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Could British Airways Be Bought?  
User currently offlineBeaucaire From Syria, joined Sep 2003, 5252 posts, RR: 25
Posted (6 years 5 months 1 day 9 hours ago) and read 5680 times:

..with a current market value of roughly 2.7 Billion £ ,the UK flag-carrier is theoretically a bargain .
Financially sound carriers with lot's of cash in their balance-sheet like LH,AF or EK are capable to manage -financially- such a take-over.
Question to the experts -who is currently majority shar-owner of BA and would it be technically possible to buy 51% of the airline ?


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24 replies: All unread, jump to last
 
User currently offlineCloudyapple From Hong Kong, joined Jul 2005, 2454 posts, RR: 10
Reply 1, posted (6 years 5 months 1 day 8 hours ago) and read 5631 times:

Anything goes at the right price.


A310/A319/20/21/A332/3/A343/6/A388/B732/5/7/8/B742/S/4/B752/B763/B772/3/W/E145/J41/MD11/83/90
User currently offlineBerlinflyer From Germany, joined Jan 2005, 94 posts, RR: 0
Reply 2, posted (6 years 5 months 1 day 7 hours ago) and read 5512 times:

Shareholders seem to be quite spread out:

http://media.corporate-ir.net/media_...areholderInformation_March2007.pdf

Non EU Airlines would cause a problem as a buyer due to rights problems. So if it would happen, it would be a possible option for LH. LH, BA and Swiss togehther with BAs stake in Iberia would be a powerful combination.


User currently offlineBeaucaire From Syria, joined Sep 2003, 5252 posts, RR: 25
Reply 3, posted (6 years 5 months 1 day 6 hours ago) and read 5406 times:

Danke sehr,Berlinflyer- good document.
BA to me seems more fragile than any other of the big three in Europe,due to their vulnerability on the US market.
Sure they make money between LHR and the US,but with increasing competition,their yields will erode.They don't have enough destinations other than US to build more resilience.
Also the negative impact of LHR as most feared transfer-point (lost luggage ) does not help.
Wouldn't be surprised that sooner or later there will be an attempt made ...



Please respect animals - don't eat them...
User currently offlineMariner From New Zealand, joined Nov 2001, 25142 posts, RR: 85
Reply 4, posted (6 years 5 months 1 day 6 hours ago) and read 5334 times:
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Quoting Beaucaire (Reply 3):
Wouldn't be surprised that sooner or later there will be an attempt made ...

If it is the mess you claim, why would anyone want to buy it?

Still, it would be interesting to watch the reaction of the people in Britain if someone did try to buy it.

mariner



aeternum nauta
User currently offlineBHXFAOTIPYYC From Portugal, joined Jun 2005, 1644 posts, RR: 0
Reply 5, posted (6 years 5 months 1 day 6 hours ago) and read 5331 times:

I hear Ryanair's interested.  Wink


Breakfast in BHX, lunch in FAO, dinner in TIP, baggage in YYC.
User currently offlineClipperBerlin From Germany, joined Feb 2008, 90 posts, RR: 0
Reply 6, posted (6 years 5 months 1 day 5 hours ago) and read 5284 times:

Wasn´t there a discussion about a possible merger of Lufthansa and BA on a.net a couple of weeks ago? I cannot be bothered searching for the thread but I remember some serious thoughts about such a merger in German and British(?) newspapers.

User currently offlineManchesterMAN From United Kingdom, joined Sep 2003, 1224 posts, RR: 1
Reply 7, posted (6 years 5 months 1 day 4 hours ago) and read 5105 times:



Quoting Mariner (Reply 4):
Still, it would be interesting to watch the reaction of the people in Britain if someone did try to buy it.

I think we'd all rejoice. I say LH should forget bmi and go after BA instead. At least then there would be a chance BA would be properly managed.



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User currently offlineBurkhard From Germany, joined Nov 2006, 4395 posts, RR: 2
Reply 8, posted (6 years 5 months 1 day 3 hours ago) and read 5085 times:



Quoting ManchesterMAN (Reply 7):
At least then there would be a chance BA would be properly managed.

And a merged Virgin/bmi a viable alternative.


User currently offlineBeaucaire From Syria, joined Sep 2003, 5252 posts, RR: 25
Reply 9, posted (6 years 5 months 1 day 3 hours ago) and read 5027 times:

BA loses a lot of credibility due to the very poor performance of BAA in their way to handle passengers.
Cutting hundreds of flights due to missing and untrained groundstaff can break the neck of an airline.I would think there must be some bargaining going on behind closed doors about compensations.
If I had to travel from any point outside UK onto the US-I'd try to avoid LHR like the pope would avoid topless bars .
LHR is becoming a liability rather than an asset .(Even if things will hopefully improve but the damage is there and the negative publicity out ..)



Please respect animals - don't eat them...
User currently offlineBCAL From United Kingdom, joined Jun 2004, 3384 posts, RR: 16
Reply 10, posted (6 years 5 months 1 day 2 hours ago) and read 4869 times:

First, anyone who might attempt to buy BA would be put off by the regulators and monopolies and merger commissions. Unlike its European counterparts if they were subject to a buy out, BA would be forced to surrender a significant proportion of its LHR slots to allow any takeover or merger to proceed. This would leave the purchaser with a company whose value would plummet after their purchase.

In addition, most of BA route licences are conditional on the company being majority owned or controlled by UK nationals or by nationals of "Member States" (basically any EU country). If BA were brought out by another European airline, the US and many other countries might not take kindly to a number of merged EU airlines operating services to/from their countries in direct competition with their own airlines and might, despite "Open Skies", seek to restrict the number of services.

So in theory a buy-out of BA is possible but in practice it would probably not happen.

Quoting Beaucaire (Reply 3):
They don't have enough destinations other than US to build more resilience.

The BA network (excluding services operated under code shares) expands to 147 destinations in 75 countries, not just the US. Also, word from Waterside is that because of less competition, LHR-YYZ is more profitable for BA than LHR-JFK/EWR.



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User currently offlineAstuteman From United Kingdom, joined Jan 2005, 10008 posts, RR: 96
Reply 11, posted (6 years 5 months 1 day ago) and read 4692 times:
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Quoting Beaucaire (Reply 9):
BA loses a lot of credibility due to the very poor performance of BAA in their way to handle passengers.

Which is a shame, because BAA are a completely separate entity to BA.

Quoting BCAL (Reply 10):
So in theory a buy-out of BA is possible but in practice it would probably not happen.

Do the Government still have a "golden share"?

Regards


User currently offlineACW367 From United Kingdom, joined Dec 2007, 242 posts, RR: 0
Reply 12, posted (6 years 5 months 19 hours ago) and read 4438 times:



Quoting ManchesterMAN (Reply 7):
I say LH should forget bmi and go after BA instead.

The LH/BD tieup is more about the wider Star alliance connections, {BA is oneworld}, rather than whether LH would be better served operating alongside BA or BD from a bilateral standpoint.


User currently offlineMutu From United Kingdom, joined Mar 2006, 536 posts, RR: 0
Reply 13, posted (6 years 5 months 19 hours ago) and read 4388 times:



Quoting Beaucaire (Thread starter):
..with a current market value of roughly 2.7 Billion £ ,the UK flag-carrier is theoretically a bargain .

Dont forget that that is the market capitalisation only.
to buy the airline intact as is, the buyer would also need to take on the airlines gross debts of circa £3bn, a dodgy pension scheme etc. So the "price" is nearer £7bn

But more importantly the share price reflects the pending massive increase in gross debt to in excess on $12bn over the nexy 6 years on the fleet renewal programme.

And as always when debt goes up, shares come down, all other things being equal.

However considering the value of LHR slots and despite open skies, BA does look cheap but if you track its share price back 20 years you will see the economic cycle clear as day. Not that long ago market cap was £6.5bn!!


User currently offlineBravo1Six From Canada, joined Dec 2007, 397 posts, RR: 2
Reply 14, posted (6 years 5 months 18 hours ago) and read 4332 times:



Quoting Mutu (Reply 13):
Dont forget that that is the market capitalisation only.
to buy the airline intact as is, the buyer would also need to take on the airlines gross debts of circa £3bn, a dodgy pension scheme etc. So the "price" is nearer £7bn

Not quite. Buying the airline "as is", by way of the acquisition of the shares, would be the market cap (price per share x number of shares) plus (presumably) a premium. The existing debt is already factored into the share price as nothing happens to the debt as a result of a change in shareholders. If you were buying one share of BA today, would you say the "price" you paid is higher than the market price? I think not.


User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 15, posted (6 years 5 months 16 hours ago) and read 3515 times:



Quoting BCAL (Reply 10):
If BA were brought out by another European airline, the US and many other countries might not take kindly to a number of merged EU airlines operating services to/from their countries in direct competition with their own airlines and might, despite "Open Skies", seek to restrict the number of services.

Sorry, but you've lost me completely on that point, and would be grateful if could you clarify it a bit. Maybe I'm misunderstanding you but, with all the current talk/negiotations going on with US carriers, what right would have the US to complain about any non-US carrier mergers? (i.e. if say LH bought out BA, what has that got to do with the US, or why is any different from DL buying out NW?)


User currently offlineBrilondon From Canada, joined Aug 2005, 4209 posts, RR: 1
Reply 16, posted (6 years 5 months 16 hours ago) and read 3406 times:



Quoting Beaucaire (Reply 9):
If I had to travel from any point outside UK onto the US-I'd try to avoid LHR like the pope would avoid topless bars .
LHR is becoming a liability rather than an asset

Why? It is the main airport serving Europe from most points outside Europe. BA has invested billions of £'s here and it would be financially a catastrophe of T-5 proportions. Or are you trying to change the topic of this discussion?



Rush for ever; Yankees all the way!!
User currently offlineViscount724 From Switzerland, joined Oct 2006, 25170 posts, RR: 22
Reply 17, posted (6 years 5 months 16 hours ago) and read 3312 times:

Quoting Brilondon (Reply 16):
Quoting Beaucaire (Reply 9):
If I had to travel from any point outside UK onto the US-I'd try to avoid LHR like the pope would avoid topless bars .
LHR is becoming a liability rather than an asset

Why? It is the main airport serving Europe from most points outside Europe. BA has invested billions of £'s here and it would be financially a catastrophe of T-5 proportions. Or are you trying to change the topic of this discussion?

I assume what he means is that LHR's many problems, especially lack of any growth capability since it's operating virtually at 100% of capacity, means that BA's attraction as an investment is negatively affected. LHR's attraction is the strong origin/destination traffic to/from London, much of it high yield business traffic, not as a connecting hub. FRA/CDG/AMS all have a larger network of destinations served directly than LHR and thus generally make more attractive connecting hubs.

[Edited 2008-04-01 17:01:30]

User currently offlineEaa3 From United States of America, joined Sep 2007, 1014 posts, RR: 0
Reply 18, posted (6 years 5 months 15 hours ago) and read 3269 times:

Keep in mind that if one bought BA one would have to take on it´s substantial debt and that would make 2.7 bil. not necessarily a bargain.

User currently offlineBaexecutive From United Kingdom, joined Jul 2005, 740 posts, RR: 0
Reply 19, posted (6 years 5 months 14 hours ago) and read 2898 times:

Whats to stop BA merging with AA?

User currently offlineBaexecutive From United Kingdom, joined Jul 2005, 740 posts, RR: 0
Reply 20, posted (6 years 5 months 14 hours ago) and read 2898 times:

Whats to stop BA merging with AA?

User currently offlineBaexecutive From United Kingdom, joined Jul 2005, 740 posts, RR: 0
Reply 21, posted (6 years 5 months 14 hours ago) and read 2899 times:

Such a good idea I said it twice lol

User currently offlineBrilondon From Canada, joined Aug 2005, 4209 posts, RR: 1
Reply 22, posted (6 years 5 months 9 hours ago) and read 2189 times:



Quoting Baexecutive (Reply 20):
Whats to stop BA merging with AA?

U.S. or U.K. law may prohibit foreign ownership on the scale to control the airline. AA may not be in a financial position to take on such a high debt load that would come with buying BA. Conversely BA certainly cannot afford to buy AA outright.



Rush for ever; Yankees all the way!!
User currently offlineBrilondon From Canada, joined Aug 2005, 4209 posts, RR: 1
Reply 23, posted (6 years 5 months 9 hours ago) and read 2164 times:



Quoting Viscount724 (Reply 17):
Quoting Brilondon (Reply 16):
Quoting Beaucaire (Reply 9):
If I had to travel from any point outside UK onto the US-I'd try to avoid LHR like the pope would avoid topless bars .
LHR is becoming a liability rather than an asset

Why? It is the main airport serving Europe from most points outside Europe. BA has invested billions of £'s here and it would be financially a catastrophe of T-5 proportions. Or are you trying to change the topic of this discussion?

I assume what he means is that LHR's many problems, especially lack of any growth capability since it's operating virtually at 100% of capacity, means that BA's attraction as an investment is negatively affected. LHR's attraction is the strong origin/destination traffic to/from London, much of it high yield business traffic, not as a connecting hub. FRA/CDG/AMS all have a larger network of destinations served directly than LHR and thus generally make more attractive connecting hubs.

[Edited 2008-04-01 17:01:30]

If that is what he ment to say why did he not say this. I only go on what I read here and not try to second guess someone elses thoughts. My mind reading skills are not obiviously as good as yours.  sarcastic 



Rush for ever; Yankees all the way!!
User currently offlineMutu From United Kingdom, joined Mar 2006, 536 posts, RR: 0
Reply 24, posted (6 years 4 months 4 weeks 1 day 21 hours ago) and read 1867 times:



Quoting Bravo1Six (Reply 14):
Not quite. Buying the airline "as is", by way of the acquisition of the shares, would be the market cap (price per share x number of shares) plus (presumably) a premium. The existing debt is already factored into the share price as nothing happens to the debt as a result of a change in shareholders. If you were buying one share of BA today, would you say the "price" you paid is higher than the market price? I think not.

I have said the debt is factored in because I stressed that if debt goes up then theoretically share price goes down etc etc

The share price rarely reflects the underlying value of a business. Even investment trusts holding $bns of quoted equities will trade at 15% discount to the market vakue of its investments!! That is not my point and buying a single share has no bearing on market/fair/true value. Its just a price derived from an auction process

But with respect if buying the whole airline, the buyer would either secure borrowings from his own bankers OR secure support from those who have committted credit lines to BA (the chinese) as there is so often change of control clauses in corporate debt instruments that allow the bank to call in its money in such an event. So standard practice is to get the debt covered either by reconfirmation of existing facilities or refinacing the debt. either way you need to demonstrate to the banks that your plan for the airline will not prejudice the bank or reduce their view of creditworthiness.

if a bid was rumoured the share price would rise substantially. Day to day share prices only reflect liquidity. If no one is buying but some are selling then prices fall, and vice versa. There doesnt need to be any change in the company 'fortunes (recent big spikes in price followed talk of EK sniffing around, then they drop back. Today whether open skies et al are serious risks or not, only a very sophisticated investor would buy in heavy. Also a large proportion of BA shares are held by the general public, staff and retired staff, and these are the guys that run for the hills in times like this hence sell pressure).


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