TC957
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BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:03 pm

It's reported in the travel trade publications that the IAG group are in the red purely because of IB's losses, with fuel prices being blamed. I'm wondering what possesed Willie Walsh that combining BA and IB was such a great idea.
 
LAXdude1023
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:04 pm

Sounds similar to KL and AF. Its like the beautiful women (BA and KL) that married the fat ugly slobs (IB and AF).
It is what it is...
 
RussianJet
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:22 pm

Quoting LAXdude1023 (Reply 1):
Sounds similar to KL and AF. Its like the beautiful women (BA and KL) that married the fat ugly slobs (IB and AF).

It is similar. Somehow, though, I feel more sorry for KL than BA. Not sure how accurate my impression is, and it's only an impression - I'm no expert, but it seems that KL is probably at more risk than BA in terms of maintaining their identity and product.

I have never understood even slightly why on earth they thought it was a good idea to join with IB. My immediate reaction when I heard it was happening was to question why the hell they did it, because there was little obvious reason.

Anyone care to try and explain what they were playing at when they made that decision?
✈ Every strike of the hammer is a blow against the enemy. ✈
 
LHRFlyer
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:29 pm

Quoting RussianJet (Reply 2):
Anyone care to try and explain what they were playing at when they made that decision?

If you go back three years ago, BA had no scope for growth at LHR and had to look elsewhere and Iberia had a complementary route network. At the time, it was not expected that the Eurozone crisis would be so bad and at least Spain seems to have got through the worst of it with better than expected debt/GDP figures recently.

The fact that the share price actually went up today says investors have full confidence IAG can turn things around.

The financial result is bad but I think there's an element of if the results are going to be bad, then it's best to get all of the bad news out of the way for a positive turnaround next year.
 
shuttle9juliet
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:47 pm

Quoting RussianJet (Reply 2):

Basically I think BA were very late in getting married , should have really hitched up with KLM earlier on, but as one member on here commented, they were left with the ugly girl at the school prom.
But all was not lost as the ugly girl came with benefits, her folks owned a lovely new home in Madrid, and she had relatives in South America..
 
UALWN
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 5:57 pm

Quoting shuttle9juliet (Reply 4):
Basically I think BA were very late in getting married , should have really hitched up with KLM earlier on

Or LX.
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IrishAyes
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 6:13 pm

Quoting RussianJet (Reply 2):
It is similar. Somehow, though, I feel more sorry for KL than BA. Not sure how accurate my impression is, and it's only an impression - I'm no expert, but it seems that KL is probably at more risk than BA in terms of maintaining their identity and product.

It sort of depends how you look at it and how you measure problem areas.

Product-wise, AF is more tightly integrated with KL's brand reputation than IB is with BA. Truthfully, I would avoid IB at all costs - it seems like an all around crap carrier with outdated planes and poor service. Whereas AF, despite its financial shortcomings, still is a great airline to fly (based on general experiences) and still at least flies newer aircraft with upgraded interiors.

Airport-wise, MAD is a vastly superior airport to transfer through (moreso than LHR). In contrast, CDG is a nightmare (compared to AMS). So there are some flip-flops there.

However, I think it all really boils down to macro factors, which all European network airlines are suffering from. The Spanish and Eurozone economic crisis have impacted all European carriers. The degree of impact, however, boils down to a country level, like unemployment rate (25% in Spain and rising), labor law headaches, and unhappy/unproductive workforces.

LCC competition is also particularly draining force to reckon with given how lean carriers like Ryanair, Norwegian and EasyJet are. Before these carriers really beefed up, and back when gas was cheaper, network carriers could subsidize profit-thin, higher-cost short-haul markets with feed from their long-haul routes. That strategy is no longer viable now, and airlines like AF and IB have had to initiate aggressive cost-cutting initiatives to turn-around their short-haul mainline ops within Europe.

Quoting RussianJet (Reply 2):
I have never understood even slightly why on earth they thought it was a good idea to join with IB. My immediate reaction when I heard it was happening was to question why the hell they did it, because there was little obvious reason.

I wouldn't say there was little obvious reason. It was an ugly acquisition, but nevertheless one that came armed with a few key assets:

For starters, Madrid is the third largest O&D destination in Europe, after LHR and CDG. That's pretty big. BCN is the fourth largest and, while not an IB hub, the presence of Vueling (a huge success story) served as a contributing factor. IAG is eyeing that prize big time moving forward, and the role that it could play for IAG (if full ownership becomes reality) cannot be underplayed.

Secondly, Iberia is the leading carrier between Europe and the South Atlantic. Allegedly, only 8 of IB's 24 long-haul routes are profitable. Although I'm not exactly sure *which* ones those are, I would not be surprised if the majority of those hail from Latin America.

Honestly, it's going to be a long and painful road to recovery for both AF-KLM and IAG. I do believe that the changes made to Iberia will be the most brutal.
confidence is silent. insecurities are loud.
 
panamair
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 6:16 pm

Quoting IrishAyes (Reply 6):
I would avoid IB at all costs - it seems like an all around crap carrier with outdated planes and poor service

IB's long-haul Business product is not bad - they already have flat-beds in J, for example.
 
PDPsol
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 6:51 pm

Quoting IrishAyes (Reply 6):
Secondly, Iberia is the leading carrier between Europe and the South Atlantic. Allegedly, only 8 of IB's 24 long-haul routes are profitable. Although I'm not exactly sure *which* ones those are, I would not be surprised if the majority of those hail from Latin America.
Quoting shuttle9juliet (Reply 4):
But all was not lost as the ugly girl came with benefits, her folks owned a lovely new home in Madrid, and she had relatives in South America..

This is what BA was focused on and it remains a key element to the IAG strategy. No one can deny traffic growth rates in Latin America are strong, in comparison to North America and western Europe.

The IB acquisition had less to do with Spain and more to do with Latin America and the key markets in the region, especially MEX, GRU, EZE, BOG, GIG, LIM, SCL.

It just so happened IB already had a developed route network between these markets in Latin America and MAD. Other European carriers also have decades of experience serving Latin America, but none had a network as extensive to Latin America. One can argue endlessly why IB's network was more developed than, say, LH or, say, AF, or, say, KL, etc...

However, today in 2013, not only is Spain and all of western Europe in the middle of a cataclysmic recession, carriers in Latin America are in the strongest position they have ever found themselves in.

Four carriers in Latin America, TAM, LA, AV and AM, can compete with European carriers. The parent companies of these carriers are publicly traded and trade at high valuation multiples compared to peers in North America and western Europe. LATAM Group trades at 19x P/E 2013, compared to 5.5x for UA and 5x for DL. CM trades at 10x.

In addition, these carriers in Latin America have a very rewarding regional network which is highly profitable compared to their trans-Atlantic routes to Europe. The European carriers do not have this.

If IAG plays its cards right and can restructure IB and continue its leadership position in the Latin America/Europe market, the shareholders of IAG will benefit quite well, thank you.
 
SASMD82
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:01 pm

Quoting LAXdude1023 (Reply 1):

Sounds similar to KL and AF. Its like the beautiful women (BA and KL) that married the fat ugly slobs (IB and AF).

The problem is that BA, KL and LH (and actually LX as well) serve the same markets (in general). That's why KL was never a serious option for LH and that's why BA and KL failed twice to agree upon a partnership. Both KL and BA are doomed with the large airlines from southern Europe -> AZ, IB and AF. From which I think AF has the least worst performance.

Without any doubt we can't prevent take overs (aka merger) such as the ones in the US in the last decades. They have to occur in Europe too. Simply an economy of scale to protect against the power of FR and U2 who have gained a huge market share in southern Europe. I think there will be no space left for an individual operating carrier of the size LX, IB, KL, TP, AZ, OA etc.

Only four or five big airlines will exist in Europe in 2020. No room for nationality or whatsoever. We are talking about loads of Euros and not about the national flag on a tale.
 
Maersk737
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:15 pm

Quoting SASMD82 (Reply 9):
The problem is that BA, KL and LH (and actually LX as well) serve the same markets (in general). That's why KL was never a serious option for LH and that's why BA and KL failed twice to agree upon a partnership. Both KL and BA are doomed with the large airlines from southern Europe -> AZ, IB and AF. From which I think AF has the least worst performance.

Without any doubt we can't prevent take overs (aka merger) such as the ones in the US in the last decades. They have to occur in Europe too. Simply an economy of scale to protect against the power of FR and U2 who have gained a huge market share in southern Europe. I think there will be no space left for an individual operating carrier of the size LX, IB, KL, TP, AZ, OA etc.

  

I have to agree.

Cheers

Peter
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airbazar
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:21 pm

Quoting LHRFlyer (Reply 3):
If you go back three years ago, BA had no scope for growth at LHR and had to look elsewhere and Iberia had a complementary route network. At the time, it was not expected that the Eurozone crisis would be so bad and at least Spain seems to have got through the worst of it with better than expected debt/GDP figures recently.

In addition, IB's problems are cost related, not market related. Their coverage of Latin America, a fast growing market, and brand awareness in that market is second to none. Their MAD hub is vastly superior to LHR and is very well positioned as a TATL and intercontinental hub. If/when IAG can get IB's costs to come down, this company will be very strong. The business case to merge BA and IB is very strong, IF Iberia can get its costs under control.

Quoting IrishAyes (Reply 6):
However, I think it all really boils down to macro factors, which all European network airlines are suffering from. The Spanish and Eurozone economic crisis have impacted all European carriers.

Well, not all. Just like BA and KL, other better managed airlines have reacted better to the European crisis. LH, TP, LX are just some European airlines that not only increased their profits from 2011 but they also grew their business.

Quoting PDPsol (Reply 8):
The IB acquisition had less to do with Spain and more to do with Latin America and the key markets in the region, especially MEX, GRU, EZE, BOG, GIG, LIM, SCL.

  
 
panamair
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:25 pm

Quoting airbazar (Reply 11):
Their MAD hub is vastly superior to LHR and is very well positioned as a TATL and intercontinental hub.

Geographically speaking, MAD is only well-positioned for Europe-Latin America flows; LHR is a superior hub for North America-Europe traffic flows...
 
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IrishAyes
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:28 pm

Quoting SASMD82 (Reply 9):
Without any doubt we can't prevent take overs (aka merger) such as the ones in the US in the last decades. They have to occur in Europe too. Simply an economy of scale to protect against the power of FR and U2 who have gained a huge market share in southern Europe. I think there will be no space left for an individual operating carrier of the size LX, IB, KL, TP, AZ, OA etc.

Only four or five big airlines will exist in Europe in 2020. No room for nationality or whatsoever. We are talking about loads of Euros and not about the national flag on a tale.

Honestly, I really have zero idea what the future holds for airlines like SK, EI, LO, AZ and TP. AY may survive on its pan-Asia strategy, also having turned around their short-haul ops, but I wonder if QR joining OW may cause some indirect damage to that plan.

The Gulf Carriers will inevitably play a role in shaping the future for the Big Three. I envision that LH Group and Turkish will grow closer. A lot of existing connections will become unraveled and simultaneously, new relationships and tie-ups will become tangled. It will be interesting to watch.
confidence is silent. insecurities are loud.
 
PDPsol
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:39 pm

Quoting airbazar (Reply 11):
In addition, IB's problems are cost related, not market related. Their coverage of Latin America, a fast growing market, and brand awareness in that market is second to none. Their MAD hub is vastly superior to LHR and is very well positioned as a TATL and intercontinental hub. If/when IAG can get IB's costs to come down, this company will be very strong. The business case to merge BA and IB is very strong, IF Iberia can get its costs under control.

Exactly, exactly, exactly... The strategic opportunity in Latin America for IAG and its carriers is very attractive:

The entire population of western Europe totals 415 million, Latin America is 575 million. The EU GDP is roughly double that of Latin America, so plenty of room for growth. Airbus expects 6% annual passenger traffic in the region over the next 20 years, topping even Asia Pacific.

Again, if IAG plays its cards right with IB, its shareholders will be rather pleased, indeed...

Meanwhile, Europe will continue to experience consolidation in its commercial aviation sector.

European carriers will also realize total integration of their operations, just like merged carriers do here in the United States. All this bluster about brands, 'identity', culture, and rigid labor agreements will disappear...
 
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OA260
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 7:51 pm

Quoting RussianJet (Reply 2):
It is similar. Somehow, though, I feel more sorry for KL than BA. Not sure how accurate my impression is, and it's only an impression - I'm no expert, but it seems that KL is probably at more risk than BA in terms of maintaining their identity and product.

Spot on with that analysis. Very sad state of affairs indeed.
 
raffik
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 8:30 pm

Quoting panamair (Reply 7):
IB's long-haul Business product is not bad - they already have flat-beds in J, for example.

Coupled with terrible terrible service.
- Alec
 
RussianJet
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 8:46 pm

Quoting OA260 (Reply 15):
Very sad state of affairs indeed.

Seems to be, for sure. Flew AF one way and KL the other to South Africa in December. They were poles apart in terms of experience. I'm guessing the great KL product will be dragged down badly in the future.
✈ Every strike of the hammer is a blow against the enemy. ✈
 
theobcman
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 9:25 pm

Quoting shuttle9juliet (Reply 4):

Basically I think BA were very late in getting married , should have really hitched up with KLM earlier on, but as one member on here commented, they were left with the ugly girl at the school prom.
But all was not lost as the ugly girl came with benefits, her folks owned a lovely new home in Madrid, and she had relatives in South America..


This is absolutely correct & actually really funny ! Made me laugh anyway - cheers
 
dtw2hyd
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:04 pm

All legacy European Airlines should merge with LH, leaving only LH and Ryanair.
 
UALWN
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:05 pm

Quoting RussianJet (Reply 17):
I'm guessing the great KL product will be dragged down badly in the future.

Why? AF and KL merged already 9 years ago. If it hasn't happened by now...
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awthompson
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:11 pm

Quoting LAXdude1023 (Reply 1):
Sounds similar to KL and AF. Its like the beautiful women (BA and KL) that married the fat ugly slobs (IB and AF).

Except 'fat' is hardly the word, 'skinny' is perhaps more accurate. Maybe she was fat when they got hitched but she went on a forced diet and is now anorexic  

Apart from BA, I am quite worried about the UK financially as a whole. Government and big companies have made very wrong/damaging moves/mistakes in recent years (ie. selling off Gold reserves/Banks/BP gulf explosion etc etc).

I have spent the earlier part of the evening researching how to open accounts in foreign currencies in an attempt to get what little money I have out of Sterling as it is plummeting against most other currencies. Many experts believe things will get worse and I would like to be able to continue travelling in the future and not be 'trapped' here with a next to useless currency. Maybe watching tonight's Keiser report has been too depressing for me!

Apologies for getting off the topic.
 
theaviator380
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:13 pm

I recently flown on BA (DEL-LHR) 777-200. Very average product to me, honestly. I wasn't happy at all.
 
IBERIA747
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:28 pm

Quoting TheAviator380 (Reply 22):
I recently flown on BA (DEL-LHR) 777-200. Very average product to me, honestly.

That has been my experience with BA as well. Never understood all the hype about them.

On the other hand, I've flown about 50 times across the Atlantic on IB (Business and Economy, and quite a few short haul flights too) and my overall experience has always been satisfactory.
¡¡VIVA ESPAÑA!!
 
theaviator380
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RE: BA/IB - A Marriage Made In Hell.

Thu Feb 28, 2013 10:36 pm

Iberia747

Yup,I don't understand all hype about them. I wrote an email to customer services regarding my experience but reply wasn't too impressive either.
 
lychemsa
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 12:19 am

IBERIA long haul and short haul in the air service was good from Geneva to New York.

The only problem is that they cancelled my Madrid to New York flight. I had to pay for my night in Madrid. Same happened to a friend.

They are unreliable.
 
ECFlyer
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:10 am

I spent a week in Barcelona in 2008 or 2009 and I honestly could not understand where the prosperity was coming from. Much of it, it turned out, was debt. At the time the bars were all full and the luxury retailers were chock full of shoppers...and the shoppers were Catalans, not Asians. Much different story in 2013.

I suppose this is the source of BA's whiplash. The weaknesses in Spain and Italy were poorly understood at the beginning of the Euro crisis, at least when compared to Greece, Ireland, and Portugal.

Being a bit Machiavellian, I have always preferred M&A that takes out a direct competitor vs. that which is "complimentary." (From the perspective of the acquirer that is, not the traveling public). Otherwise, internal growth seems to work best. If you are stalled out on internal growth, I am not sure buying some questionable compliment is the best way forward. It seems to work much less the half of the time.

I have only two IB experiences I can recall. A marvelous trip in 2000: JFK to MAD on a 742, then onto SVQ on an IB 722. The 727 flew so silkily even then that it was a zen experience. More recently was the trip from LHR to BCN, booked purely through BA. Only when I got to check in did I realize IB was the operator and would not honor BA's baggage policy--pure corporate stupidity. Several of us were at check in, ramming one bag into a second and holding BA tickets showing two complimentary bags allowed.
 
vv701
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 2:15 am

Quoting IrishAyes (Reply 6):
Airport-wise, MAD is a vastly superior airport to transfer through (moreso than LHR). In contrast, CDG is a nightmare (compared to AMS). So there are some flip-flops there.

I do not disagree. But if you are flying in and out of LHR T5 then the experience can be as good as anywere else in the world.

My own view is that the BA / IB merger may never have happened IF - repeat, IF - BA had known that by April 2012 they would have added all BD's LHR slots to their portfolio. However being in partnership with IB and, through DFW and MIA, AA does mean that there is less urgency to focus on expanding operations to Latin America. So BA can focus their expansion more towards Asia (were IB is hardly present and BA not very strong) and, to a lesser extent, Africa. But the likely 787 delays will not help. However BA have managed to secure the delivery in 2014 of two more 77Ws on a ten year lease.
 
Curiousflyer
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 3:36 am

AF is going through rough years but it also has had it good ones. KL voluntarily joined AF after giving it a very long thought, and before that they had given an even longer thought at joining BA, and they chose.

KL needed AF to get better access to a large market, one can think that they are much better off with AF than without, having now critical size not only for passenger access but also for aircraft and engine purchases and many other synergies. On top of it the AF management was bright enough to leave a lot of autonomy to KL, thus sparing the pride of its employees and more generally the Dutch.

People can claim all they want that KL married an ugly girl, in my view it was and still is a very beneficial move for both.

As for BA, I have read and heard pretty nasty things about their purchase of IB, mostly they are trying to move the South America traffic towards the UK instead of letting it go through MAD, which both culturally and practically makes little sense. Instead of helping IB develop its brand and hub, they are sucking the blood out of it.

An example is the shuttle service that exists between AMS and CDG: hourly flights. Is LHR MAD anywhere near this?

One last thing: the CDG hub has vastly improved lastly, particularly with AF having most of its flights concentrated between two very well interconnected terminals, 2E and 2F. It certainly meets or beats LHR and is not that bad compared to AMS, where the walks can be pretty long too.
 
TN486
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 8:02 am

Seems QF (Alan Joyce) made the right decision some years ago in regards to "merging".
remember the t shirt "I own an airline"on the front - "qantas" on the back
 
Speedbird2155
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 8:24 am

Quoting CuriousFlyer (Reply 28):
As for BA, I have read and heard pretty nasty things about their purchase of IB, mostly they are trying to move the South America traffic towards the UK instead of letting it go through MAD, which both culturally and practically makes little sense. Instead of helping IB develop its brand and hub, they are sucking the blood out of it.

This is why you should never believe all of what you read or hear. MAD and IB are the IAG keys to South America. By pushing more traffic through MAD, IAG/BA can focus on expanding to Asia and other areas of the world when slots at LHR become available. Also, as you may have noticed, BA and IB are now jointly located in T5 at LHR, with IB operating most of the flights to MAD. So how is this "sucking the blood" out of IB?

BA and IB have their own management, who have to decide what is best for each carrier. Yes, ultimately both have to operate within the parameters set out by the parent company, but it is for each company to decide how to achieve the goals. BA went through a couple years of extreme hardship, where many of us didn't know if we would still have jobs, but we have come out of it being more profitable.
 
LHRFlyer
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 9:06 am

Quoting CuriousFlyer (Reply 28):
An example is the shuttle service that exists between AMS and CDG: hourly flights. Is LHR MAD anywhere near this?

LHR-MAD has 13 flights a day. That's quite a lot and most of Iberia's long-haul departures are in waves rather than spread out through the day. Also, some of the flights are operated by a Iberia A340 and a BA 767.
 
TYCOON
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 9:29 am

As far as service is concerned (putting aside profitability etc... for the moment), I believe AF is miles ahead of BA and that's a given in my book. I have flown BA 63x and a good number of those flights have been in the front, long-haul intercontinental and short-haul intra-Europe. The food and overall service is very poor. If I get served once again that atrocious Club Europe salad of lettuce, beets, goat cheese and chorizo, I will lose it... Just thinking of it makes my stomach churn.
And I am not a big fan of T5, always jammed packed with people like a huge shopping mall during Xmas rush... the outer terminals (B&C) are decent as less crowded, but they don't tell you which terminal until shortly before boarding time.
Going through T5 security, even in Fast Track, is always an unpleasant experience. Not friendly at all. I find the people manning the security at CDG terminals much more pleasant... and actually very friendly. Invariably they bid me "Have a nice flight".
The BA lounges aren't bad, but the selection of newspapers is appaling and very UK-centric. I have yet to find an International Herald Tribune in any BA lounge (!). The selection in AF lounges in CDG is more intellectually appealing.
BA may make more money than AF for NOW, but it is not in the same league service wise.
AF-KL work well together and I believe service on KL has actually improved since the merger.
And, at least on short-haul business class flights, I actually don't find IB to be too bad, friendly service, much the case with AZ too! However, longhaul on both AZ and IB, even if the seats are very comfortable and spacious in business class, the service is pretty poor.
Just my two cents!
 
shuttle9juliet
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 9:33 am

Quoting LHRFlyer (Reply 31):

It's actually an A330 now, brand new.
 
Azure
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 10:07 am

Quoting CuriousFlyer (Reply 28):
AF is going through rough years but it also has had it good ones. KL voluntarily joined AF after giving it a very long thought, and before that they had given an even longer thought at joining BA, and they chose.

KL needed AF to get better access to a large market, one can think that they are much better off with AF than without, having now critical size not only for passenger access but also for aircraft and engine purchases and many other synergies. On top of it the AF management was bright enough to leave a lot of autonomy to KL, thus sparing the pride of its employees and more generally the Dutch.

People can claim all they want that KL married an ugly girl, in my view it was and still is a very beneficial move for both.

Indeed ! It is really funny to read that AF was an "ugly guy" while it was the most profitable European airline in the early 2000s when the AF/KL "merger" took place ! As a matter of fact, at that time KL knew it could not survive alone and the dutch carrier certainly made the right decision when you compare what it was then and what it is now.
As for AF, if you take some time to look at its finances, its losses come from a/ its domestic operations (due to an ever increasing competition with an extensive high-speed train network that no other European carrier has to deal with); b/ cargo operations (due to the worldwide economic slowdown); c/ costs of its restructuring plan. Without b/ and c/ alone the airline would be profitable...



Quoting DTW2HYD (Reply 19):
All legacy European Airlines should merge with LH, leaving only LH and Ryanair.

Lol ! In another thread, one of your fellow citizen was as bold and imaginative as you are and suggested that AFKL needed a US management. I am well aware that the US know better than the rest of the world : this is certainly why most US carriers are / were placed under chapter 11 and why in general the economic data of the USA are even worse than the Eurozone (in terms of public debt, for instance).
Give us a break please ! How can you suggest Europe, with 500 millions citizens, can only sustain 1 major airline + 1 LCC (and what are you doing with Easyjet btw ?) And why should this major European airline be LH ? Granted, LH is profit making at the present time, and AF is loss making, but it has not always been the case in the curse of history. Furthermore the trends are now more in favor of AF than LH (the operating result is improving at AF, and deteriorating at LH - according to Bloomberg).



Quoting Speedbird2155 (Reply 30):
BA and IB have their own management, who have to decide what is best for each carrier. Yes, ultimately both have to operate within the parameters set out by the parent company, but it is for each company to decide how to achieve the goals.

I believe IAG is duplicating the LH/LX/OS and AF/KL model, and rightfully so.
IAG carries 50 million pax a year, vs 75 million for the AF group and 90 million for the LH group. BA and IB alone cannot survive as independant carriers in an ever more competive market. IMHO they were right to merge. In the long run they will benefit from mutual synergies. IAG was not created with the fiscal year 2012 in mind but with a long term perpective !
 
1400mph
Posts: 1051
Joined: Wed Jan 16, 2013 11:29 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 10:26 am

One thing to ponder...

When LH group released their results the share price tanked.

When AF-KLM released their results the share price tanked.

When IAG released their results the share price went up 8%.

As is always the case with the airline industry its more about reading between the lines.

It's as good as it's going to get for LH group from here on in but their market is only going to get tougher.

Air France-KLM are in one hell of a mess.

IB is burgeoning with potential and latent promise. A well run and lean IB combined with MAD with its South Atlantic / Latam partner in Oneworld will do very well indeed. BA is now in a very strong position at LHR with its new slots and upcoming A380 introduction on highly competitive (and lucrative) routes. A reborn AA and BA will be a powerhouse across the north Atlantic whilst BA concentrates on new routes east.

That is why even with an almightly loss (albeit it through exceptions) and an awful union battle looming the stock price surged on a better than expected 'loss' !!
 
babybus
Posts: 2379
Joined: Sun Dec 28, 2003 5:07 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 10:57 am

IB is a dreadful airline but to be honest BA isn't exactly leading the world in terms of in-flight service these days either.

Maybe not the awkward marriage we'd like to think.

I f there were money in them there south american routes BA would be trying to operate those routes themselves.
and with that..cabin crew, seats for landing please.
 
Azure
Posts: 624
Joined: Mon Dec 17, 2012 8:34 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 11:00 am

Quoting 1400mph (Reply 35):
One thing to ponder...

When LH group released their results the share price tanked.

When AF-KLM released their results the share price tanked.

When IAG released their results the share price went up 8%.

As is always the case with the airline industry its more about reading between the lines.

It's as good as it's going to get for LH group from here on in but their market is only going to get tougher.

Air France-KLM are in one hell of a mess.

Another thing to ponder :

AFKL share price : roughly + 100 % in 1 year




LH group share price : roughly + 50% in 1 year




IAG share price : roughly +80% in 1 year




Granted, the markets are not as pessimistic about IAG as some posters are here, neither do they believe AFKL is the huge mess you claim it is ! And of the 3 European major carriers, LH seems to have the least convincing economic profile...
 
1400mph
Posts: 1051
Joined: Wed Jan 16, 2013 11:29 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 11:47 am

Quoting babybus (Reply 36):
I f there were money in them there south american routes BA would be trying to operate those routes themselves.

Oh well that's a refreshing outlook. No money in South American aviation eh ? I think Latam might have something to say about that ? Projected growth for South American aviation is outstripped only by China hence the desperate attempts of other global alliances to lure Latam away from Oneworld.

Quoting babybus (Reply 36):
IB is a dreadful airline but to be honest BA isn't exactly leading the world in terms of in-flight service these days either.

Like I said...the only way for IB is up and analysts have every faith in management to achieve this despite its losses and current union issues hence the rising share price.

BA service ? Best business class seat in Europe (maybe VS is comparable but so small an outfit as to be irrelevant), comparable First class product in Europe. Economy certainly no worse than say Air France or Lufthansa and for people that fly on regular basis to a multitude of destinations by far the best Terminal and facilities on offer in any European airport for its national (or equivalent) carrier.


Quoting Azure (Reply 37):
AFKL share price : roughly + 100 % in 1 year

The market cap for an airline the size of AFKL is abismal by any standards.
 
jumpjets
Posts: 1111
Joined: Tue Apr 10, 2012 2:17 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 11:50 am

Quoting Speedbird2155 (Reply 30):
BA and IB are now jointly located in T5 at LHR, with IB operating most of the flights to MAD

Also IB maintenance facilities in Madrid are doing OK out of the BA fleet repaints/maintenance which I doubt they would have had IAG not come along.

Quoting Azure (Reply 34):
IAG was not created with the fiscal year 2012 in mind but with a long term perspective !

Well said, concise and accurate.
 
vv701
Posts: 5773
Joined: Fri Aug 19, 2005 10:54 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 12:33 pm

Quoting CuriousFlyer (Reply 28):
As for BA, I have read and heard pretty nasty things about their purchase of IB

BA never purchased IB. Former IB shareholders received 45 per cent of the equity in the new SPANISH REGISTERED company, International Consolidated Airlines Group SA (IAG). Former shareholders in BA were issued with 55 per cent of IAG's equity. Nevertheless the largest IAG shareholder is a Spanish bank with around 12 per cent of IAG's equity.

Note in particular the following extracted from the IAG investors' web site:

"As a Spanish company IAG is subject to Spanish legislation and therefore the Shareholders Meeting will always be held in Spanish at a venue in Spain."

You can check this out in paragraph 2.2 of the IAG Shareholders' Guide accessible here:

http://www.iairgroup.com/phoenix.zhtml?c=240949&p=irol-meeting

So I think you can safely ignore the "nasty things" you have heard about how what is actually a British subsidiary of a Spanish registered corporation is treating a Spanish subsidiary of that same Spanish corporation. As you will know, things just do not work that way.

Quoting CuriousFlyer (Reply 28):
An example is the shuttle service that exists between AMS and CDG: hourly flights. Is LHR MAD anywhere near this?
Quoting LHRFlyer (Reply 31):
LHR-MAD has 13 flights a day.

Arguably the question is whether the AF/KL shuttle flights between PAR and AMS are anywhere near those of BA/IB between LON and MAD. And the answer is that they come quite close.

The first departure for MAD from LHR is at 06:20, the last at 20:15 . So that's 13 flights in 13 hrs 55 mins. Additionally there are two BA LCY-MAD flights a day. So there are 15 BA/IB LON-MAD flights in under 14 hrs. AF-KL have a similar frequency but over a slightly shorter day. They have slightly fewer departures from PAR (12) over the slightly shorter period (09:00 to 21:35) of 12 hrs 35 mins.
.
 
jfk777
Posts: 5828
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 12:41 pm

BA - KLMwould have been heavenly. Then BA tried Swissair but was only interested in their LHR slots. IB was the last significant airline left to get hicked to.
 
airbazar
Posts: 6805
Joined: Wed Sep 10, 2003 11:12 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:01 pm

Quoting panamair (Reply 12):
Geographically speaking, MAD is only well-positioned for Europe-Latin America flows; LHR is a superior hub for North America-Europe traffic flows...

I was speaking from an operations perspective, primarily. MAD is not slot restricted and does not suffer from the weather and airspace issues that LHR has. But geographically MAD is no more out of the way than ATL is on the other side for example and yet, it's DL's biggest TATL hub. Yes, if you're flying between ORD and TXL, LHR is shorter. But if you're flying between MIA and FCO, then MAD is shorter. MAD also no worse positioned for Asia-Latin America or N.America-Africa that LHR. So geographically speaking the two have their place.
 
1400mph
Posts: 1051
Joined: Wed Jan 16, 2013 11:29 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:07 pm

Quoting jfk777 (Reply 41):
BA - KLMwould have been heavenly.

Yes it would but at the time it was being discussed it was WAY ahead of its time and would have been blocked at every turn as indeed was the case with BA and AA forcing them into the current 'catch up' scenario.

I'm afraid that as is often the case BA was just far too forward thinking for the rest of the aviation world at that time. The flat bed seat is another prime example of BA genius.

However, BA's two main partners namely AA and IB are in the process of being reborn and 'catch up' they will. (and more)
 
thowman
Posts: 342
Joined: Tue Jul 06, 2004 6:51 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:07 pm

Quoting IBERIA747 (Reply 23):
On the other hand, I've flown about 50 times across the Atlantic on IB (Business and Economy, and quite a few short haul flights too) and my overall experience has always been satisfactory.

I don't think you would say that about you experience in Miami a few years ago when stranded, would you Alfonso?
     

I have flown both trans atlantic to MIA in the old first class upper deck with IB, and also in business class and economy to latin America with IB. I don't think they're a match for BA across the board - but the experience depends a lot on the crew, and some of the crews I have had are great and others suck. That's where BA win every time - the level of service.

Admitedly, I haven't been on Iberia for at least a couple of years now to get to and from the UK to Spain as they cannot compete with U2 and FR - and I think my days of doing so are over now - so cannot comment on recent developments.
 
Azure
Posts: 624
Joined: Mon Dec 17, 2012 8:34 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:23 pm

Quoting 1400mph (Reply 38):
The market cap for an airline the size of AFKL is abismal by any standards.

AFKL market caps is not even worth the price of their 6 A380s, which does not mean this airline is a mess as you previously wrote. The fact their share price doubled in one year confirms my position and demonstrates your initial wording was based at least on some lack of information.

Quoting jumpjets (Reply 39):
Quoting Azure (Reply 34):
IAG was not created with the fiscal year 2012 in mind but with a long term perspective !

Well said, concise and accurate.

Thanks ! I wish this long term issue would be obvious for everyone !
 
1400mph
Posts: 1051
Joined: Wed Jan 16, 2013 11:29 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 1:29 pm

Quoting Azure (Reply 45):
AFKL market caps is not even worth the price of their 6 A380s, which does not mean this airline is a mess as you previously wrote.

Any airline that delivers two consecutive billion euro losses is a mess. Before you self combust I am not implying that will always be the case. Maybe AF's rather lethargic management has seen the light ?
 
vv701
Posts: 5773
Joined: Fri Aug 19, 2005 10:54 am

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 2:01 pm

Quoting Azure (Reply 34):
IAG was not created with the fiscal year 2012 in mind but with a long term perpective !

Yes. But in the current economic climate the short-term perspective is also very important. In tte IAG 2012 Annual Report Willie Walsh is quoted as saying:

"We achieved synergies of €313 million in 2012, exceeding our €225 million target set at the beginning of the year. This is another excellent performance, in particular through higher than expected revenue synergies. However, we must not be complacent - while this trend must continue it needs to be hand-in-hand with structural change."

Certainly IB (as well as BA) have financially benefited. What we can see additionally looking in from the outside includes:

1. Several BA aircraft being repainted at MAD.

2. Both airlines adjusting their LHR-MAD schedules to avoid the over-night stops away from their home hub that both previously made, thus avoiding the additional staff costs that created.

3. BA operating out of its home hub taking over the loss making IB BCN-LR flights between two non-hub airports.

How much difference this made to the IB 2012 financials under what were very difficult operating conditions is difficult to say. But it could be a crucial difference.
 
UALWN
Posts: 2171
Joined: Mon Jun 01, 2009 3:27 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 2:15 pm

Quoting VV701 (Reply 40):
Nevertheless the largest IAG shareholder is a Spanish bank with around 12 per cent of IAG's equity.

A Spanish bank that is bankrupt and has had to be rescued by the government...
AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/787/AB6/310/32X/330/340/380
 
Azure
Posts: 624
Joined: Mon Dec 17, 2012 8:34 pm

RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 2:34 pm

Quoting 1400mph (Reply 46):
Any airline that delivers two consecutive billion euro losses is a mess.

Not necessarily when its turnover is 25,7 billion euros and when half of its losses come from provisions for restructuring costs.

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