's my bag of crisps?

[One9iner]

"williberia"

Q. When you let the plug out in the bath... does the water spin clockwise or anti? (N.Hem)

Doesn't matter I suppose. It always gives the same result.

[Airbus Unplugged]

The news has been out for half an hour now, and Richard Branson hasn't started whinging.

Is he still alive:confused:

[mcdhu]

Willie Walsh commuting to MAD on easyJet to keep costs down!!

Mcdhu

[StoneyBridge Radar]

The news has been out for half an hour now, and Richard Branson hasn't started whinging.

Oh, you do him an injustice; reported last night on the BBC:


News of the deal did not go down well with Virgin Atlantic, one of BA's big competitors in the UK, which raised concerns about the new company's market share.
"The merger will increase BA's dominance at Heathrow with 44% of take-off and landing slots this winter. It is impossible for any other airline to replicate their scale," the airline said.

[Joetom]

AA/BA/IB @ LHR.

Three items come to mind, Jobs/Slots/Ticket Prices.

Two will reduce, One will increase.

Jobs and Ticket Prices will be OK.

Slots and Pensions will be the key that allows 3 in this bed.

[One9iner]

3-2=?
2+2=?
1+2=?
3-1=?

[demomonkey]

Where/how these two organisations save cash?

Staffing - Airlines are not banks/retailers/manufacturers who all have successful track records in consolidating. You still need X people physically on-site to provide service. Out stations maybe consolidated but the %age saving isn't going to be radical. So not alot of scope to consolidate there then.

Procurement - Aeroplanes. BA is a hybrid of Airbus/Boeing. Iberia are Airbus customers. Neither company has a standard equipment fit. BA has recently placed orders that will more than meet its needs for the next 10 years. So not alot of scope to consolidate there then either.

Back Office - Operations, Pay-roll, HR etc. EU law applies across both legal entities albeit with sufficient subtle differences to mean that local presence of some sort will still be required. So not alot of scope to consolidate there then either.

Route Network - For UK-Spanish flights BA and Iberia have been working in partnership with revenue sharing agreements for years. However growth on this route has come from LoCos operating seasonal and leisure flights from regional airports, not BAIb hubs. Expansion at MAD, you don't need to merge to do this. If there was a market for it, why hadn't it happened already? Expansion at MAD and BCN is again largely from LoCos in shorthaul not longhaul.

Management - There will still be two brands operating in essentially the same way. Each brand will have its own standards and still require a senior management team of a somewhat emasculated CEO et al. Plus 'TopCo' will require a management team, board, shareholder management apparatus etc. So, there will be one new management team and two mini management teams, none of which will be exactly 'carbon neutral' in the modern parlance. So not alot of scope to consolidate there then either.

Customer Choice - As a silver card holder. If I wanted to fly to Caracus, I could have already done a OneWorld LHR-MAD-CCS trip already. So not alot of opportunity for me to get a benefit there?

Summary: Not alot of scope to consolidate and save cash.


Am I missing something? Is the Emporer wearing any clothes?

[M.Mouse]

Am I missing something? Is the Emporer wearing any clothes

No, you are not missing anything. All the people involved in the industry are complete numpties and know nothing about how the airline business works.

And you will note that there has been no moves around the world to merge other airlines.....errrrr.....no wait .....errrrr....well you are right anyway.

[Andy_S]

Summary: Not alot of scope to consolidate and save cash. Am I missing something?

How about synergies and consolidation between the two companies networks? And potential for expansion at Madrid?

[demomonkey]

And you will note that there has been no moves around the world to merge other airlines

Successful mergers are about synergies. The whole being greater than the sum of the parts. Air France/KLM has had mixed success and in some ways turned into a reverse take-over. Lufthansa just went on a spending spree, unfortunately it didn't have the money and it's purchases didn't have the passengers. Looking over the pond there has been a long track record of airline consolidation but no healthy super-airlines have emerged.

My points are that BA and Iberia don't have a great deal of synergies.

Mergers and takeovers without obvious synergies are just land grabs. Land grabs flatter egos. Unfortunately they come down to earth with a bump 3-4 years later when the magic has blown away. Larger companies just have larger problems. If they're really lucky they can always divorce, for example Daimler-Chrysler a company for which synergies are tangible to all but were impossible to implement.

There's only one successful synergy I can think of. If a pig farmer, chicken farmer, baker and sauce maker were to merge I would definitely taste the benefit! :)

[barry lloyd]

My points are that BA and Iberia don't have a great deal of synergies.

Totally agree. They both have crowns over their logos though :hmm:

[Tigger4Me]

Back Office - Operations, Pay-roll, HR etc. EU law applies across both legal entities albeit with sufficient subtle differences to mean that local presence of some sort will still be required. So not alot of scope to consolidate there then either.


I may be wrong but I seem to recall from my time working in Spain, that under Spanish contract law there were 14 pay days a year; 12 + 2 bonus. Also, if you left or were dismissed (for any reason) then a healthy lump sum became payable. That was back in 2003. Unless things have changed, I can see the BA staff wanting to consolidate some of that. :E

[airsmiles]

You don't need to merge airlines to get huge consolidation savings. Plenty of savings in aircraft purchase/maintenance savings, route rationalisation etc. AF/KLM have proved that already and multiple brands is a well-established and proven practice.

For both airlines it's a question of survival, especiallly since AF/KLM, Ryanair and Easyjet changed the direction of airlines in Europe. What other partner would BA choose for expansion from it's European operations? BA is being attacked by low-cost carriers on one-hand and consolidated of the full-service airlines on the other. It has to respond or die.

Both airlines need massive culture changes to survive but that doesn't alter the justification for the merger. The strategy is right but it's all in the implementation of that strategy. If BA and Iberia staff think they're immune from culture change and the realities of economic life they're sadly mistaken. Overall the merger is right, but real culture change is the key to success. Neither airlines have a great track-record of managing their staff, respecting them and winning their support for genuine business transformation, but that's what they've got to do.

For BA also, if no third LHR runway, they will expand through Madrid which is bad for Britain. They don't want two hubs in a country the size of Britain and in any case they only think in terms of their european hub of LHR. If the facilities don't exist in the UK what are BA meant to do? Once they secure their european operations, they'll do the same in the USA and Asia. Long-term stategy - Oneworld Airlines? Who knows?

airsmiles

[L337]

Some ideas...but with all due deference to demonmonkey. :ugh:

• Larger combined network—205 optimised destinations
– 48 destinations served by British Airways and Iberia
– 59 new destinations for British Airways customers
– 98 new destinations for Iberia customers
• Large network for cargo customers
• Greater potential for future growth by optimising dual hubs of London and Madrid

• Complementary transatlantic networks
– BA currently a leading long haul North Atlantic carrier
– Iberia currently a leading long haul South Atlantic carrier
• Highly complementary worldwide fit

Synergies will come from:

IT and Back Office
Network and Fleet
Sales and Distribution
Maintenance
Purchasing
Ancillary Business

These synergies will take up to five years to maximise, and are estimated to be 33% of revenue.

[demomonkey]

Stats only look good on Powerpoints. As both airlines were already OWA partners all those options were available to customers yesterday. Please read my original post to see why there are sufficient complications to make benefit realisation more complex.

I agree wholly with AirSmiles. The points he/she makes about internal cultures are the key to success for either airline regardless of marriage.

I'll be happy to defer if you can quote any case studies of successful airline mergers. (Please don't say Air France / KLM :hmm:)

[racedo]

Iberia can exit if BA don't sort out their pensions debacle which clearly shows that its Iberia getting the good end of the deal.

Putting two entities together which are loss making and then saying it will take 5 years to get all the benefits pretty much tells you its a con.

Bottom line is in any merger the benefits either happen within maximum of 2 years or not at all.

[Golf Charlie Charlie]

One good example of a successful airline merger was Delta and Western in the 1980s. But, agreed, they're pretty rare.

[The SSK]

demomonkey: Please don't say Air France / KLM

Why not?
Lufthansa/Swiss

No-one seems to have considered that this is in part a defensive move. Five years ago, BA were roughly the size of LH and AF. Nowadays they are little more than half the size of AFKL and the Lufthansa Group - and as MoL loves to remind everybody, he's overtaken them as well, in passenger numbers at least.

Ditto Iberia.

That's one reason why I wouldn't expect any significant opposition from the EU. A much more disturbing scenario would be IB joining up with LH and BA having no option but to throw in their lot with AFKL.

[Morbid]

Personally I find it very difficult to see either commercial or strategic value in this tie up. Posters have made noises about potential "cost savings" but lets be honest, the problem with both these airlines is not their costs its their passenger numbers ergo eroding load factors and lack of strategic planning.

Can you tell me what differentiates Iberia from Ryanair on a Spanish Domestic or intra European flight? Perhaps the ability to hub in Madrid but even that has no material benefit when you can't even retain those pax that live in Madrid! Its like a farmer caring greatly about the 5 sheep in mountain pastures and forgetting the 100 on his doorstep. :hmm: Furthermore given the very limited international destinations from Madrid (low yielding F&F market to S America) business traffic is frequently going via Frankfurt, Paris and Zurich to the tiger economies of Asia.

Now take BA... Little or no domestic services (ie feed) something which that group AF / KLM has realized and taken over the flying and pax from the regions in the UK via their hubs. Intra European routes are still bringing in long haul pax but for how long as the number of international destinations flown with longer range lower pax capacity aircraft come on line from airports all over Europe?

IMO until either company wakes up to its need to respond to market changes over the last 10 years, perhaps requiring them to re invent themselves, niether airline is going to be investment grade for a long time... What does the merger bring? Perhaps expertise in facing common problems but I would be suprised to see best practice and knowledge exchange happening between what are people of two of the "proudest" nations around. (I've lived a looonnnggg time in both countries and it has to be said that people of both nationalities are somewhat "stuck in their ways" when compared to the Dutch or Germans for example). This isn't a racist slur or anything of the sort just an honest admission of experience working in pan european environments.

Realistically its time for both airlines to either change or die a slow death... A shame as both were once excellent airlines.

[Carnage Matey!]

demomonkey - why not Air France/KLM. It's a bit tough saying "name me a successful airline merger - but not any successful ones". Whilst I don't believe the synergies between BA and IB are going to be huge, synergies there'll be. Some examples...

BA still have sizeable aircraft ordes to make, they are in no way all set for the next 10 years with the exisiting orders. A combined order with IB generates economies of scale.

BA have minimal presence in South America, with little in the way of local staff, sales offices, engineering support. Iberia are huge in South America. By using Iberia resources BA could lower entry costs to further South American destinations and increase revenue. Ditto for Iberia and North America.

Route overlap: at existing overlapping destinations BA/IB can slash costs by combining ground handling.

Back office: savings in admin, revenue, IT systems, ticketing, sales. Will BA need any Spanish speaking telesales staff when the calls can be routed to Spain. Will IB need any English speakers when London can deal with it? Will either company need to employ a full payroll department when the basic admin functions can be combined?

Technical support: Both BA and IB operate sizeable fleets of shorthaul Airbus aircraft. By combining spares and maintenance functions savings can be made.

Increased customer base: both airlines tap domestic and international markets that the other has less access to. An overall greater potential customer base can lead to overall greater revenue.

Expansion opportunites: LHR is pretty full. If the third runway doesn't come where's BA going to expand? The UK regions don't provide enough revenue and aren't big enough to support a second hub, so it'll have to be Europe. Now which country has a massive 4 runway airport in the middle of nowhere that offers potential for unconstrained growth?

[Whiskey Papa]

from the BBC website:

However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.

Well, that's easy enough to sort out...

WP

[Basil]

Iberia can exit if BA don't sort out their pensions debacle which clearly shows that its Iberia getting the good end of the deal.

I guess that depends how one interprets the following:

http://ftalphaville.ft.com/blog/2009/11/12/83076/baiberia-merger-terms-announced/
Iberia will be entitled to terminate the deal “if the outcome of the discussions between BA and its pension trustees is not, in Iberia’s reasonable opinion, satisfactory”.

IBLA entitled to terminate if discussions between BAY and pension trustees not satisfactory in IBLA’s reasonable opinion = materially detrimental to economic premises of merger.

NO guarantee from TopCo or IBLA to fund BAY pension schemes.

[manintheback]

They are keeping the seperate names as entities but will the actual product offerings be identical?. Club World the same on whichever airline you fly for example.

Back office savings potentially big if the whole lot is offshored to a Bi-Lingual Spanish/English country. Mexico offers this to the USA already.

[Walnut]

I believe the biggest deal breaker will be the BA pension deficit. It has doubled since the last valuation, ie since this deal was first mooted, which is why the IB board have said it has got to be fixed. I believe the scheme will have to be closed even to existing staff, which is going to cause a lot of staff pain. At least once it has been closed you can start to calculate the liability, at the moment it is open ended which is what the IB board hate, uncertainty

[Wing Commander Fowler]

Its actually just a desperate attempt to steal the "biggest airline in europe" crown from Ryanair........ :}

[J-Class]

The hub optimisation will be interesting.

For travellers not departing the hub cities it will in many cases be immaterial in terms of flying time whether to hub via Madrid or London. For a traveller starting their journey in Malaga, flying to Shanghai via London only adds about 100 miles to the trip - a rounding error in the scheme of things.

Similarly, for a traveller going from Edinburgh to Santiago, there's only 150 miles difference between a LHR or a MAD connection.

I wonder if WW now wishes he'd kept a greater presence at LGW?

[Joetom]

Morbid, good post.

Pensions will be easy, 6 letters, C _ _ _ _ D.

Slots at LHR, unhappy, 4 letters, L _ _ T.

The savings will be made by BA/IB staff trying to keep jobs in their own country, the staff who provide best value will tend to lose less jobs, well that's the story that will be told, facts will be more like, true to a degree and as much outsourcing as you can manage to slip in for all the reasons under the sun.

Sit back and enjoy the show.....

[Diamond_Dog]

All the cr*p to one side, "The merger of BA and Iberia is like two drunks trying to prop each other up" .....

[Wing Commander Fowler]

"Bye bye bye-beria" perhaps? :ok:

[ExSp33db1rd]

Quote:
However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.
Well, that's easy enough to sort out...

WP


Obviously you don't rely on one.

So you're Alright, Jack.

[keltic]

Oh Dear, shamefull, the greasy Dagos are coming into BA :E After some racist comments, the post seems to be getting interesting and informative.

While most of Spanish are striving to get rid of Iberia grip in the Spanish market, it seems that the monster is extending its claws into more spaces.

Bad news for the consumers. :{

[gas path]

Bad news for the consumers.

Er.....why?

[Joetom]

gas path,

Ticket prices will go up !!!

[gas path]

Why?

oops got to put in more characters!!

[PAXboy]

Prices have to go up as both companies are in serious financial trouble. The want to dump staff and any other commitments that they can, and then jack prices. Just like everyone else!

[HZ123]

This tie-up has the making of being a great business chance. Dspite losses both airlines have made good progress in reducing costs and maximising revenues for the future.
Why so many threaders (that probably know jack**** about the airline industry) are so expressive as to how this tie is doomed is beyond me. BA and IB are both companies on the way up slowly but surely, the same critics slag off the likes of BA whatever they do?

I rest my case; If IB walk away we get £18 millions compo!!!

[PC767]

Interesting to see a recent Times article noting that IB cabin crew are paid an average £44,000 pa and Pilots an average £190,000pa. Am I wrong in believing both groups work to 750 hours pa as well.

Walsh isn't finding it easy to lower BA cabin wages to £14,400 + 10%. I can only imaging the carnage if he tries this at IB. I also wonder how both BA Pilots and Cabin Crew will feel if, whilst working for the same company, TopCo(?), their new colleagues continue to earn substantially more?

[Joetom]

gas path,

At present, person in UK/Spain for example wants to fly to the America (north/south) two ways come to mind. UK example used.

1. Fly to spain, then fly to south America.

2. Fly to north America, then fly down to south America.

These two routes will be under one roof, can anyone think prices will go down.

People flying between Spain/UK to the Americas will have less choice for better priced tickets, looking at the airline networks, guess most money will be made on the south American routes, north America - Euro has more choice so prices should remain better.

[Joetom]

Simon Calder will be covering this item in his show today, 2 hour show, 14.00 till 16.00.

Am sure their will be some interesting points of view.

http://www.lbc.co.uk/simon-calder-3540

Enjoy......

[Carnage Matey!]

Re the IB vs BA crew costs. Iberia crew appear to be paid more than BA crew because they are paid in euros and sterling is rather low against the euro. If you convert those figures to a more realistic historical exchange rate you'll find the gap is not so large.

[ChristiaanJ]

Re the IB vs BA crew costs. Iberia crew appear to be paid more than BA crew because they are paid in euros and sterling is rather low against the euro. If you convert those figures to a more realistic historical exchange rate you'll find the gap is not so large.
I don't follow your reasoning.

In 2003 £1 was about €1.50, now it's about €1.10.
Even converting by taking £44,000 x 1.10 /1.50 = £32,300, that still makes the IB wage 32.3/14.4 = 225% of the BA wage.

Depends on how you define a "not so large gap", I suppose....

CJ

[Shingles]

Iberia's crew costs etc have indeed not registered as an issue in much of the coverage of this story, recent entries on this thread and here (http://insidetraveller.co.uk/blog/?p=512) excepted:
"[Iberia] has never got over being state-owned ... there are too many pilots, cabin crew and ground staff who fail to respond to management requirements."
Just the sort of thing Willie Walsh likes to get his teeth stuck into, don't you think?

[ExSp33db1rd]

IBAria


They both have crowns over their logos though


Is that a typo ? Clowns ?

[jetset lady]

I also wonder how both BA Pilots and Cabin Crew will feel if, whilst working for the same company, TopCo(?), their new colleagues continue to earn substantially more?


That would almost be funny, if it wasn't so ironic!

Don't you worry, PC767. It's not great, but you do get used to it after a while....:E

[waco]

With a pension deficit of approaching 3.9 billion, which is what, twice the book value of the airline. Facing massive losses in the current financial year. Fixed costs appearing to be very much higher than the competition.

What are the options? Merger or bankrupt.

No brainer really.

[golfyankeesierra]

Interesting to see a recent Times article noting that IB cabin crew are paid an average £44,000 pa and Pilots an average £190,000pa. Am I wrong in believing both groups work to 750 hours pa as well.
Walsh isn't finding it easy to lower BA cabin wages to £14,400 + 10%. I can only imaging the carnage if he tries this at IB. I also wonder how both BA Pilots and Cabin Crew will feel if, whilst working for the same company, TopCo(?), their new colleagues continue to earn substantially more?
Isn't it true that you guys at BA have a basic salary supplemented by hourly pay (flight time - time enroute)? And IB? And what are the taxes?
I am no party in this, but I know it is very difficult (and dangerous) to campare wages.

[Wod]

Having been through a merge, I would caution that you need to doublecheck assumptions - one person's "Salary" might include all allowances and a superannuation component, and equate to a "Cost to Employer" and the other person's "Salary" might be base pay before an aircraft has been sighted, let alone boarded.

It applies to far more things than pay. You think you speak the same language because you use the same words - not necessarily so when you get right down into the detail.

For what it is worth, I'm a pessimist. The unions will want to cherry pick the best bit out of the other mob's contracts, and the employers will want to go in the other direction, and because this is Europe the unions will win and b*gger up two airlines.

[Taildragger67]

Wonder where QF and AA are in all this (being previous merger candidates with BA and close family members of OW)...

I'm not convinced by the 'prices will have to rise' arguments. Part of the reason these two carriers are in such dire straits is due to competitive pressures from other carriers on most of their routes. Does anyone really think that, if there are supernormal profits to be made on any route where BA and IB will be dominant, that MOL or a clone won't be on it like a flash?

Even South American routeshave competition; if a punter wants to go to Buenos Aires, there is currently one (1) direct - BA. All others are connections - so it doesn't matter whether it's IB via MAD, AF via CDG, LH via FRA, or a North American carrier via their hub. There are enough other European and North Am carriers on pretty much any conceivable major European-Sth Am city pair to be able to argue that the competition effect will be barely a ripple.

This merger is aimed at cost savings rather than revenue increases.

With 20% unemployment in Spain, expect any back-office (ie. non customer contact) job not nailed down, to be moved. The fact that they will stay within the EU will facilitate that. Corporate-centre jobs can also be streamlined (so all you who bemoan bloated management should be happy).

Examples: some of IB's A343s are getting a bit long in the tooth... wonder how a 777 would look in IB strip... and the short-haul fleets (A320s) will be pretty well interchangeable. So - wonder where A320 maint is cheaper...

[Morbid]

Curious how everyone thinks that its easy enough to "adjust" staffing levels. Due to UK law post Thatcher you get what, 1 week per year worked in redundancy payments? I stand to be corrected on this

In Spain its a little different... 45 days tax free for every year worked. Take a CC on €35K with 10 years service in Iberia. Thats a redundancy payment of: €43K per employee.

When you put engineering into the picture, logical area that has duplication of fuctions, you're talking about people earning around €50-60K pa and that have been with Iberia 20 years.

Reservations / call center staff? Yes, savings to be made here. One poster said Mexico as a dual language country could be an outsourcing center. Probaby not, Spain is already a dual language country.

So where does this leave things:

- Cheaper to retain Spanish staff
- Spanish staff can meet the language needs (No offence intended but Brits aren't exactly famed for their knowledge of languages)
- British staff can be fired quickly and easily (unions permitting)
- Spanish unions are very strong and the Spanish government is a Union backed one

If there are savings to be made with staff it doesn't look good for the UK side of things....

Finally, and maybe slightly cynical of me, but does anyone think that WW knows the benefits of cheaper labour in Spain from his time at Futura and sees this merger as a chance to take advantage of that?

[racedo]

Curious how everyone thinks that its easy enough to "adjust" staffing levels. Due to UK law post Thatcher you get what, 1 week per year worked in redundancy payments? I stand to be corrected on this

Ready Reckoner for calculating the number of weeks' pay due - BIS (http://www.berr.gov.uk/whatwedo/employment/employment-legislation/employment-guidance/page33157.html)

The figure you quoted is Statutory redundancy and pretty much applies when a company has gone bust with little if anything to pay out which the Govt ends up paying. It is also maxed at £380 per week.

Private sector employers vary in what they pay out. Few would pay just Statutory as that aside from Peeing off the staff going, which you don't care about as they leaving, sends a very important message to the staff staying. In effect you are telling the ones staying that if you need to make more people redundant then they will get the same............not a good way of keeping morale up post clearout.

It also ensures staff staying can work out how much they would on average get, example an 8 year veteran would know that potentially he/she would get max of 4 weeks pay later so they may decide to jump ship sooner or knowing last cull got 6 weeks means they could get 48 weeks means they would stay in hope.

On average most companies would pay something between 4-8 weeks depending on the company, age, cost etc but each company is different.

I think I could safely say BA would not pay statutory.

[Otterman]

It is interesting that people are approaching this mostly from the Anglo-Saxon perspective (logical as pprune is mostly British orientated, I guess). But the rape and pillage mentality that business has in the UK/USA axis (mostly responsible for the current economic crisis) is not what is applicable here.

The Air France take-over of KLM is the model that this will be based on. Most people on this forum are thinking more along the lines of a Delta, Northwest Airlines merger, where one dominant party imposes itself on the other. This would be a recipe for failure. It has taken baby steps at Air France KLM to get to the point where they are now (six years running). On the operational level they are not integrated in any way shape or form. One company (Air France KLM Group), two Airlines (Air France and KLM), and three businesses (passengers/cargo/maintenance) is the model. Each airline in the group has to keep its own house in order. If the BA (mis)management has any other ideas it will turn out very badly.

But I sure hope they retain their outrageous bonuses. It was great to read that the bankers are still doing business as normal on that count, it gives the airline managers hope. Morals are not taught in business school.

[Morbid]

Thanks Recedo, I believe the most interesting part of what you say is the following:

On average most companies would pay something between 4-8 weeks depending on the company, age, cost etc but each company is different.

So basically it would cost a whole lot less to fire the Brit than the Spaniard (salaries etc being equal).

Sobering thought...

[TURIN]

On average most companies would pay something between 4-8 weeks depending on the company, age, cost etc but each company is different.

I think I could safely say BA would not pay statutory.

The last cull (12 months ago) gave approx 3 weeks basic pay for every year's service.
Please note the term "BASIC PAY". It's a lot less than salary for many BA staff.

One individual refused the 'voluntary' redundancy package and had his employment terminated on the grounds of redundancy at the statutary rate (approx 1 week's pay/years service).

That went to tribunal. He got the voluntary package back and took it.

[robmack]

A question, dear readers-what happens when Willie's (Catholic)opposite number turns up for work wearing a cross on a chain?

[racedo]

The last cull (12 months ago) gave approx 3 weeks basic pay for every year's service.
Please note the term "BASIC PAY". It's a lot less than salary for many BA staff.

One individual refused the 'voluntary' redundancy package and had his employment terminated on the grounds of redundancy at the statutary rate (approx 1 week's pay/years service).

That went to tribunal. He got the voluntary package back and took it.

Thanks as didn't know exact details of last cull.

[scarebus03]

I guarantee that the average BA worker is paid a hell of a lot more than his/her IB counterpart. I know that this is very true in relation to ground and engineering staff.
I imagine there is more or less parity among the flight crews of both companies (within reason! :ugh:)

Brgds
SB03

[BikerMark]

Severance deals were based on 3 weeks basic salary for every year worked up to 25 years, i.e. capped at 75 weeks. This time last year, the management cull was taking place and heavy hints were dropped about this being the "last good deal".

More VR offers were made at this level earlier this year but now the current deal looks to be 2 weeks basic salary for every year worked up to 26 years, i.e. capped at 52 weeks.

[ISO100]

I may not have worked in Airline management but I do understand sales and marketing and what it is like to be a customer. Putting it in simplistic terms there are two types of businesses. Firstly there is The Market Driven business which takes time to understand what the market wants to buy and secondly there is The Product Driven business that simply pushes products on the blind assumption that there are actually plenty of customers out there happy to buy their offering . It doesn’t take too much to work out which type is likely to be the more successful.
So for the last few years I have watched with interest as BA struggles to find its niche and I find it hard to understand how constant retreat, ( Harvest Heathrow) is going to be a success or how the tie up with Iberia takes into consideration the needs of the customer. Shareholders are being shown the possibility of millions of anticipated savings to be derived from the integration of business processes and routes but have either the management of Iberia or BA stopped to ask what positive impact this will have on the customer. From what I have read the so called benefit to me being regionally based in the UK is that I will only need one ticket and that my bags will be conveniently interlined as I take my three flights en route to Rio (ie Manchester – Heathrow-Madrid-Rio). In addition I will be allowed to use Iberia’s lounge in Madrid. So that’s all right then Mr Shareholder, the passengers will be nicely looked after won’t they. Of course the answer is no. BA gets to save money by integrating routes and pushing passengers through Madrid but sadly for them I, like many other customers have no intention of adding an extra stop on the journey. I accept that there is probably insufficient business to justify an airline flying direct from Manchester to Rio so I will put up with having to change flights at LHR but I am damned if I am going to take an extra layover just to provide some extra gravy to you Mr Shareholder. So which airline flies direct from Heathrow, perhaps its time to shop around and then again, why do I have to use LHR as my hub, surely Amsterdam and Paris are just as convenient from Manchester as well as arguably offering a better airport experience.
I accept that I do not have anything more than anecdotal evidence but I know plenty of people in the Northwest of England and Scotland who fly long haul and where as ten years ago most of them would be using BA the situation now is that the airlines they fly are Emirates, Qatar, Etihad, American, Continental, Delta and US Air, KLM/Air France and even Lufthansa.

Perhaps there are gains to be made by cutting routes, services and staff levels but they don’t seem to be making a positive impact on BAs bottom line. Perhaps it’s time for BA to stop pulling back on the stick and get the nose down if they are ever going to recover from the current spin!

[911slf]

I am flying to Buenos Aires late January. I paid extra to fly BA so I could avoid Madrid. How ironic is that? :O

[ETOPS]

How ironic is that?


Not ironic at all - your Flight BA247 will still operate LHR - GRU - EZE.

[ExSp33db1rd]

Just heard that Price Waterhouse have been asked to comment on the effect a merger will have on pensions, and that there has been a call for the resignation of Roger Maynard, Chairman of the pension Trustees, who was ALSO the person chosen by BA to lead their merger negotiations !!

The words, Denmark, and State and Rotten come to mind.

I wonder why.

ExSp33db1rd - present cynic.

[M.Mouse]

...and that there has been a call for the resignation of Roger Maynard, Chairman of the pension Trustees, who was ALSO the person chosen by BA to lead their merger negotiations !!

The implication that Roger Maynard has no integrity. It could also be said that the employee pension trustees are biased in favour of the employees. By its composition the board of trustees is 50% employee elected and 50% BA management nominated.

Having heard the very erudite and effective pilot representative pension trustee (who is also a BALPA rep.) respond to the call for Roger Maynard to resign saying that he has every confidence in the man's honour and integrity then that is good enough for me.

He also went on to point out that there is no obvious replacement and to be careful what we wish for.

It is always so easy to shoot from the hip and make wild accusations which appeal to the uninformed but I for one trust the trustees to do what is right and correct for the fund. I trust the judgement of the pilot trustee who was voted on to the board to represent the interests of the pilots.

Edited for grammar!

[ExSp33db1rd]

.........has no integrity


Not necessarily so, but to whom is the integrity given as first priority ?

Still a cynic.

[L337]

As MM said above you..

It could also be said that the employee pension trustees are biased in favour of the employees

[ExSp33db1rd]

Only time will tell.

[Sir George Cayley]

BA have quite a track record at Manchester for doing things that ultimately harm themselves.

Used to be a QuaintArs B747 that popped up and back to LHR that allowed northwest VFR pax to start as they meant to go on. When BA and QF joined forces guess what? Yup, the 747 got pulled and you went on the Shuttle.

Shrank the market by 30%:D

The Islamabad service was a similar story. Ram jam full every rotation but pulled 'to improve the quality of service to northwest passengers' :confused:

For south America, I'd go west to say NY or PHL and on from there, though KL AF prices in Business class are quire keen at present.

Sir George Cayley

[harbour cotter]

From another pax perspective, I feel that they need to get the customer service to improve for both airlines. I have always have had a love/hate relationship with BA because when they are good, They are very good. Unfortunately on the flip side, I have had many poor trips, some even on Business Class. Unfortunately you tend to remember the negatives more than the positives. Unfortunately Iberia long-haul are the pits. After 1 hour of a flight, the cabin crew are absent until landing. Food is a hit or a miss, not just on quality, but whether you get any at all!, even on 12 hour flights.

I am also a regional pax, and I am amazed anyone routes MAN/LHR/MAD/Any S.A. Destination. It appears madness. 4 flights when 2 will do. I will fly LPL/MAD on EZY and IB from there, (although I am looking at alternatives to IB). This routing, despite booking in luggage again, is a lot less hassle and I can chill out in the lounge if connection time permits. Another positive is that you avoid the long haul tax this way. However, I put MAD in the same category as LHR in trying to avoid. Both have good elements but can be a nightmare at times. The new terminal at MAD is the only one I know where you have to catch a train from one part of the terminal to another. Its caught many pax out, including myself.

I'm hoping that the merger will bring about the best bits of both airlines, and I certainly hope that that everyone employed will keep their jobs, particularly in these uncertain times. I might even be tempted to use BA again on some flights, rather than the odd associated flight in the last few years such as GLA-Stornoway and CPT-Port Elizabeth, hardly mainstream.

[keltic]

IB longhaul coach class will be refitted soon, I hope they fit AVOD system in all seats. Will they create also a kind of IB World Traveller Plus?.

[agusaleale]

From another pax perspective, I feel that they need to get the customer service to improve for both airlines. I have always have had a love/hate relationship with BA because when they are good, They are very good. Unfortunately on the flip side, I have had many poor trips, some even on Business Class. Unfortunately you tend to remember the negatives more than the positives. Unfortunately Iberia long-haul are the pits. After 1 hour of a flight, the cabin crew are absent until landing. Food is a hit or a miss, not just on quality, but whether you get any at all!, even on 12 hour flights.

I am also a regional pax, and I am amazed anyone routes MAN/LHR/MAD/Any S.A. Destination. It appears madness. 4 flights when 2 will do. I will fly LPL/MAD on EZY and IB from there, (although I am looking at alternatives to IB). This routing, despite booking in luggage again, is a lot less hassle and I can chill out in the lounge if connection time permits. Another positive is that you avoid the long haul tax this way. However, I put MAD in the same category as LHR in trying to avoid. Both have good elements but can be a nightmare at times. The new terminal at MAD is the only one I know where you have to catch a train from one part of the terminal to another. Its caught many pax out, including myself.

I'm hoping that the merger will bring about the best bits of both airlines, and I certainly hope that that everyone employed will keep their jobs, particularly in these uncertain times. I might even be tempted to use BA again on some flights, rather than the odd associated flight in the last few years such as GLA-Stornoway and CPT-Port Elizabeth, hardly mainstream.

I disagree with you, as a frequent flyer with Iberia, they do offer a reasonable meal service on long haul flights. On european flights, you have to pay for it.
I agree with your opinion about the cabin crew, as they are well known as not been very serviceable and been also unfriendly.

Concerning the train service in Madrid from T4 to T4S, I´ve seen that kind of trains on many airports around the world and it doesn´t suppose a problem for nobody, except you.

[PAXboy]

Having read the whole thread, I see that some took a swipe at Branson attacking the deal. (I am not, nor have ever been an employee/shareholder of VS) If Branson did NOT attack the deal - he would not be doing his job. During the last BA/AA attempt, I recall WW saying that, if their jobs were reversed, he would be doing the same as Branson.

Many here seem to consider the KLM/AF deal a success and I have nothing to go on but what they say. I suggest that the difference is this: KLM/AF had time, unions and money on their side. If they have gone six years and are still not integrated - they have not saved as much money as they could have. So they can still squeeze more, but are unlikely to.

BA/IB have no time, or money and the unions will be against them. Unless they integrate FAST, they won't save the money and they will fall into the pit together. Since both companies are very long in the tooth, I would not be surprised to see this happen. Then the only question is: Will OWA come to their rescue and really start the consolidation or will KLM/AF try to rescue them and break all the alliances?

Of course, if they do collapse inward on themselves, most of the folks who are orchestrating this - will be retired and taking their pensions. Since someone mentioned the Daimler/Chrysler merger that had to be unpicked - I wonder if the ones who put it together had to pay back their bonus' and return the gold medals? That car merger never made cultural sense and I was not in the least surprised when it failed. This air merger will be overtaken by other world and financial events, so that it's success or failure will be hidden, from most!

[seat 0A]

There is a huge difference in the way the (pilots)unions in the OneWorld Alliance view the whole merger/joint venture development as opposed to the unions in the Skyteam Alliance. Just look at the current opposition from the AA pilots against the JV with BA.
This can be of great influence, as the previous poster also indicates. You need to have the support of the employees if you want to go down this path.
The brandnew JV between AF/KLM/Delta over the north atlantic will be a great success and is fully supported by the pilots.

[Rainboe]

I still cannot see it happening, and if by some remote chance it does, I see a remote chance of it being a success. In my time, BA was in the ring for a merger with United, USAir, AA, KLM, Sabena, Alitalia, Iberia (previously).....there were more, many more, but they have gone in the mists of time!
Unlike AF/KLM, and I still marvel at the success of that amalgamation of Catholic and Protestant cultures, but still don't feel it will last, I think BA will find it difficult to amalgamate. It still has the best worldwide connections, but with a moronic government determined to stamp out 'evil' air travel and use it to raise tax revenue under the guise of 'green' taxes, the predominance of LHR is slowly vanishing and the central axis of European travel moves to a Frankfurt/Amsterdam/Paris axis. Sad, but with a stupid hostile government strangling BA at Heathrow, BA is in for a very hard time. It won't be long before people sort out shorthaul flights out of the UK to join a longhaul flight out of Europe not subject to the disgraceful tax raising of this government. Then BA goes under!

[TURIN]

BA was in the ring for a merger with United, USAir, AA, KLM, Sabena, Alitalia, Iberia (previously).....there were more, many more, but they have gone in the mists of time!


You forgot, B/Cal, Dan Air, etc.:E

[Pinkman]

Their long-held aspiration to form an alliance with Qantas made more cultural sense.

This probably makes more financial sense and is less duplicative.

Looking forward to Churros y Chocolate instead of the cookies on those midnight medium hauls from the sandpit :}.

P

[Swedish Steve]

Long interview with W Walsh in the FT

FT.com / Companies / Airlines - Interview: Willie Walsh, chief executive of British Airways (http://www.ft.com/cms/s/0/c016a3da-d6f8-11de-8647-00144feabdc0.html?nclick_check=1)