From Independent.co.uk
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British Airways has identified the Spanish flag-carrier Iberia as its preferred merger partner in Europe and has begun a series of top-level discussions to achieve an alliance.
Rod Eddington, BA’s chief executive, held two days of talks in Madrid last month with his opposite number at Iberia, Fernando Conte Garcia, to explore ways the two airlines could work more closely together in advance of a full-blown merger.
He was accompanied by the full BA “leadership” team. This includes the finance director, John Rishton; the director of marketing and commercial development, Martin George; the director of customer service and operations, Mike Street; the director of investments and alliances, Roger Maynard; and BA’s general counsel, Robert Webb.
Mr Eddington told shareholders at BA’s annual general meeting yesterday: “I see Iberia as an absolutely key partner for us. Our first priority is to restore the fortunes of BA and our next priority is to take advantage of consolidation in Europe. I have no doubt our relationship with Iberia will be the cornerstone of that.”
BA already owns a 10 per cent stake in Iberia, which was privatised in 2001, and has two seats on the board of the Spanish carrier. Iberia is also a member of the BA-led oneworld airline alliance, while BA and Iberia are currently seeking European Commission approval to codeshare on routes between the UK and Spain.
BA executives say the fit between the two airlines outside Europe is better than with any other carrier on the Continent. Iberia has a strong position in the Latin American market but almost no presence in the Far East and Middle East – two regions where BA is traditionally dominant.
A merger of the two airlines would create a single carrier with 82,000 employees, a market capitalisation of more than £3bn and 63 million passengers a year. BA is roughly twice the size of Iberia in terms of staff, aircraft fleet and passengers carried. But the Spanish carrier is more profitable, with operating margins last year of 5.4 per cent against BA’s 3.8 per cent. BA is currently valued at £1.93bn, while Iberia has a stock market capitalisation of €1.64bn (£1.15bn).
BA has twice investigated the possibility of taking over the Dutch carrier KLM but called off the talks each time.
Lord Marshall of Knightsbridge, the BA chairman, told shareholders that moves by the European Transport Commissioner, Loyola de Palacio, to confer EU status on the airlines of member states could allow “sorely needed industry consolidation”. The moves by the Commission are linked to talks with the US, due to begin in October, which will allow Brussels to negotiate changes to nationality clauses in air service agreements with other countries.
By: robc - 19th July 2003 at 10:24
Originally posted by Florida Dude
The plan is if Virgin and BMI are getting too close together then BA will buy BMI straight up, if this happens it will be sad to see BMI disappear but great for BA as I think they would have just over or just under 50% of the take-off/landing slots at LHR:)
Well im pretty sure not of that is going to happen…
By: keltic - 18th July 2003 at 21:12
I have been out some days…..and I almost chocked with it….you have scared me to death……merger?, it´s like mixing water and fire, two different philosofies, two different management, and strategies…..I don´t see it. As a current Iberia worker….I would love to get rid of our horrible uniform to get the BA one:)
By: Florida Dude - 18th July 2003 at 20:52
sounds interesting what about the virgin takeover or bmi take over they said they were planning?
This business and theres always a loop hole.
We’ll wait and see.
By: Bhoy - 18th July 2003 at 18:08
No way would the Mergers and Monoplies Commision let them have that much of the slots at LHR…
By: Florida Dude - 18th July 2003 at 17:58
sounds interesting what about the virgin takeover or bmi take over they said they were planning?
The plan is if Virgin and BMI are getting too close together then BA will buy BMI straight up, if this happens it will be sad to see BMI disappear but great for BA as I think they would have just over or just under 50% of the take-off/landing slots at LHR:)
By: EAL_KING - 18th July 2003 at 14:57
sounds interesting what about the virgin takeover or bmi take over they said they were planning?:confused:
By: robc - 18th July 2003 at 11:28
🙂 Thanks for clarification!
By: Mark L - 18th July 2003 at 11:26
They now have 3 737 400’s at LHR, with all the rest at LGW. I think the plan is that with every A320 received one 737 moves to LGW?
By: robc - 18th July 2003 at 11:20
Does BA still operate 737’s from LHR anymore, I think there 737 fleet is at gatwick and the A320 fleet is at heathrow. Not that it matters just me rambling on again:D
By: Saab 2000 - 18th July 2003 at 09:56
Yes, it would seem as if this is a definite deal according to the media though the truth is probably very different. I except that a merger presumably would occur with the current emphasis on consolidation in Europe, therefore Iberia and British Airways becoming partners is the key to future success. However, firstly, as stated in the article, British Airways must be restored to former fortune, which seems to be well in process. Then once any formal merger talks take place you must consider the changes to existing air treaties that will be needed before these international airlines are allowed to merge. Existing bilateral would be worked out eventually though it would take time. But again there is recognition within the industry that consolidation is needed if some European carriers are to survive. With the hope that changes may be accelerated if the US and the EU can find a way forward over the transatlantic “open skies” predicament, hopefully the British Airways and Iberia deal could successfully be worked out in the future.
But on the whole it is a positive step for both airlines.
By: Mark L - 17th July 2003 at 22:08
Looks very good, not sure if anything will come out of it for a while though.
BA are striving to create an all Airbus fleet in shorthaul, with their 757/767 fleet being slowly retired, and the 737 fleet likewise. New A320’s (And next year A321’s and some more A319’s) are creeping in. I think they have more Airbuses than Boeings now (In short haul config anyway)
By: Saab 2000 - 17th July 2003 at 18:44
BA is literally saying “Do what you want KLM” with this Iberia merger talk, I think from this KLM’s options have been decided for them and it looks like they are left to Air France. They had their chance though it now seems as if British Airways has got over its KLM chasing period.
Anyway, Iberia is an excellent partner if British Airways were to merge; at last they start concentrating on their existing partners. Total access to the South American and the chance for connecting traffic through Heathrow to North America and the Middle East with no real threat from Madrid because of their niche, it is good for both parties involved.
By: MapleLeaf_330 - 17th July 2003 at 16:35
Very interesting. I understand that a lot of British people like to holiday in Spain. Is this true?
I suppose if Air France and KLM merge to the north then BA must take Iberia to the south, plus they are part of the same alliance. This would also free up BA’s fleet to south America and allow it to focus on other markets. Also gives BA two major hubs, Heathrow and Madrid (6th in Europe I believe with new runways coming online).
If this comes about, what would be the result in terms of fleet restructuring? Isn’t Iberia an Airbus operator and BA is mainly a Boeing operator (long distance)?
What do you make of it SAAB?
Also, where does this leave Lufthansa? I wonder if this surely means that Virgin and British Midland will merge also?
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July 17, 2003 at 12:10 pm