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bastew
Topic Author
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Possibility Of A BA/BD/AA Tie Up?

Thu Oct 18, 2007 1:25 pm

There are a few reports in the UK press today about BA in apparent talks with Sir Michael Bishop of BMI, as well as their desire to further co-operate with AA.

I recall that BD has some agreement with LH from years ago that gives LH automatic righs to BD shares at a pre-determined amoount. I guess this could scupper any deal between BA/BD. But looks like interesting times ahead!

http://business.timesonline.co.uk/to...ctors/transport/article2681621.ece
 
ripcordd
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RE: Possibility Of A BA/BD/AA Tie Up?

Thu Oct 18, 2007 1:34 pm

Ok can someone tell me know why AA/BA can't tie up like all the other ones in the USA and Europe LHR is now open so whats the hold up now?
 
aa1818
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RE: Possibility Of A BA/BD/AA Tie Up?

Thu Oct 18, 2007 2:16 pm

I think it's about time AA/BA were allowed to cooperate as much as AF/KL/DL and the other relationships that exist out there. BA controls LHR much like DL controls ATL and AF controls CDG, so I don't see the point in restricting AA/ BA out of LHR but not AF/DL out of ATL/ CDG. Bring on the free market. Bring on competition!!!

AA1818
“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
 
Rivet42
Posts: 608
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RE: Possibility Of A BA/BD/AA Tie Up?

Thu Oct 18, 2007 2:36 pm

Well, if you read the article, it says...

"...Aviation sources believe that BA is in talks with Sir Michael Bishop, controlling shareholder of bmi, to buy the British carrier..."

- which is rather speculative, and not based on anything substancial.

It is highly unlikely that the competition authorities in UK (let alone EU) would permit BA & BD to merge, as in many markets out of LHR, BD is the only local competition to BA.

On the other hand, my understanding of the Open Skies deal is that it does indeed remove anti-trust obstacles to the BA/AA tie-up, so I would expect that to go ahead as originally planned.

Riv'
I travel, therefore I am.
 
AIR MALTA
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RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 8:09 am

Quoting Rivet42 (Reply 3):
It is highly unlikely that the competition authorities in UK (let alone EU) would permit BA & BD to merge, as in many markets out of LHR, BD is the only local competition to BA.

I really don't why a lot of people keep on insisting that BA won't have a local competition out of LHR. Do AF, LH, LX, OS or KL have local competition out of their hubs. It seems that most of OneWorld airlines have the stiffest competition at their bases : BA/BD at LHR, IB/JK/UX at MAD/BCN, AY/Blue1 at HEL. So come on, it is time to stop this triring excuse and work on a stronger UK airline which could face the foregein competition or we could end up with no UK airlines in the UK!!!
Next flights : BRU-ZRH-CAI (LX)/ BRU-FCO-TLV (AZ)
 
BCALBOY
Posts: 102
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RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 11:05 am

Quoting Rivet42 (Reply 3):
It is highly unlikely that the competition authorities in UK (let alone EU) would permit BA & BD to merge, as in many markets out of LHR, BD is the only local competition to BA.

BA fly to approx 42 Shorthaul destinations ex LHR.
BMI compete on only 8 of these, of which 4 are UK Domestic points....ABZ,EDI,GLA,MAN,AMS,BRU,DME,NCE.

On the UK Domestic services/short european services has shrunk in recent yrs for a nbr of reasons...

1/Growth of competition from LCCs out of LTN,STN,LGW by Easyjet , Ryanair capturing a lot of pt 2 pt leisure.

2/The increased security/congestion @ LHR has increased total journey times and has led to psgrs to
places like CDG/AMS/BRU switching to Eurostar ( BMI actually pulled CDG a year or so ago for this reason ),
Virgin rail have improved journey times , frequencies or Euston/MAN and are taking an increasing share of business travellers even at fares similar to the air fare .There has been big growth on routes like EDI and MAN at LCY
again with psgrs prepared to pay fares as high or higher than LHR because of the proximity to City Centre and the relative ease of travelling thru LCY compared to LHR.

3/Growth of direct services from the regions offering Hub connections avoiding LHR e.g Emirates via DXB , CO via EWR.

4/Govt Policy of discouraging domestic air travel on 'Green grounds'.
Taxes have a disproportionate affect on these routes due to their being a bigger % of total fare.
Some Parties are proposing even greater taxes to increase this affect.

On LHR/NCE BMI flys once per day and doesn-t offer a Business product against the 6 times daily BA
service with full range of product options, hardly significant competition.

On LHR/DME BMI recently commenced service but is reportedly struggling to gain a significant share
of the business segment.

On key routes like FCO/MAD/ZRH/LIN BMI have tried to compete in the past but have had to pull back.

In terms of the bigger picture the importance of BMI in providing competition to BA @ LHR is much less significant than Virgin altho this too may decline with Open Skies and is certainly less important than it was 4-5 yrs ago.


In addition BA's major competitors have been given scope to expand their spheres significantly...

Over the years AF has acquired its domestic competitors Air Inter / UTA, more recntly has acquired KLM ,
is reportedly interested in IB/AZ and has been allowed more immunity than BA in co-operating with
the likes of DL/CO/NW than BA has with AA.

Similarly LH has acuired some of its domestic competition , has been allowed to take-over LX and significant intersts in OS/LG/BD. It also has reported interest in AZ/IB/SK and has been allowed greater immuniities in coop with
UA/US than BA has with AA.

Both AF/KL and LH are significantly biiger tha BA already......

In 2006 , Operating Revenue Passengers

BA GRP USD 16.6 BN 36 M

LH GRP USD 25.5 BN 53.4 M

AF/KL USD 30.7 BN 72.7 M



In summary , the environment has changed and the UK Govt can-t keep shackling BA if they want the carrier to
remain a leading carrier in Europe.
 
Rivet42
Posts: 608
Joined: Mon Aug 08, 2005 11:26 am

RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 2:52 pm

That's all true, and well put.

However, the reason for BA being at a disadvantage to AF, KL and LH regarding transatlantic ATI (Anti-Trust Immunity) is one of its own making. In the 80's, BA had an alliance with US Airways, even having US aircraft flying into LGW in BA colours, and no-one batted an eyelid, because US were not a major player on the LON-NYC market. However, BA then made a tactical - and as it turns out very costly - mistake to enter into discussions with AA. Of course this led directly to the unravelling of the BA-US agreement, but also immediately attracted the attention of the competition authorities on both sides of the Atlantic, because even then AA was a dominant player in UK-US traffic, and one of the big 4 in the prized LON-NYC market. A tie-up between the two biggest carriers on the LHR-JFK route was always going to be opposed by everyone in sight, and BA should have been able to see that coming. In the meantime, AF, KL and LH have been able to sneak through their own alliances without so much attention, because all eyes have been on LHR, where none of those have offered any threat to the existing status quo.

Thus BA arguably went after too large a slice of the cake, and only now, with Open Skies making it possible for any of their key competitors to fly LHR-JFK, will they get that highly prized ATI for their alliance with AA. Some might say that is far too high a price to pay, but only time will tell. What is beyond doubt is that BA shot themselves in the foot by trying to form an alliance with one of the other big 4 LHR-JFK players, rather than aiming a little bit further down the tree.

Nevertheless, they are where they are now, and your points about their disadvantaged position within Europe are perfectly valid. The problem is that whilst LH and AF in particular have benefited from very slack (some might say invisible) domestic competition scrutiny, here in the UK, where BA's formal relationship with the state ended much longer ago, and where BA is therefore treated much more like any other private corporate enterprise, scrutiny by the competition authorities is much more rigorous. It's true that BA and BD do not actually compete head-to-head on many domestic routes, but the concern will be that such a merger would see all the domestic routes out of LHR in the hands of a single operator, and all the European routes originating at LHR in the hands of a single UK carrier. For those reasons, whether they are 'fair' or not in the bigger field of view, it is extremely unlikely that the authorities would permit such a deal.

Riv'
I travel, therefore I am.
 
AIR MALTA
Posts: 1790
Joined: Mon Sep 17, 2001 6:45 am

RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 3:17 pm

Quoting Rivet42 (Reply 6):
but the concern will be that such a merger would see all the domestic routes out of LHR in the hands of a single operator, and all the European routes originating at LHR in the hands of a single UK carrier.

How many UK carriers do we need for LHR-BRU or LHR-AMS??? 20 may be? Why do you need to fly to LHR from EDI if it is cheaper to go to LTN, STN or LGW. On the EDI-LON you can fly BA, BD, U2 and AF. What airlines fly CDG-NCE?? Oh only AF and U2. Come on, tell me what competition there is on the FRA-VIE or FRA-ZRH routes. If you want to fly from FRA to VIE you have LH, OS and JP which are all in STAR and share codes on that route. We have to stop this competition non sense, cause in the UK there is a lot of competition and if BD is taken over by BA, we will still have competition.
Next flights : BRU-ZRH-CAI (LX)/ BRU-FCO-TLV (AZ)
 
Rivet42
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RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 3:51 pm

I understand what you are trying to say, but you have confused a couple of the points that I tried to make.

I did state that elsewhere in Europe the market is not as open as in the UK due the former state-owned airlines being allowed to control/dominate key routes. That's not a good thing, I'm sure you would agree, and I'm sure many people would prefer to see the authorities in Germany and France taking a slightly more unbiased approach to market regulation.

Here in the UK, where we have a much freer market, and therefore much fairer scrutiny (which is also a good thing), you have to look at a bigger picture than just (for example) EDI-LON and the options of LTN/STN/LGW v LHR. For example, if you are in Scotland, and want to fly to somewhere that involves a connection via London, at present you have BD with Star Alliance, or BA with oneWorld. If you allow BA & BD to merge, then all of a sudden the market becomes entirely oneWorld, unless you want to complicate your journey by buying a non-LHR round-trip separately, and having to plan for a transfer around/across London. How can you not accept that the market in that case becomes dominated by one key alliance/carrier, to the disadvantage of everyone else?

Just because that's the case elsewhere, doesn't mean that it's a good thing and should be allowed here. In reality it's a bad thing and shouldn't be allowed anywhere, and our attention should be on making sure that AF and LH are not assisted in their own markets against the interests of fair and free competition.

Riv'
I travel, therefore I am.
 
BOSSAN
Posts: 175
Joined: Tue Aug 03, 2004 11:49 am

RE: Possibility Of A BA/BD/AA Tie Up?

Sat Oct 20, 2007 6:34 pm

Quoting Rivet42 (Reply 8):
For example, if you are in Scotland, and want to fly to somewhere that involves a connection via London, at present you have BD with Star Alliance, or BA with oneWorld.

Why is a connection via LHR necessary? Starting from Edinburgh, for instance, domestic British destinations are covered well by bmi, flybe and BA Loganair; nonstops on low-cost carriers go all over Europe; European and international connections can be handled well by other nearby hubs such as Skyteams' Amsterdam or Paris or Star Alliance's Frankfurt (Amsterdam is only 80 miles further from Edinburgh than London is); North American destinations can be reached via Skyteam's Newark.

The major airlines in continental Europe do dominate flights to their capitals and traffic within their countries, but once you're making a connection the hub location should matter less than the total flight time, the reliability of the carrier and the cost.
 
JoFMO
Posts: 1840
Joined: Wed Jul 14, 2004 1:55 am

RE: Possibility Of A BA/BD/AA Tie Up?

Sun Oct 21, 2007 2:41 am

The 'whining' by some BA supporters has some valid points, but completely neglects every other argument that speaks against BA being a victim of unfair competition in its home market compared with other European carriers.

Some points:

- BA has London as home base. London is THE business city in the world. Some poeple argue it has even overtaken New York in recent years. Dominating this market as much as BA does (it's only competitors are VS, which only serves less than 20 longhaul destinations and BMI that is just a domestic operator with a hand full European destinations and some recently acquired "exotics'), is unprecedented in other world cities as Tokyo or New York.
In contrast LH might have 80% of slots in FRA, but just compare this tiny backyard with 600.000 people (2.5 Mio in the hole urban area) with London. LH has to make a business case with flying from a small city that's importance in Germany is only 1 out of 5 other equally import ones (Munich, Dusseldorf/Cologne, Hamburg, Berlin). And non of these cities could even think about playing int he same league than London or New York.

People argue that there is not the same level of competition in France and Germany than in the UK.. That might be true to some degree but it does not hold too much water.
AF has no credible domestic competition from another airline. But France has build a railway system has taken the lead to any destination except Nice and Toulouse. Everywhere else AF has lost its position as the leader in market share to rail. So it is not quite true that the French government has prevented any competition from AF. In fact they created another mode of transportation that is far superior to AF's domestic flying
Germany has with AirBerlin a very valuable competitor to LH. With the exemption of routes to Frankfurt every other main domestic route is well covered by AB with several flights a day. And the last stronghold FRA will also come down once the 4th runway is finished in 2011. But again, having FRA as a stronghold does not mean too much. FRA is right in the middle of Germany, so Railway is quite competitive already from anywhere else in Germany to Frankfurt.

Others did argue, that AF and LH teamed-up with a lot of its surrounding carriers. But the fact that AF and KLM or LH & LX went into a partnership is different from BA and BMI.
I would be more than happy to see BA becoming more active in European consolidation. Why did they run away from KLM and let LX standing in the rain? Nobody would stop BA starting closer relations with IB, SN or LY.
But BA + BM is as foul as LH and AB would be!
 
jbernie
Posts: 206
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RE: Possibility Of A BA/BD/AA Tie Up?

Sun Oct 21, 2007 2:48 am

Don't forget QF already has close ties with BA, likewise didn't QF take some of AA's 737 delivery slots a few years back when AA was not in a position to take them?

Don't know how much it would come into play but certainly BA/QF/AA in much closer ties could be very interesting, it would also be interesting to see how/if this would influence future purchases from A & B assuming there would be a desire to have a common fleet to make maintenance etc much easier/less expensive.

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