BA & Iberia to merge
the lunatic fringe
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Some ideas...but with all due deference to demonmonkey. 
Larger combined network205 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.
Larger combined network205 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.
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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
)
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
)
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.
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.
A Runyonesque Character
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demomonkey: Please don't say Air France / KLM
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.
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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. 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.
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.
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.
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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?
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?
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.
http://ftalphaville.ft.com/blog/2009...rms-announced/
Iberia will be entitled to terminate the deal if the outcome of the discussions between BA and its pension trustees is not, in Iberias reasonable opinion, satisfactory.
IBLA entitled to terminate if discussions between BAY and pension trustees not satisfactory in IBLAs reasonable opinion = materially detrimental to economic premises of merger.
NO guarantee from TopCo or IBLA to fund BAY pension schemes.
IBLA entitled to terminate if discussions between BAY and pension trustees not satisfactory in IBLAs reasonable opinion = materially detrimental to economic premises of merger.
NO guarantee from TopCo or IBLA to fund BAY pension schemes.
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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.
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.
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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
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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?
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?
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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.....
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.....
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
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
So you're Alright, Jack.
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Oh Dear, shamefull, the greasy Dagos are coming into BA 
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.
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.
