oneworld news

[Pieter C. 5]

Spain Could Ask Iberia To Save Spanair

 

September 10, 2008

The government is considering asking Iberia to act as a white knight to save rival Spanair after one of its planes crashed last month, newspaper Expansion reported on Wednesday, without citing a source.

 

SAS-owned Spanair was already struggling and had announced it was cutting a third of its work force when on August 20 a Spanair MD-82 crashed on take-off at Madrid's Barajas Airport, killing 154 people on board.

 

A spokesman for Iberia, which is in the process of merging with British Airways, said the airline had heard nothing of the plan.

 

"Right now we have no knowledge of this. We have not received a proposal," the spokesman said.

 

Expansion said the government was concerned that the crash could affect Spanair's viability because of a fall in revenues, combined with expenses related to the planned lay-offs.

 

In May, Iberia pulled out of the bidding process for Spanair after SAS put it up for sale last year, citing worsening sector conditions as a result of rising oil prices and the weakening Spanish and global economy.

 

Brokers Banesto cast doubt on the chances of a deal.

 

"We find it difficult to believe that the government would oblige SAS to sell the company to Iberia, and in turn, it is difficult to believe the government could force Iberia to buy Spanair when they had already rejected the acquisition."

 

BPI, the Portuguese bank, said a deal would significantly improve Iberia's position in Spain, by optimizing routes and gaining pricing power.

 

"We believe that Iberia is in a win-win situation. The conditions that Iberia would ask would be much better than they would have been otherwise," it said in a note to clients.

 

(Reuters)

 

[Pieter C. 5]

Iberia Investors Seek Bigger Merger Stake

 

September 12, 2008

Iberia's Spanish board members have told the airline's executives to fight for a larger share of the airline which will be formed through a merger with British Airways, a source close to the board said on Friday.

 

The airlines will spend several months hammering out terms of the deal, chief among them what share of the new carrier existing shareholders will receive. Analysts initially expected a roughly two thirds to one third split in line with BA and Iberia's market values.

 

"Yesterday, the eight Spanish Iberia board members asked management to begin talks aimed at establishing a share exchange (for the merger) which defends the interests of Spanish shareholders," the source said.

 

The two board members representing BA, which holds 13.5 percent of Iberia, did not attend the meeting held in Madrid on Thursday, the source added.

 

"The rest of the board unanimously backed the proposal," the source said.

 

An Iberia spokesman declined to comment on the matter.

 

The combined carrier would be the world's third largest based on income of EUR16.5 billion euros (USD$23.1 billion) -- around 60 percent of that from BA. It will fly nearly 450 aircraft and would enable British Airways to better compete with larger rivals Air France-KLM and Lufthansa.

 

Iberia and BA said on July 29 they were in talks to merge via a share exchange, the division of which would be determined by their appointed investment banks.

 

Fortis Bank analysts said at the time that BA would own 66 percent of the new merged group and Iberia 34 percent, taking into account BA was worth twice Iberia at the time of the announcement.

 

But Fortis added that the share going to Iberia shareholders would increase based on the average price of Iberia shares over the six months leading up to the announcement or target prices established by analysts.

 

"It's going to be a long negotiating process until the share exchange is fixed, but the board will work closely with management," the source said.

 

Newspaper Expansion said on Friday core shareholder Caja Madrid, with 23 percent of Iberia, and three representatives on the 12-strong board were seeking more influence in the new merged group to ensure greater control of Madrid's Barajas Airport.

 

(Reuters)

 

[Pieter C. 5]

British Airways Suspends Flights To Pakistan

 

September 22, 2008

British Airways has suspended its flights to Pakistan because of security fears after a bloody suicide truck-bomb blast at a hotel in Islamabad on the weekend, an airline spokesman said on Monday.

 

"We suspended all flights to Pakistan immediately after the blast. It's a temporary suspension. Our people at headquarters are reviewing the security situation," said spokesman Sohail Rehman.

 

The airline had six flights a week to Pakistan, he said.

 

(Reuters)

 

[Pieter C. 5]

Iberia Drops Historic Gibraltar Air Route

 

September 22, 2008

Spain's Iberia is to stop flying to Gibraltar because of weak demand, the airline said on Monday, 2-1/2 years after it began the first air service between Spain and the British colony it claims as its own.

 

The twice-weekly service between Madrid and Gibraltar was the first scheduled route by a Spanish airline to the territory, and its start in December 2006 marked a new high in Anglo-Spanish relations over the Rock.

 

"It was simply a lack of demand, nothing else," a spokeswoman for the airline said.

 

Apart from its claims to Gibraltar, Spain says the airport, which doubles up as a Royal Air Force base, is on land not ceded to Britain under the Treaty of Utrecht in 1713.

 

Iberia's last Airbus flight will take off from Gibraltar's airport, which juts out into Algeciras Bay, for the last time on September 28.

 

(Reuters)

 

[Pieter C. 5]

British Airways Cancels Pakistan Flights Indefinitely

 

September 22, 2008

British Airways said on Tuesday it had cancelled flights to Pakistan indefinitely after a suicide truck bomb blast at a hotel in Islamabad at the weekend killed at least 53 people and heightened security fears.

 

"In light of the security situation in Pakistan we have cancelled our flights from Heathrow to Islamabad indefinitely," British Airways said in a statement. "The safety of our customers, crew and aircraft is of paramount importance."

 

A spokesman for the airline in Pakistan had said on Monday that the airline had temporarily suspended flights to the country.

 

The Czech ambassador and at least three other foreigners were among those killed in Saturday night's blast at the Marriott Hotel, Islamabad's worst bomb attack, which wounded scores and which security officials said bore the hallmarks of al Qaeda.

 

(Reuters)

 

[Pieter C. 5]

Iberia Says Business Plan Key To BA Merger

 

September 24, 2008

The priority in merger talks between Iberia and British Airways is to establish a business plan not when the deal will be completed, the Spanish airline's chairman Fernando Conte said on Wednesday.

 

"The main element we need to define is the future business plan and the synergies," Conte told journalists during an aircraft maintenance conference in Madrid.

 

On Tuesday, British Airways chairman Martin Broughton said the merger should be wrapped up by March, but Conte was more circumspect about the timing on Wednesday.

 

"It is a reasonable target, but it is a bit early (to estimate). We have to see how the fundamental elements of the deal evolve, which is the business plan and synergies," he said.

 

Conte said the structure of the merger was similar to that between Air France and Dutch airline KLM in 2004, but radically worse market conditions would change the business model.

 

Conte declined to say whether Iberia's board had received a proposal from British Airways on how to split the new company between Iberia and British Airways shareholders.

 

"All the analysts inside and outside our project are speculating about the project based on past experience of deals like this," he said.

 

(Reuters)

 

[Pieter C. 5]

British Airways Slams Tory Opposition To Heathrow Runway

 

October 1, 2008

British Airways chief executive Willie Walsh criticized Britain's opposition Conservatives' plan to scrap a proposed third runway at London's Heathrow Airport on Wednesday.

 

Conservative Transport spokesman Theresa Villiers said this week the party would call off controversial plans to expand Heathrow in favour of a new high-speed cross-country rail link should it win the next election.

 

"The latest idea that a rail link from Leeds and Manchester to Heathrow would be an adequate substitute for a third runway beggars belief," Walsh said in a speech at the Institute of London Insurance.

 

"Without extra runway capacity, Heathrow will never have any slack in the system and the tiniest disruption will cause knock-on delays all day," he added, saying the Conservatives were "all over the place" when it came to aviation policy.

 

Walsh's views echo those of business group the Confederation of British Industry (CBI) and Heathrow owner BAA, part of Spain's Ferrovial.

 

Outgoing Transport Secretary Ruth Kelly, who announced her resignation last week, called the move a "false choice" as extra capacity is needed both at Britain's airports and its railways.

 

The Labour government is considering its response to a public consultation on expanding Heathrow, with a decision expected by the end of the year. Opinion polls suggest the Conservatives are on course to return to power at the next election, however.

 

Construction of a third runway at Heathrow would involve the demolition of the village of Sipson, including around 700 homes.

 

London Mayor Boris Johnson wants to look at the possibility of building a completely new airport on the Thames Estuary.

 

(Reuters)

 

[Pieter C. 5]

Iberia Investor Says BA Merger Swap Around 60:40

 

October 6, 2008

British Airways shareholders are likely to receive around 60 percent and Iberia investors 40 percent of a new airline when they merge, Iberia's biggest shareholder, Caja Madrid, said on Monday.

 

The saving bank's chairman, Miguel Blesa, also told reporters that the board of Iberia had unanimously requested a commensurate representation on the board of the new company.

 

British Airways and Iberia announced their merger plans at the end of July, and last month the UK carrier's chairman, Martin Broughton, said the deal should be wrapped up by March.

 

Based on the current market capitalization of both companies, the share exchange would have been 33 percent for Iberia and 67 percent for British Airways.

 

But Spanish media has reported over the last few days that the Spanish flag carrier's shareholders have increased their influence in the merger operation as a result of a pension fund deficit at British Airways.

 

(Reuters)

 

[Pieter C. 5]

BA Pension Deficit Leaves Iberia Wanting More

 

October 7, 2008

British Airways' widening pension deficit could become a stumbling block in its merger talks with Iberia, as the Spanish airline's shareholders use it to gain a bigger stake in the new group.

 

The British carrier announced last month that trustees at its biggest pension scheme had calculated its deficit on March 31 at GBP1.5 billion pounds (USD$2.65 billion) -- a bigger-than-expected hole that spooked the market.

 

It compared to just GBP357 million quoted in BA's most recent annual report -- although a company spokesman said the two figures had been calculated using different methods.

 

Analysts in both London and Madrid said they expected Iberia to use the deficit as a negotiating tool to gain a greater slice of a merged entity than the one third many analysts estimated it would receive when the pair announced merger talks in July.

 

"I don't think the merger is in danger, (but) what could change is the swap -- British Airways has a very big liability there... I don't see Iberia carrying much dead weight," said Manuel Zayas, airlines analyst at Fortis in Madrid.

 

"I don't think there will be delays, it is purely a problem of valuation," he added, suggesting that Caja Madrid, the regional savings bank that is Iberia's biggest shareholder with a 23 percent stake, would be pushing to take advantage.

 

Caja Madrid Chairman Miguel Blesa said on Monday Iberia investors were likely to receive 40 percent of the combined group although a BA spokeswoman said ongoing talks would determine the ratio.

 

His comment -- the first time a shareholder from either side has publicly mentioned the split -- was part of the cut and thrust of negotiations, analysts said.

 

British Airways' deficit has spiked as markets take a beating and money in the pension fund falls short of its obligations to 70,000 current and former employees belonging to its final salary pension scheme.

 

In contrast Iberia has no pension deficit, no final salary scheme, and last year had a pension bill of just EUR22 million (USD$29.9 million).

 

Industry magazine Aviation Week ranked the Spanish carrier as the world's third-best performing carrier in a recent report, marked on liquidity, fuel costs, financial health, earnings and use of assets. It has EUR1.57 billion of cash reserves.

 

"Both sides are building a case and this will definitely be a factor. The pension deficit is one that is BA specific," said Collins Stewart transport analyst Andrew Fitchie.

 

Based on their stock prices on Tuesday morning, British Airways -- down 8 percent -- would receive less than 60 percent of what would be world's third biggest airline in terms of revenue.

 

A BA spokeswoman said ongoing talks would decide the ratio, adding: "Talks about the proposed merger between the companies cover all issues, including the pension deficit".

 

BA's shares have dropped nearly 50 percent since the pension snapshot on September 18 -- due to an uncertain outlook for the airline industry, volatile markets, but also because of uncertainty surrounding the deficit.

 

British Airways last conducted an actuarial review in 2006, which resulted in a deficit of GBP2.1 billion. It subsequently agreed to pay two one-off sums of a combined GBP850 million to plug the deficit, plus annual payments of GBP131 million until 2016.

 

One major BA shareholder said it was not clear how much the merger discussions would depend on a triennial pension review due to start next March -- the same month BA estimates the merger should be wrapped up.

 

BA spokespeople have said the result of the review to determine the actuarial value of the pension fund will not be known until autumn.

 

Some analysts predict that when the full extent of the deficit is known, BA may be forced to go back to the negotiating table with the pension trustees to agree a new plan -- all of which will have an impact on any future BA-Iberia combine.

 

"We believe the shares have further to fall, and estimate it is entirely possible that the deficit could exceed BA's current market cap at the next full actuarial valuation. This raises the very real prospect that BA will have to put more cash into the schemes," said Societe Generale analyst Jonathan Wober.

 

"The BA pension fund trustees will be concerned about what effect the merger will have on the covenant -- a company's ability and willingness to finance the scheme," said Andy Scott, Principle of pensions consultant Punter Southall.

 

(Reuters)

 

[Pieter C. 5]

British Airways, Iberia Pilots Support Merger

 

October 8, 2008

Unions representing pilots at British Airways and Spain's Iberia support a proposed merger to create the world's third-largest airline, they said on Wednesday.

 

The Spanish pilots union, SEPLA, and the British Airline Pilots Association (BALPA) estimate the merger will generate GBP323 million pounds (USD$567 million) in combined savings and revenue growth in 2010, rising to GBP615 million in 2014.

 

The unions said it would give the combined company greater scale to compete with European rivals Air France-KLM and Lufthansa.

 

"A merger between the two companies will bring benefits to both and, without doubt, to the workers. It is essential to face the challenges of our industry," Justo Peral, president of SEPLA told a joint news conference with his British counterpart in Madrid.

 

Peral said Spanish pilots would not lose their jobs as a result of the merger.

 

"Iberia is 100 pilots short and we have gone five years without hiring," he said.

 

Under the planned merger BA and Iberia will continue to operate as separate carriers but benefit from shared muscle in buying aircraft and fuel. Gains would also come from route rationalisation, as well as an expansion in the number of flights and destinations key to attracting business passengers.

 

Jim McAuslan, secretary general of BALPA said the unions are worried that the global financial crisis could sink the merger.

 

"What is important is to say "go ahead"," McAuslan told journalists. BALPA represents all but 200 of the 3,500 British Airways pilots while SEPLA speaks for 1,800 Iberia pilots.

 

Iberia and British Airways bosses have so far refused to outline possible job losses, but BA chief executive Willie Walsh said in an interview on Monday the most evident synergies were in IT and supplies.

 

Walsh also told Spanish newspaper El Mundo the merger would take more time than expected. His chairman Martin Broughton said last month the deal should be finalised next March.

 

(Reuters)

 

British Airways Mulls Alitalia Cooperation

 

October 9, 2008

British Airways is considering cooperation with Alitalia, BA chief executive Willie Walsh told German newspaper Frankfurter Allgemeine Zeitung.

 

"A partnership with Alitalia is certainly possible, if the CAI investor group restructuring really succeeds," the CEO told the paper in an interview published on Thursday.

 

CAI plans to merge the most viable parts of Alitalia with rival Air One and is currently looking for a partner abroad.

 

British Airways is also interested in buying a stake in its UK rival bmi, even though it is part-owned by competitor Lufthansa, Walsh added.

 

"We are observing the development of bmi very carefully and we are interested in any acquisition that strengthens our position at Heathrow," the CEO said.

 

Lufthansa holds 30 percent in bmi together with the option to lift its holding in the airline.

 

Asked about Austrian Airlines, Walsh said that the company is a "better strategic fit for Lufthansa."

 

(Reuters)

 

[Pieter C. 5]

BA Shares Jump On Market Talk Of Cathay Interest

 

October 22, 2008

Shares in British Airways closed up 4.3 percent on Wednesday on market talk that Cathay Pacific was planning a takeover bid, traders said.

 

The shares, which have more than halved in value this year, closed the day at 148.1 pence, the top gainers on the FTSE 100 benchmark, which was down 4.5 percent.

 

British Airways said it did not comment on rumour and speculation.

 

European Union (EU) regulations prevent non-EU investors buying more than 49.9 percent of an EU airline, but Hong Kong-based Cathay Pacific is 40 percent owned by British controlled Swire Pacific.

 

"A bid by Cathay Pacific for British Airways makes sense... BA has a huge network in Asia that it could just replace with Cathay Pacific's," an analyst said.

 

He added that both airlines have a business class focus and are part of the Oneworld global airline alliance which also includes Spain's Iberia, which is currently in merger talks with BA.

 

Swire Pacific is 36.5 percent owned by John Swire & Sons, headquartered in London but originating in the port town of Liverpool nearly 200 years ago.

 

The private firm has a wide range of business interests, and reported a profit attributable to shareholders of GBP299 million pounds (USD$490.3 million) last year on turnover of nearly GBP3 billion, according to the company's website.

 

(Reuters)

 

Wow, this is interesting !!!

 

[James Gota 0]

BA and Qantas fined millions for price-fixing

 

British Airways and Qantas have been fined millions of pounds for their part in an international freight price fixing cartel.

 

The airlines reached a settlement today with the Australian Competition and Consumer Commission, (ACCC) which brought the action over the alleged price fixing of fuel surcharges in the international air cargo market from 2002-2006.

 

Qantas, Australia’s national airline, agreed to pay an £8 million ($AU20 million) fine in the Federal Court in Sydney. The ACCC said BA had also reached an agreement, which, along with the Qantas fine, still has to be approved by a judge. However the regulator would not disclose the sum.

 

The cartel has been the subject of ongoing inquiries and actions by regulators in the US and Europe, as well as class action suits in the US, Australia and Britain.

 

Related Links

OFT charges BA executives with price-fixing

Overcharged passengers to claim compensation

The Australian regulator’s chairman Graeme Samuel said BA and Qantas were the first airlines to be proceeded against in Australia “because both came forward and voluntarily made admissions under the ACCC’s cooperation policy”.

 

“Qantas has continued to assist and provide evidence both in relation to its own conduct and that of others,” Mr Samuel said.

 

“British Airways has also provided significant information as to its own role and that of others. It too has made available staff to assist and voluntarily respond to multiple requests for information and undertaken to continue doing so.”

 

In November 2007 Qantas apologised for engaging in price-fixing activity on cargo in the US and agreed to pay a £39 million ($US61 million). Last May, a former Qantas executive accepted an eight-month jail term as part of a plea agreement with the US Department of Justice, which had also secured guilty pleas by BA, Japan Airlines and Korean Air Lines.

 

In August four BA executives were charged with criminal price-fixing.

 

In April, Japan Airlines pleaded guilty to conspiring to fix air cargo prices and paid a £70 million ($US110 million) fine. British Airways and Korean Air Lines pleaded guilty last year and paid £191 million ($US300 million) in fines.

 

In February 2006, US and European officials raided airlines as part of the probe, which centred on the imposition of fuel surcharges in the international air cargo market.

 

Today, Qantas Chief Executive Officer, Geoff Dixon, again apologised on behalf of the airline.

 

“Qantas apologises unreservedly for the conduct of the employees involved,” Mr Dixon said in a statement. “All Qantas employees are expected to comply with the law and we take any failure to comply very seriously.”

 

The investigations, involving more than 30 other airlines, could take another two years to complete.

 

 

From http://business.timesonline.co.uk/tol/busi...icle5028138.ece

 

Maybe if both of them stop price fixing they wouldn't get so much fines

[Pieter C. 5]

Qantas Agrees Fine In Cargo Price Fixing Case

 

October 28, 2008

Qantas Airways agreed on Tuesday to pay a AUD$20 million (USD$12.2 million) fine for its part in a price fixing case and vowed to help regulators as they probed 30 other airlines over the same issue.

 

Qantas said the fine was part of a settlement with Australia's competition regulator. The agreement still needs approval from Australia's Federal Court, where the local regulator is suing both Qantas and British Airways for alleged price fixing on air freight between 2002 and early 2006.

 

The Australian Competition and Consumer Commission (ACCC) said separately on Tuesday that British Airways had also agreed to pay a fine, though it did not disclose the sum.

 

"Qantas is one of the first airlines to settle its liability in Australia," Qantas chief executive Geoff Dixon said in a statement, offering an unreserved apology.

 

"Since being advised of the allegations in May 2006, Qantas has cooperated fully with investigations by the ACCC and all other relevant antitrust regulators," he added.

 

Last May, a former Qantas executive accepted an eight month jail term as part of a plea agreement with the US Department of Justice.

 

"The ACCC continues to investigate other airlines, some of which are assisting voluntarily, while others are not," the competition regulator said in its statement.

 

"The ACCC expects to be able to resolve its investigations with other cooperating airlines shortly."

 

In April, Japan Airlines pleaded guilty to conspiring to fix air cargo prices and paid a USD$110 million fine. British Airways and Korean Air Lines pleaded guilty last year and paid USD$300 million fines.

 

In February 2006, US and European officials raided airlines as part of the probe, which centered on the imposition of fuel surcharges in the international air cargo market.

 

(Reuters)

 

[Pieter C. 5]

Cathay Sheds 5 Aircraft, Sees Tough Outlook

 

October 31, 2008

Cathay Pacific, trying to cut costs in a worsening travel and aviation environment, said it planned to shed five jets from its fleet and warned of slowing bookings.

 

Asia's fifth-largest airline said the planes would be replaced eventually and it would continue to grow its fleet, although at a slower pace, according to a report posted on Cathay's internal web site on Friday.

 

Chief executive Tony Tyler said in the report that cash from a disposal of five Boeing 777-200 aircraft would be useful, but added the airline was not certain a deal could go through in the current climate.

 

A Cathay spokeswoman confirmed the internal report had been posted on the web site.

 

"The outlook remains very challenging with continued stress on the premium segment and weakening demand in the economy cabin. This means consistently weaker forward bookings for the rest of the year compared to 2007," Tyler said in the report.

 

Cathay also said that in the week ended October 25, net revenue from passenger services, cargo and mail and excess baggage was 4.4 percent below target. The target was not specified.

 

Cathay, which owns regional carrier Dragonair and has an 18.1 percent stake in mainland carrier Air China, posted a January-June net loss of HKD$663 million (USD$84.95 million), its first interim loss in five years, on high fuel costs.

 

Despite global oil prices falling more than half to USD$64 per barrel this week from a record USD$147 in July, Cathay may not benefit as much as expected.

 

"First, we will inevitably see a reduction in fuel surcharges soon. Second, the hedging protection we benefit from when prices rise has to be paid for by benefiting less when prices fall," the report said.

 

Aviation analysts warned this week that Asian airlines will fail as tourism in the region slows and a worsening global economic outlook leads carriers such as Singapore Airlines to cut back flights.

 

The financial crisis is moving into the real economy as layoffs hurt consumer sentiment, leading airlines from China to India to post losses or lay off staff and hoteliers to focus on budget travellers as the luxury market takes a hit.

 

(Reuters)

 

[Pieter C. 5]

WestJet To Expand Reach Via Oneworld Carriers

 

November 5, 2008

WestJet Airlines said on Tuesday it is teaming up with some members of the Oneworld airline alliance, led by British Airways and American Airlines, to broaden the Canadian carrier's international reach.

 

WestJet, Canada's number two airline, said it and the group of international carriers will form the Canadaconnect corporate travel program, offering flights to 600 destinations in 130 countries.

 

The alliance may help WestJet better compete against its larger rival Air Canada, which offers international service and is part of the Star Alliance code-sharing group.

 

WestJet said the other participating airlines in its Canadaconnect program include Cathay Pacific Airways, Japan Airlines, Qantas and Royal Jordanian. It said other members of the group may join in the future.

 

The airline said it has no plans to join the Oneworld alliance. The company has agreed to a code-sharing agreement with Southwest Airlines, the biggest US domestic carrier, that begins next year.

 

(Reuters)

 

[Pieter C. 5]

British Airways Raises Full-Year Revenue Forecast

 

November 7, 2008

British Airways stuck to its forecast for a small operating profit this year and lifted its revenue target, despite first-half profit dropping more than 90 percent due to high fuel costs and the global financial crisis.

 

The British carrier said higher prices and a helpful exchange rate would offset falling passenger numbers, meaning revenues are expected to grow 4 percent this financial year, up from a previous estimate of 3 percent.

 

BA has been raising fares to offset the decline in passengers, most keenly felt in its highly profitable business travel market -- down more than 9 percent last month.

 

BA said pretax profit fell to GBP52 million pounds (USD$82.64 million) in the six months to end September from GBP616 million a year earlier. Total passenger numbers continued to fall in October, down 4.4 percent.

 

"This is a good performance given the incredibly difficult trading conditions. The six month period will be remembered as the bleakest on record," Chief Executive Willie Walsh said, citing high fuel costs and the banking crisis.

 

Walsh also said merger talks with Spanish partner Iberia remained on track.

 

He said BA had cut capacity for next summer by 1 percent to address falling demand due to the economic downturn, and would review next winter in the new year.

 

"We fully expect to see a number of airline failures over the winter, so we may have increased capacity next winter," he told reporters.

 

The airline is the third of Europe's big five to report half year figures. Low-cost rival Ryanair, which in contrast to BA is cutting prices, said it would break even for the current financial year.

 

Germany's Lufthansa said it would post a relatively healthy operating profit of EUR1.1 billion euros (USD$1.41 billion), while Air France-KLM and easyJet report over the next two weeks.

 

Walsh said merger talks with Iberia had so far focused on BA's pension deficit, which was reported in September to be GBP1.5 billion -- around the same as the market capitalization of the entire company.

 

He added that talks had yet to reach the crucial topic of the share split between the two companies. The fall in BA's share price since talks were announced has provoked market speculation that Iberia could demand a greater split than the one-third estimated during the summer.

 

Walsh said anti-trust immunity for its alliance with American Airlines was expected from the US early next year -- despite a campaign by rival Virgin Atlantic.

 

British Airways said its fuel bill for the year would still be the previously stated GBP3 billion despite lower oil prices, and that its hedging strategy remained broadly in place.

 

Finance director Keith Williams said the airline had hedged 40 percent of its fuel in 2009/2010, meaning that if the oil price stayed at USD$75 a barrel and the dollar at USD1.65 to the pound the group's bill would be GBP2.8 billion.

 

(Reuters)

 

 

BA Eyes Commercial Deal With Alitalia

 

November 7, 2008

British Airways is interested in a commercial alliance with Italian flag carrier Alitalia, its chief executive Willie Walsh told the Financial Times online edition.

 

"We believe we have made a very credible and potentially exciting proposition for the new company," Walsh said in comments quoted by the newspaper's web site on Friday.

 

But he added BA was not interested in an equity stake.

 

CAI, an Italian investor group, has offered to buy the bankrupt Italian airline and would then look for an industrial partner to invest and help run the revitalised company.

 

Rivals Air France-KLM and Lufthansa are in contention for an initial stake in Alitalia of up to 20 percent.

 

Walsh said CAI, whose bid is worth about EUR1.05 billion euros, did not need capital.

 

"They have a consortium with sufficient capital, they are not looking for capital," he told the Financial Times.

 

(Reuters)

 

[Pieter C. 5]

British Airways CEO Pessimistic On Open US Market

 

November 11, 2008

British Airways' chief executive Willie Walsh holds out little hope that the United States will open up its air travel market under US President-elect Barack Obama and a Democrat-controlled Congress.

 

European airlines had hoped the second stage of the US/EU Open Skies agreement, now under discussion, would force the United States to lift foreign ownership restrictions on its airlines by 2010, and open up domestic routes to overseas carriers.

 

President George W. Bush supported that goal, but US labor groups and Democrats have opposed the idea, fearing it would mean job losses for financially weak US airlines.

 

"I wouldn't be very optimistic about making significant progress," said British Airways CEO Willie Walsh, after a presentation to analysts and media in New York, when asked about Open Skies.

 

"I think it's very clear Obama has taken a strong line in relation to any change in the ownership and control regulations," said Walsh. "So at this point I would not be expecting any major progress to be made."

 

The first stage of the Open Skies accord, which took effect last year, allowed any carrier to operate from any point in Europe to any point in the United States and vice versa, and opened London's Heathrow Airport to all airlines.

 

Despite pressure from the Bush administration, Congress has resisted moves to lift the 25 percent cap on foreign ownership in US airlines.

 

Given those restrictions, British Airways has focused instead on a plan to co-operate with American Airlines on transatlantic flights, although the plan has not yet received approval from US antitrust regulators.

 

The upcoming change in administration was "neutral" to British Airways' antitrust immunity application, Walsh said.

 

Walsh was also pessimistic about the state of the global economy, saying the "eye of the storm" was still ahead.

 

"Economic conditions will remain poor for 18 to 24 months, and consumer confidence in key markets will probably continue to decline," said Walsh. "I don't think we've seen the full effect of job losses yet in some of the major economies."

 

He said the falling price of oil might mitigate some of the pain, and British Airways was protected by its strong position at Heathrow, one of the world's busiest airports.

 

He also expects capacity to be taken out of the air travel market as more competitors go out of business, on top of the dozen or so carriers which have exited the business this year.

 

"How many airlines will fail between now and next winter?" asked Walsh. "I suspect there will be quite a few. That may deal with the necessary capacity reduction that the industry needs to take."

 

However, he said that his airline had "limited visibility" about trends next year, given the economic turmoil and volatile fuel prices.

 

(Reuters)

 

[Keith T 2]

AZ in oneworld??

Please say it isn't so!!!

[Pieter C. 5]

AZ in oneworld??

Please say it isn't so!!!

 

Can confirm, it is not

Article was about BA wanting a commercial deal with AZ...

 

Another OW-carrier has some news:

 

LAN Buys 4 Boeing 767s

 

November 11, 2008

Chile's dominant airline, LAN, has signed a deal with Boeing to buy four new 767-316ER aircraft for around USD$636 million for delivery in 2012, the company said overnight.

 

LAN told the Chile bourse regulator late on Monday it had also signed a deal with Boeing giving it the option to buy two more of the aircraft for delivery in 2013.

 

LAN said the purchase of the planes was part of a revision to its fleet strategy in light of estimated delays to deliveries of 787 model aircraft, which had been due for delivery in 2011.

 

LAN, which has affiliates in Ecuador, Peru and Argentina, accounts for more than half of Chile's international passenger traffic and nearly three-quarters of its domestic traffic.

 

(Reuters)

 

 

 

Iberia Confident On British Airways Deal

 

November 12, 2008

Spanish airline Iberia is still confident of reaching a deal to merge with British Airways, it said on Wednesday, but added BA's widening pension gap would affect how the new firm was carved up.

 

"There are still some difficulties and one of them is BA's pension deficit but we are confident we will be able to reach a successful agreement for both parties, although it will take some more time and will likely have an impact on the relative value of both companies," Iberia Chairman Fernando Conte said after Iberia published nine month results.

 

"We are working on the deal, it is a complex process and it is crucial that it is well designed to fulfill the expectations of both companies".

 

When the merger was announced on July 29, it was thought BA would take around two thirds of the new carrier based on their relative market capitalisations. However the financial crisis has blown an even bigger hole in BA's pension fund and since then BA's share price has sunk 38 percent compared to a 12 percent fall in Iberia's stock.

 

Some analysts have said the tie-up could collapse under the weight of the British firm's pension deficit, calculated at GBP1.5 billion pounds in March. BA chief executive Willie Walsh said last Friday it had been the focus of talks.

 

Earlier on Wednesday, Iberia said its core earnings (EBIT) dropped 98 percent in the first nine months to EUR6.1 million euros (USD$7.7 million) as fuel prices rose and economic woes, particularly at home, hit demand.

 

Conte signalled that his airline would not slip to a full-year loss. "We are confident that Iberia will achieve a balanced result from total operating activities and a positive net income."

 

Iberia was ready for a tough 2009, he said, and, in a sign of the gathering storm clouds, Iberia released October traffic data showing an 8.6 percent fall in passengers. That accelerated August and September's declines and came in worse than Europe's big three -- Air France, Lufthansa and BA.

 

Falls were particularly heavy on domestic routes, partly as a result of cutting routes.

 

The proportion of Iberia's traffic that flies within Spain has halved in the last five years and national routes would continue to bear the brunt of cuts next year, the chairman said.

 

Along with demand, analysts said a higher-than-expected fuel bill, which rose EUR374 million to EUR1.2 billion, was responsible for the fall in earnings.

 

Conte said the fuel bill was likely to fall around 9 percent next year.

 

Analysts have complimented Iberia on a strong balance sheet, but many say the stock is vulnerable to the effects on demand from the financial crisis, growing competition from low-cost carriers, doubts over the BA merger and limited upside from falling fuel prices due to hedging.

 

Conte added that he expected Iberia, British Airways and American Airlines to receive US anti-trust approval for its trans-Atlantic alliance in the first half of 2009.

 

Iberia said its net profit fell to EUR51.1 million from EUR223 million a year ago.

 

Earnings before interest, tax, depreciation and aircraft rentals (EBITDAR) dropped to EUR419 million, a 40 percent fall, while revenue was flat at EUR4.12 billion.

 

(Reuters)

 

[Pieter C. 5]

Qantas In Talks To Sell Loyalty Scheme Stake

 

November 13, 2008

Australia's Qantas Airways is in talks with private equity funds to sell a 40 percent stake in its Frequent Flyer unit for as much as AUD$1.2 billion (USD$764 million), The Australian Financial Review said on Thursday.

 

Qantas is holding exploratory talks with major private equity funds, including Blackstone Group and Kohlberg Kravis Roberts, the newspaper said without citing any source.

 

Qantas shelved a proposal to spin off the Frequent Flyer loyalty scheme in September due to turbulent market conditions. Industry analysts have previously valued the unit at anywhere between AUD$1 billion and AUD$3 billion.

 

The scheme makes money by selling frequent-flyer points to third parties such as credit-card firms which then use the points as rewards in their own loyalty schemes. Many points are sold but never used, delivering windfall profits for the scheme.

 

The report quoted an unnamed private equity investor as saying the question was whether Qantas would get the price they wanted in this market.

 

(Reuters)

 

[Pieter C. 5]

Good Thing Qantas Takeover Failed - Outgoing CEO

 

November 17, 2008

Qantas Airways' outgoing chief executive Geoff Dixon has said the Australian airline was fortunate a massive takeover bid from private equity failed last year, although he strongly backed the deal at the time.

 

In a newspaper interview, Dixon said the AUD$11 billion (USD$US9 billion) deal from the consortium Airline Partners Australia (APA) had been "clouded by emotion", as board members and management stood to make huge personal gains.

 

Had the takeover gone ahead, Dixon said, Qantas would now have been in serious financial difficulty, although he believed the airline would have survived.

 

One of the members of the APA consortium, Allco Finance, collapsed this month with debts of more than AUD$1.1 billion.

 

"It didn't happen, and I'm very pleased now it didn't happen," Dixon told the Sunday Telegraph. "The real issue I'd never repeat was having the management -- myself and the management -- involved in it.

 

"The real Achilles' heel was that it got very, very emotional -- principally because I and the senior management team were going to earn tens of millions of dollars as part of it. That's the way private equity works."

 

APA, which also included Canada's Onex and Australia's Macquarie Bank, withdrew its bid in May last year amid lack of support from Qantas shareholders.

 

The bid's failure forced former Qantas chairwoman Margaret Jackson to announce her retirement.

 

Dixon steps down later this month, when he will hand over to Alan Joyce, the former chief of the airline's low-cost subsidiary Jetstar.

 

In the year to June 2008, Qantas reported net profits of AUD$969 million, up 44 percent on the previous year.

 

(Reuters)

 

[Pieter C. 5]

Qantas Cuts Profit Forecast, Capacity

 

November 25, 2008

Qantas Airways, Australia's flag carrier, lowered its 2009 profit forecast and said it would further cut capacity due to shrinking demand as the global financial crisis bites.

 

Analysts said Tuesday's profit warning was unlikely to be the last for Qantas, as Australians, hit by a weak local currency, holiday closer to home and the global economy deteriorates.

 

"Investors will be cautious that there could be further bad news down the track," said Derek Sadubin, chief operating officer of the Centre for Asia Pacific Aviation in Sydney.

 

"Everyone's going to be struggling to make money in the 2009 calendar year. The second half of their (Qantas') current financial year is going to be very, very challenging."

 

The International Air Transport Association said last week that business and first-class travel dropped 8 percent in September from a year earlier, with Asia most affected.

 

"We are in unpredictable times and the international business market, in particular, has slowed," Qantas chief executive Geoff Dixon, who is due to step down this month, said in a statement.

 

Qantas now expects its pre-tax profit to fall 65 percent to around AUD$500 million (USD$327 million) in the year to June 2009.

 

Despite a big drop in oil prices, Qantas said its fuel bill this year would still be AUD$750 million higher than last year, as it had hedged 97 percent of its fuel at USD$106 a barrel, nearly double the current oil price.

 

"The carriers that have hedged have had wrong-way bets because fuel prices have come off so steeply," said Sadubin, pointing to Air China's USD$454 million in potential losses on fuel hedging.

 

Qantas said its latest capacity cuts, equivalent to grounding 10 planes, would be met partly by not taking up planned leases of two A330-200 aircraft and by stopping all planned growth within Australia for Qantas and its budget airline, Jetstar.

 

It said it would cut costs by accelerating staff leave, rather than adding to plans to cut 4 percent of its work force.

 

The latest news comes after Qantas planes had a string of incidents, including a mid-air explosion of an oxygen bottle that ripped a minivan-sized hole in the side of a jumbo jet in July.

 

Dixon last month blamed the two biggest incidents on the aircraft manufacturers or parts manufacturers, rather than any problems with maintenance.

 

Air New Zealand, which last week announced plans to cut up to 200 jobs, said on Tuesday traffic between Australia and New Zealand and in the Pacific market had fallen sharply in October, with passenger numbers down 10 percent on a year ago.

 

It said its scheduled international capacity for the fourth quarter of the 2009 financial year would be down 13 percent on a year earlier.

 

Airlines around the world are being buffeted as corporate customers reduce their travel budgets, and sliding oil prices are not helping in the short run as many had hedged their fuel costs at much higher levels.

 

(Reuters)

 

[Pieter C. 5]

British Airways Sees Steady Middle East Revenues

 

November 26, 2008

British Airways expects revenues from the Middle East and Asia to hold steady this fiscal year despite the global economic slowdown, its regional director said on Wednesday.

 

Robbie Baird said the airline's profits would be crimped by higher fuel costs, despite its hedging.

 

"Asia and particularly the Middle East have a solid base of business and premium traffic driven by economic growth and we are turning some of our capacity to the Middle East," he told reporters.

 

"There's pressure on your profitability because of fuel costs but there is huge demand in passengers," he said, adding the region adds about 17 percent to airline revenues.

 

Earlier this month, the British carrier stuck to its forecast for a small operating profit this year and lifted its revenue target, despite first-half profit dropping more than 90 percent due to high fuel costs and the global financial crisis.

 

Those figures were the carrier's half-year results.

 

In Abu Dhabi, Baird said BA planned to increase weekly flights to the Gulf Arab region to 61 from 56 currently.

 

As regional airlines expand aggressively, Baird said the British carrier takes the competitive threat seriously and has reduced fares on some Middle East routes to compete.

 

"We are not taking competition for granted," he said. "Middle East carriers are competitors to British Airways and we are happy as long as there is a level playing field.

 

"We have to stay competitive and fight on quality and price. We had to stimulate demand and so followed other airlines (in cutting prices)."

 

He added the airline has not reduced staff in the Middle East but would keep a tight rein on costs.

 

(Reuters)

 

[Pieter C. 5]

Caja Madrid Expects Iberia, BA Deal To Go Ahead

 

November 28, 2008

The core shareholder of Spanish air carrier Iberia, savings bank Caja Madrid, expects its planned tie-up with British Airways to go ahead, the bank's chairman Miguel Blesa said on Thursday.

 

BA's widening pension deficit has become a stumbling block in its merger talks with Iberia as the Spanish airline's shareholders use it to gain a bigger stake in the new group.

 

"Both parties are interested so I think (the merger) will go ahead," Blesa told journalists on the sidelines of a seminar in Madrid.

 

"The deal is still continuing... it's not without difficulties, but it hasn't been paralysed," he said.

 

Iberia and BA announced their merger plans at the end of July.

 

(Reuters)

 

 

 

[Seth K 3]

Thanks Unc. Pieter for the news update regarding one world, star alliance etc.

 

Just want to add, I think BA miles redemption is the most ridiculous FFP ever. I tried to redeem my miles from ORD to SIN, the tax and surcharge is near USD800!!!! or I could pay extra USD300 for CX so much for "free flight"...

Edited November 28, 2008 by Seth K