Another flirtation for British Airways

published 5 December 2008

If it keeps this up, "BA will have had a dalliance with half the carriers" in the Oneworld airline alliance, said Fiona Maharg-Bravo. It wants to deepen its collaboration with American Airlines, and has been discussing a merger with Iberia since July. The latest flirtation is with Australia's flag carrier, Qantas. A deal would mark the first intercontinental airline merger and a major step towards the first global airline: throw in the other two and the combined group would carry six times BA's current traffic.

The impetus behind consolidation is growing amid high recent fuel prices, widespread overcapacity and the global recession. According to the International Air Transport Association, worldwide losses will total $5bn this year, the eighth loss in the past nine years and the worst since 2004. Airline bosses hope that the dire state of the industry "will weaken the resolve of competition authorities", said David Wighton in The Times. Hence Ryanair's latest tilt at Aer Lingus.

As far as a Qantas deal is concerned, the proposed dual-listed company with separate boards (designed to circumvent foreign ownership restrictions) would "hardly be the most manoeuvrable of vehicles", but it would "pack some punch", said Wighton. The merged entity would control almost half the London-Sydney traffic and there should be plenty of cost savings. But nothing will happen fast. Beyond regulatory hurdles, there are "a myriad of bilateral agreements on landing rights" governing all airlines, and these would have to be renegotiated before the merger, as Jeremy Warner noted in The Independent. Meanwhile, let's hope CEO Willie Walsh doesn't get "distracted from his main job", said Damian Reece in The Daily Telegraph: "flying BA safely" through this recession.

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