BA & Iberia to merge
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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 ! 
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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?
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?
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The news has been out for half an hour now, and Richard Branson hasn't started whinging.
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.
"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.
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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.
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.
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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?
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?
Last edited by demomonkey; 13th Nov 2009 at 09:11.
Controversial, moi?
Am I missing something? Is the Emporer wearing any clothes
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.
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And you will note that there has been no moves around the world to merge other airlines
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!
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.
Last edited by Tigger4Me; 15th Nov 2009 at 22:12. Reason: Typo
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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
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