Friday 6 April 2012

Decline of airlines


-- The death spin is accelerating. Air Berlin and IATA air in serious trouble. Chinese airlines have just raised fuel surcharges to new levels. The parent of Colgan air has filed for bankruptcy and (out of desperation) Delta is trying trying to buy a refinery. What did I tell ya? Control of refineries is becoming as important as control of oil... --MCR

British Airways’ Europe-Empire Zeal Tested by AMR-JAL Crunch
Even before sealing a merger of British Airways and Spain’s Iberia, Willie Walsh, the deal’s architect, said he had 12 more targets in his sights. Eighteen months later, he may have more opportunities than he can handle.


5 April, 2012

Faltering growth and surging fuel prices are pushing TAP of Portugal and Scandinavia’s SAS AB toward a sale, with Ireland’s Aer Lingus (AERL) Group Plc and eastern European operators including Poland’s LOT and CSA of the Czech Republic also potentially seeking investment. At the same time, Walsh may need to take stakes in ailing American Airlines and Japan Airlines Co. in order to keep the two carriers in the Oneworld alliance.

Walsh, 50, faces the dilemma just as International Consolidated Airlines Group SA, the company formed from the BA- Iberia combination, struggles with cost cuts at its Spanish business and prepares to absorb BMI, a cast-off from Deutsche Lufthansa AG (LHA) it’s buying for 173 million pounds ($275 million).

In the near term the priorities would be BMI and TAP,” said Stephen Furlong, an analyst at Davy Stockbrokers in Dublin. “They’ll do what they have to do to ensure their leadership in the trans-Atlantic market is maintained, but if that could be achieved without putting money in they’d probably be happier.”

Best Performer

IAG traded 0.7 percent lower at 178.40 pence as of 9:43 a.m. in London, where it’s based. The stock has added 21 percent this year, valuing Europe’s third-biggest airline at 3.3 billion pounds and outperforming Air France-KLM (AF) Group, ranked No. 1 and down 1.7 percent, and Lufthansa, the No. 2, up 10 percent.

Having won approval for a venture between BA, Iberia and American Airlines in 2010, IAG should have been contemplating its opportunities for European expansion from a position of strength in the trans-Atlantic market, the largest in the world for lucrative premium-class business traffic.

Instead American’s parent, AMR Corp. (AAMRQ) (AAMRQ), is mired in bankruptcy proceedings, having filed for creditor protection in November. US Airways Group Inc., a member of the Lufthansa-led Star group of carriers, and Delta Air Lines Inc. (DAL) (DAL), aligned to Air France-KLM within the SkyTeam affiliation, are mulling bids, people with knowledge of their intentions have said.

High Priority

IAG, then as British Airways (IAG), pursued the right to coordinate prices and schedules with Fort Worth, Texas-based AMR for 13 years. The airline devotes 31 percent of capacity to North American routes and said Feb. 29 that the venture’s revenue grew to more than $8 billion in 2012.

While Walsh said Feb. 29 that IAG is “not looking to invest in American” and saw no “cause for concern,” with AMR’s revamp plans “very credible,” it can’t stand by if a bid comes in, said John Strickland, an analyst at JLS Consulting in London.

It will be a high priority to keep American Airlines,” Strickland said. “The joint venture was a long time coming and should yield many future advantages.”

At the same time, IAG will “look closely” at investing in Japan Airlines as the Asian carrier plan an initial public offering as early as September after exiting bankruptcy last year, Walsh said March 12 in Tokyo, adding that an investment “represents a great opportunity for us in the future.”

IAG and AMR together fought off a bid from Atlanta-based Delta to pry JAL away from Oneworld after it first filed for bankruptcy in January 2010, and an application has been lodged for a joint venture on routes between Japan and Europe.

European Openings

Walsh has to juggle the needs of Oneworld against an increasing number of acquisition opportunities in Europe, where a second wave of consolidation is taking place.

IAG is in pole position to make acquisitions in Europe as returning Air France-KLM CEO Jean-Cyril Spinetta focuses on steering 2 billion euros ($2.6 billion) in cost cuts past French unions and Lufthansa’s Christoph Franz retreats from a string of takeovers that added ailing Austrian Airlines and BMI.

Lisbon-based TAP SGPS SA (TAP) is likely to be the first asset available to Walsh, with Portugal targeting a sale before the end of the year, Secretary of State for Treasury and Finance Maria Luis Albuquerque told journalists in Lisbon on Feb. 28.

We would certainly be interested in looking,” Walsh said on March 20 at a Oneworld event in Berlin. “The network it has into Brazil is interesting, certainly. It’s got some interesting network into Africa as well, so we will wait and see.”

No comments:

Post a Comment

Note: only a member of this blog may post a comment.