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

Fri Mar 01, 2013 2:36 pm

Quoting IrishAyes (Reply 6):
Truthfully, I would avoid IB at all costs - it seems like an all around crap carrier with outdated planes and poor service.
Quoting IrishAyes (Reply 6):
However, I think it all really boils down to macro factors, which all European network airlines are suffering from.

I think it's both macro and micro, a weak product in a weak economy.

Quoting SASMD82 (Reply 9):
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.

Well, there's this small problem that the EU doesn't hold the bilateral agreements, the member nations do.

Quoting Speedbird2155 (Reply 30):
MAD and IB are the IAG keys to South America.
Quoting 1400mph (Reply 38):
Projected growth for South American aviation is outstripped only by China

As posted earlier, there is this small issue of well financed LatAm and SouthAm carriers with a lower cost base and lots of brand recognition in their home countries. The real question is can IAG compete? Three years on we should have some indications, no? Seems IAG is mainly focused on UK-ES at this point instead of ES to the Americas.
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IBERIA747
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 2:37 pm

Quoting thowman (Reply 44):
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?

Hehehehe the good ole' Andy. Long time no see mate!.

I think you're starting to forget things!!       

My experience was positive. Iberia handled the situation perfectly, and my only complaint was not about them, but about the bunch of "paletos" who started insulting and attacking IB staff...typical, rowdy "I've-conquered-the-world" Spaniards on their way back home after their very first trip outside their village.

Here's the link to my 9-year old report, so you can check it out by yourself:

A Trip From Spain To Guatemala With IBERIA, Part 2 (by IBERIA747 Jun 27 2004 in Trip Reports)
¡¡VIVA ESPAÑA!!
 
Azure
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 3:11 pm

Quoting Revelation (Reply 50):
Quoting SASMD82 (Reply 9):
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.

Well, there's this small problem that the EU doesn't hold the bilateral agreements, the member nations do.

Yes, but the EC can - and does - block any merger that may affect competition (eg the EI/FR merger)
Anyway, the European market is already consolidated and dominated by 3 major carriers (AF/KL, IAG and LH/LX/OS) plus 2 or 3 LCCs.
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 3:36 pm

Quoting 1400mph (Reply 43):
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.

What a load of hogwash : The talks failed because it wasn't a merger as KLM seeked, but from BA a takeover:
Roy Eddington "...we would be happy if we could acquire them..."
Telegraph

or..."...Eddington, BA's chief executive, said the key obstacle had been agreeing a structure which would have given BA control of the merged airline at the same time as guaranteeing KLM's traffic rights, which are granted on the basis that it is Dutch-owned."
The Independent

In other words, greed was the main cause of the failure.
...and it wasn't BA who intiated the talks, but KLM who showed a better vision of the future.

That said, the risk, in the year 2000 that an alliance between BA and AA, added to a KLM and Nothwest alliance would have in all probability been rejected by both the US and the EU anti trust regulators.
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PDPsol
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 3:52 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. 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.

That is why carriers are evaluated on a Firm value, or Enterprise value, basis, rather than simply equity market capitalization. A very material portion of a carrier's fixed assets, its fleet, is financed via direct debt and/or capital leases. Operating leases, which are not capitalized on the balance sheet, can also mask the true level of capital required for the carrier, as well as capacity purchase agreements ["CPA"] with regional carriers, which are simply a form of operating leases as well. The true FV of AF or IAG or the big US carriers, UA, DL, etc, are much larger than their market capitalization.

Carriers are, by their business model, highly levered [high debt levels] and also have a high level of operating leverage. This characteristic is only further amplified with rigid labor agreements, volatile fuel costs, etc., etc...

Quoting UALWN (Reply 48):
A Spanish bank that is bankrupt and has had to be rescued by the government...

Yes, of course, Bankia's parent company, BFA. This situation is a complete and total mess. However, there may actually be a silver lining to all this, that could benefit IAG. Bankia is essentially in restructuring, with long-term creditors squeezing out the equity [many of whom are small retail investors, i.e.: people, who were told Bankia's quasi-equity capital and straight equity at IPO were risk less investments].

As a result, BFA is desperate to monetize its residual equity investment in IAG and will likely sell most, if not all, of its interest. This would further institutionalize IAG's corporate governance and force the management team, the labor groups and all other constituencies to operate solely in the interest of the IAG shareholders, without any regard to silly issues, such as nationalities, differences, etc.
 
airbazar
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 4:54 pm

Quoting Azure (Reply 52):
Anyway, the European market is already consolidated and dominated by 3 major carriers (AF/KL, IAG and LH/LX/OS) plus 2 or 3 LCCs.

You left out TK and any potential future mergers. I would love to see a TK/TP merger for example. IST is too far East to be a good hub for TATL traffic, but the new IST airport will be a great intercontinental hub. I think the 2 airlines would compliment eachother very well, but I'm just dreaming of course  
 
EddieDude
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 4:59 pm

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

And according to many IB also has great catering in J. However, overall, IB's reputation is terrible. So you might get a comfy J-class seat in long-haul and yummy meals, but the crews are known for their rudeness and lack of interest. I have heard some bad stories regarding baggage handling. I have never flown IB though. it is pretty much the general opinion of a.netters.

Quoting PDPsol (Reply 14):
The EU GDP is roughly double that of Latin America, so plenty of room for growth.

And that gap will undoubtedly narrow as the region, led by countries such as Brazil, Mexico, Colombia, Chile and Peru, continues to thrive. The potential for increased demand in the Latam-to-Europe market is good.
Upcoming flights:
April/May: AM MEX-SCL 788 (J), AM EZE-MEX 789 (J).
 
jumpjets
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 5:43 pm

Quoting UALWN (Reply 48):
A Spanish bank that is bankrupt and has had to be rescued by the government...

That may be the case but it doesn't stop them exercising their votes as IAG shareholders
 
vv701
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 6:09 pm

Quoting Revelation (Reply 50):
Well, there's this small problem that the EU doesn't hold the bilateral agreements, the member nations do.

Many of the bilateral agreements are between the EU and other nations. The EU-USA Open Skies agreement is a case in point. Some other countries (such as Turkey) have bilateral agreements with individual countries that have been modified so that, for example, any airlinefrom any EU state can operate under the Turkey-UK bilateral. But some countries - such as the Russian Federation - have refused to so modify their bilateral agreements with individual EU member states in this way. And some bilaterals between individual states continue to exist because no effort has yet been made to renegotiate them.

Because of the last two categories above Lufthansa Group, Air France-KLM and IAG all have company structures that allow the individual airlines that comprise each group to operate under all four of the categories of agreement listed above. However the corporate structures adopted do not prevent the airlines within each group to financial benefit from te synergies created by being a member of te group.

As an example while both BA and IB are 100 per cent financially controlled by Spanish registered International Consolidated Airlines Group SA, both BA and IB are operationally controlled by British and Spanish registered companies that are not subsidiaries of IAG..

So it is clearly possible for three, four or five major trans-national European airline groups to be formed trough the merger of all existing European legacy airlines and for LCCs like Vueling to join those groups.
 
PDPsol
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 8:58 pm

Quoting jumpjets (Reply 57):
That may be the case but it doesn't stop them exercising their votes as IAG shareholders

Actually, the restructuring situation that BFA/Bankia does absolutely affect their participation in the corporate governance, especially if they have no choice but to divest their ~12% equity interest:

Quoting PDPsol (Reply 54):
Yes, of course, Bankia's parent company, BFA. This situation is a complete and total mess. However, there may actually be a silver lining to all this, that could benefit IAG. Bankia is essentially in restructuring, with long-term creditors squeezing out the equity [many of whom are small retail investors, i.e.: people, who were told Bankia's quasi-equity capital and straight equity at IPO were risk less investments].

As a result, BFA is desperate to monetize its residual equity investment in IAG and will likely sell most, if not all, of its interest. This would further institutionalize IAG's corporate governance and force the management team, the labor groups and all other constituencies to operate solely in the interest of the IAG shareholders, without any regard to silly issues, such as nationalities, differences, etc.

This will benefit IAG and IB.
 
Viscount724
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 11:03 pm

Quoting UALWN (Reply 5):
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.

LX would have been of minimal benefit to BA. Their route networks largely overlapped. On the other hand IB brings all of the rapidly-growing Latin America market to BA where BA has been historically weak. I'm convinced the BA/IB merger will eventually prove to be an excellent decision. Obviously the timing wasn't the best considering Spain's economic meltdown but that won't last forever and IB's strength is connecting traffic via MAD, not exclusively O&D Spain-Latin America traffic.
 
JAL
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RE: BA/IB - A Marriage Made In Hell.

Fri Mar 01, 2013 11:06 pm

Things will eventually improves for IB and IAG once Europe wakes up from all those cuts and taxes and try to boost their economy!
Work Hard But Play Harder
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 7:45 am

Quoting JAL (Reply 61):
Things will eventually improves for IB and IAG once Europe wakes up from all those cuts and taxes and try to boost their economy!

Mmm. Europe all the world ? The worlds largest trading block will suck the weakening remaining global economy down with it if it fails.

For example who will sit in all those EK A380's that leave Europe on a daily basis if we're all skint ? (broke) At 500 people per rotation how do you make a 100 A380 fleet pay during the rough times ?

Fingers crossed that doesn't happen.
 
thowman
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 10:23 am

Quoting IBERIA747 (Reply 51):

Yes, my memory is certainly going, but wow, how time goes by very quickly - can't believe it was 9 years ago already.

Cheers

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

Sat Mar 02, 2013 10:32 am

Quoting Azure (Reply 34):
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.

100% agree, people forget facts very easily. AF was very profitable in the 2000s.
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 11:57 am

Quoting AirGabon (Reply 64):
100% agree, people forget facts very easily. AF was very profitable in the 2000s.

?

Subtract the figure AF received in state aid during this period and then look again.
 
MD11Engineer
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 12:42 pm

I think the profit / loss figures for AF/KLM are missleading. Due to high taxes in France and lower taxes in the Netherlands the company´s accounting office doctored the figures that the losses would appear on the AF side in France, to reduce their tax burden there, while the profits would appear with KLM, which then has to pay less tax than if the profits would appear in France.

Jan
Je Suis Charlie et je suis Ahmet aussi
 
Azure
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 2:38 pm

Quoting 1400mph (Reply 65):
Subtract the figure AF received in state aid during this period and then look again.

What state aid did AF receive in the 2000s ?!

Quoting MD11Engineer (Reply 66):
I think the profit / loss figures for AF/KLM are missleading. Due to high taxes in France and lower taxes in the Netherlands the company´s accounting office doctored the figures that the losses would appear on the AF side in France, to reduce their tax burden there, while the profits would appear with KLM, which then has to pay less tax than if the profits would appear in France.

Jan

Indeed. The tax rate on corporate profits is 34,3% in France versus 25% in the Netherlands. It is AFKL interest that KL registers most of the group's profits.
It has even been rumored that the AFKL holding company had plans to move its headquarters from Paris to the Netherlands...

I suppose IAG is using the same fiscal tools to optimize its finances.

Quoting airbazar (Reply 55):
You left out TK.

Indeed. I still have some difficulties to consider TK as a mere European carrier when I see their plans for their new uniforms and after their alcohol ban on certain flights. Not very "European" by my standards, even if their headquarters are geographically located in Europe (but 90% or so of their territory is in Asia).
But from an operational perspective, a TK-TP merger would be quite interesting for sure ! However as you certainly know, the State of Portugal has been required by the EC to sell TAP and I doubt that Lisbon would accept to sell its national carrier to an airline in which a foreign state, Turkey, owns 49% of the capital...

As for the other European Legacies, SK, EI, AZ, etc., they certainly cannot survive by themselves but whatever happens to them, this will not dramatically modify the structure of the business in Europe (at least in a foreseable future).
 
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par13del
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 2:53 pm

Quoting Azure (Reply 67):
Indeed. The tax rate on corporate profits is 34,3% in France versus 25% in the Netherlands. It is AFKL interest that KL registers most of the group's profits.
It has even been rumored that the AFKL holding company had plans to move its headquarters from Paris to the Netherlands...

How are they able to fly under the radar as tax cheats while companies like Google, Amazon and others are blasted daily by all and sundry, are airlines special?
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 2:57 pm

Quoting Azure (Reply 67):
What state aid did AF receive in the 2000s ?!

Sorry it was the late 90's AF received £2 BILLION in state aid.

Then there was the landing charges debacle for domestic flights in France. Tantamount to another £700M in state aid.

Apart from that............
 
vv701
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 4:27 pm

Quoting par13del (Reply 68):
How are they able to fly under the radar as tax cheats while companies like Google, Amazon and others are blasted daily by all and sundry, are airlines special?

Google and Amazon secured their low / zero UK tax rates by transfer pricing. They charged their UK subsidiaries high prices for services / product supplied to their UK subsidiaries by their non-UK subsidiaries.

You could have included Starbucks with Google and Amazon. It is the easiest illustrative example of how to avoid paying any corporation tax. Indeed although it is the UK's largest coffee shop chain, Starbucks in the UK made a reported profit in only one of the last 14 years. It made a loss in the other 13. Over those 14 years it has paid £8.6 million in UK tax. Compare this figure wit its reported turnover of £398 million and a "loss" of £33 million in its last UK accounts. This "loss" was achieved by getting its UK subsidiary to buy all of its coffee from Starbucks' subsidiary in that well known coffee producing country, Switzerland, by making high "royalty" payments to the Starbucks' subsidiary in the Netherlands (were it had negotiated a special tax rate with the government) and paying higher than market interest rates on loans to Starbucks' subsidiaries in other countries.

The opportunity for an airline to buy raw materials from a subsidiary in another country at an inflated price is, to say the least, limited. Of course BA could buy engineering or aircraft painting services from IB in MAD at inflated prices or the other way around. And, indeed, since the formation of IAG BA has had six former BD aircraft painted by IB. With corporation tax in Spain at 30 per cent and in the UK 24 per cent any tax advantage to IAG would accrue to them by minimising the amount invoiced by IB to BA. But the value of these transactions is so low that it would hardly be worth the hassle.

The nature of an airline's business is such that it significantly limits opportunities for such activities. This is primarily because airlines are national and not international corporations.

When airlines come together in international groups as in the case of AF-KLM, Lufthansa Group and IAG the opportunities are a little greater, particularly in the case of Lufthansa Group. They have around 400 subsidiaries in everything from airline catering to IT services. These subsidiaries include the likes of Lufthansa Technik in Sofia, Bulgaria and in Malta. But the nature of the Lufthansa Group's main business of providing transportation services for passengers simply does not provide for tax advantageous transfer pricing on a significant scale. Tickets sold in an international market do not have a transfer price to artificially inflate.
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 5:34 pm

Quoting 1400mph (Reply 65):
Subtract the figure AF received in state aid during this period and then look again.

Quote a source when you utter that sort of statement.
For your information, the EU forbids it, and have done for thirty years or so.

Quoting 1400mph (Reply 69):
Sorry it was the late 90's AF received £2 BILLION in state aid.

Rubbish. It was a repayable loan for restructuration. And the EU watched the process like a hawk. During the time of the financing :
-All assets were frozen
-No investment could be made on new airplanes ( at a time when AF alreadyu had the oldest fleet in Europe )
-All salaries were frozen, no promotions were allowed
-A drastic reduction on woirk force was required
-Were also frozen: the number of flkights , in general and to any destinations / the numlber of seats offered...
-AF was to do all the above - and a lot more obstacles - to prepare for a privatisation...
The state recovered all the money.
By the way, the financing was approved by the EU, especially from a few British officials, among them Mr Kinnock.

Now compare that to BA's privatisation when the Thatcher government wrote off 900 M£ of debt and offered 20% of the shares to the public... if you want to live in a glass house, be aware some consequences could happen.
Of course, during the privatisation process, BA was quitre free to improve and develop, contrarily to AF.
BA did welkl to initiate the process in the eighties. They would have had EXACTLY the same conditions AF did 10 years later... and I'm certainly not sure the 900 M£ debt write-off would have been approved by the EU commission.

As for the so-called "landing charge debacle", you should check your references ba bit more carefully : AF won a court case they intented against Aéroport de Paris for overcharges - mainly for cargo flights - in the years 1992 - 1996 ; the amount claimed was 70 m [|B]FRANCS[:B], which they eventually got after winning the case. Once again, if that is a state aid...
Contrail designer
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 7:46 pm

To come back to the topic :
Iberia had been for a long time #1 in Europe for number of transported passengers , confirming the country's position as one of the greatest holiday destinations, mainly from Northern Europe.
The fact is the airline has a very degraded customer's image ( # 10 in a "Worst ten Airlines" list, but the list includes the likes of USAir, Egyptair, China Eastern, China Southern, Air China... and RyanAir ).
Another fract is that it survived the 2001 to 2008 different crisises when airlines perceived as more "quality" went belly-up. See Swissair, Sabena, SAS... list is as everybody knows rather long.

IAG would try and ride on the South American market where Iberia is quite present, but so are national airlines with a better brand image and a loyal customer base : TAM, Aerolineas Argentinas, AeroMexico and... AFKL.. The fight is by no means won as these airlines belong to alliances other than OneWorld.

As a hub, Madrid is on the margin of the EU in terms of geography. That, combined with the fact that Heathrow is already struggling to keep up with FRA, AMS and CDG will make the business proposition even more difficult.

By experience, regaining a brand iimage takes five to ten years. By then, IAG would be well into profit.
Even if some A.netters won't be happy.
Contrail designer
 
airbazar
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RE: BA/IB - A Marriage Made In Hell.

Sat Mar 02, 2013 9:46 pm

Quoting Azure (Reply 67):
But from an operational perspective, a TK-TP merger would be quite interesting for sure ! However as you certainly know, the State of Portugal has been required by the EC to sell TAP and I doubt that Lisbon would accept to sell its national carrier to an airline in which a foreign state, Turkey, owns 49% of the capital...

That's largely overstated and widely misunderstood. There is no mandate for Portugal to sell TP. So much so that the government rejected an offer from the Synergy Group to buy TP just 3 months ago. However, I do think that TP should be privatized and I would love to see it bought by TK and the 2 airlines merged. I would much rather see TP in the hands of TK than in the hands of LH, IAG, or Synergy.
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 7:45 am

 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 7:48 am

Quoting Pihero (Reply 72):
, confirming the country's position as one of the greatest holiday destinations, mainly from Northern Europe.

Yes indeed.

I wonder if the hotel, restaurant and bar owners of the Spanish Costas share the sentiment of Iberia workers with their 'British go home' placards ?
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 9:44 am

Quoting 1400mph (Reply 74):

Quoting Pihero (Reply 71):
Rubbish

What I find extraordinary is you found sources on the state aid for AF, and not one for BA's privatisation, which smacks of, to say the least, biased reporting, and argumentation.
You'd notice as well that I never contested the existence of the aid.
Allm the articlkes you mention are very late in the history of that financing, so that AF had come out of the limitations imposed on the initial agreement, hence the first fleet order.
When it happened to BA, that airline was in much direr trouble than AF was ever in. Please forward the accumulated deficits and the airline debt numbers. Come on, you're in the country where it happened.
And the only reference to your so-called "landing charge debacle" is an article stating the complaint of one ryanair ? Please tell us you're joking or provide us with the court ruling. Let's have a laugh.
Contrail designer
 
IndianicWorld
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 10:04 am

The issues that IAG are currently dealing with are those that numerous airlines will have to overcome in the coming years.

Labour issues are becoming ever more prevalent, as both sides try and maintain what they have and want to have. The reality is though that unless these carriers continue to drive down their costs, they will fail. The more that unions fight for what they currently have and even more in most cases it seems, the more other LCC's and other carriers will exploit that weakness.

IB and MAD offer some very strong benefits but at present it just isn't panning out how they would have hoped, with so many factors against it.

I don't think its necessarily a bad move to merge, but timing wasn't ideal for this to come into effect. In some ways though, its likely best IB had to IAG backing or else things could have been much worse.
 
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FlyCaledonian
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 12:09 pm

Quoting Pihero (Reply 71):
Now compare that to BA's privatisation when the Thatcher government... offered 20% of the shares to the public.

What's that got to do with things? Those shares were sold to the public, not given away.
Let's Go British Caledonian!
 
UALWN
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 2:50 pm

Quoting 1400mph (Reply 75):
I wonder if the hotel, restaurant and bar owners of the Spanish Costas share the sentiment of Iberia workers with their 'British go home' placards ?

The "British" in the IB workers placards are just a proxy for IAG's management. And, yes, I know WW is Irish. Now, in the costs, on the other hand:

http://www.dailymail.co.uk/news/arti...-British-students-wreak-havoc.html
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/330/340/350/380
 
vv701
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 6:07 pm

Quoting Pihero (Reply 71):
Quote a source when you utter that sort of statement.
Quoting Pihero (Reply 76):
What I find extraordinary is you found sources on the state aid for AF, and not one for BA's privatisation, which smacks of, to say the least, biased reporting, and argumentation.

So where is your source?

"Pot", "kettle" and "black" are three words that come to mind.

What is really extraordinary is that you expect others to provide a source for your statements.

For example were is your source for claiming:

Quoting Pihero (Reply 71):
the Thatcher government . . . offered 20% of the shares to the public...

Actually 100 per cent of BA shares were sold. See page labelled 278 here:

http://www.finance.pamplin.vt.edu/fa...1997-JFE-AirlinePrivatizations.pdf

Where is your source for stating:

Quoting Pihero (Reply 71):
the Thatcher government wrote off 900 M£ of debt

At the end of 1984 BA did have debts of £901 million. Most of these debts were in US $s and related to aircraft ordered and not yet delivered, primarily the 757. These are perfectly normal debts for any airline as new aircraft must be paid for. In this case there was an element of what might be considered a subsidy because the British government, as owner of BA, had guaranteed to meet any change in the Sterling value of the debt relating to aircraft purchases as a result of a change in the £/$ exchange rate (but not any of the debt itself).

I look forward to seeing your sources confirming that the British government wrote off the £901 million debt and that they sold only 20 per cent of BA. My link will not help you. Though it is a direct analysis of the financial aspects of the BA privatisation from the election of the Thatcher government in 1979, it mentions no such write-off. However since 1400mp provided you with six sources I am sure you will want to at least try to equal he who you critiqued so strongly.
 
anstar
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 7:24 pm

Quoting VV701 (Reply 27):
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.

LHR T5 is a HUGE improvement over the other terminals.... but in all reality it lacks space and feels very crowded and cramped at best - especially during the peak seasons....

So whilst it may be the best at LHR it is certainly not great compared to the better airports out there.
 
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jsnww81
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 9:02 pm

Quoting anstar (Reply 81):
LHR T5 is a HUGE improvement over the other terminals.... but in all reality it lacks space and feels very crowded and cramped at best - especially during the peak seasons....

Correct. It's the nicest terminal at Heathrow by a large margin, but it's still a BAA facility, which means circulation and relaxation space was sacrificed in the name of retail and the overall experience is still one of being in a massive, labyrinthine shopping bazaar, where passengers are held captive in retail areas until just before departure time.

Give me Madrid's T4 any day. One of the classiest designs out there, and it's worth noting that it's also the original design proposed for LHR T5, but which was nixed due to site constraints. The LHR T5 site was too small to allow for the light wells and "canyons" that punctuate MAD T4 and help bring a sense of spaciousness to the facility. That's why baggage claim in Madrid feels like a cathedral and baggage claim at LHR T5 feels like a cavern. A nice, shiny and new cavern, but a cavern nonetheless.

Heathrow improved by leaps and bounds when T5 opened, no doubt about that, but the experience could still be a lot better.
 
realsim
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 10:13 pm

The merger was quite easy to understand: BA is the largest European airline from Europe to North America, and Iberia is the largest airline from Europe to Latin America. If you own both, then you are the largest airline from Europe to America as a whole.

Another key point here is that BA/IB are, by far, the airlines with most LCC competition in their countries and home cities. Just until recently, apart from IB, JK, UX, FR and U2 had all bases in MAD, and we have to add the high speed competition with the lines to the largest Spanish cities (BCN, VLC and SVQ) and others such as AGP and soon ALC. The same can be said about London and the huge LCC competition to almost every single city in Europe. In fact, it would be interesting to see, for example, in how many routes AF, KL or LH have direct competition, and compare the numbers to BA's and IB's. In addition, IB has home long haul competition from UX, and BA from VS, which is not the case in CDG, AMS or FRA.

However, I think that, if IB can manage to solve its cost problems, it could have a better future. Taxes in MAD aiport have been increased because they were quite cheap compared to the other big European hubs, and LCC competition will decrease. However, the train competition will increase and this is why IB's domestic network will continue to be a problem.

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

There are more flights and seats between MAD and LHR than between CDG and AMS, so yes, there is coordination between both airlines.

Indeed, CDGMAD has more passengers than CDGAMS, CDGMAD being the busiest international route from CDG, despite IB flying only from ORY.
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Sun Mar 03, 2013 11:57 pm

Quoting VV701 (Reply 80):
In this case there was an element of what might be considered a subsidy because the British government, as owner of BA, had guaranteed to meet any change in the Sterling value of the debt relating to aircraft purchases as a result of a change in the £/$ exchange rate (but not any of the debt itself).

So, as a matter of fact you confirmed that Thatcher's governement footed a bill of 901 M £ for fleet investment at a time when the company was just about to be sold to investors.
I tried to find the article on some British papers at the time. they've ALL disappeared for being too old and funny enough, there is scarcely a trace of the process in later documents, all of them showing, as your link does - report which I have known for some time - only the improvement in the airline results after the privatisation.( which btw nobody disputes )
There's one report, though that very partly tells of the story : " Over 23,000 jobs were shed in the early 1980s,[7] though King managed the considerable trick of boosting staff morale and modernising operations at the same time. Offering generous inducements for staff to leave led to record losses of £545 million, to the cost of taxpayers but to the benefit of the future privatised company.", which you could find here

Quoting VV701 (Reply 80):
Quoting Pihero (Reply 71):
the Thatcher government . . . offered 20% of the shares to the public...
Actually 100 per cent of BA shares were sold. See page labelled 278 here:

Which is true : I should have made myself clearer : 20 % to small private investors.
On the other hand, see, from your link that the value of the company was 2 bn£ whereas the sale to the public brought earnings of 900 M£ - your source said 1 bn. (0.01 % = 200,000 £ )
So if my maths add up, 901 M£ for fleet renewal + 1 bn + 545 M for severance = 2.545 bn £ ; That's by how much the UK governement of the time got short of.
No wonder we now are unable to find sources any more. That's not one episode to be proud of.
As for kettles, pots and black, who was the first offender ? THe UKIP maybe ? or am I mistaken ?..

Regards
Contrail designer
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 7:31 am

Quoting Pihero (Reply 76):
What I find extraordinary is you found sources on the state aid for AF, and not one for BA's privatisation, which smacks of, to say the least, biased reporting, and argumentation.

Look firstly I wish Air France every success.

My point is all about timing and that AF seem to have suffered from some sort of time lag within their management circles.

BA ? BA was privatized in 1984 !! Subsequently went from strength to strength because they simply HAD to get their act together.

As is the case with AF's current woes they have failed to adapt quickly enough to a dramatically changing market environment.

That's all I'm saying. Apart from that I'm sure they will do very well indeed when they get their house in order.

Kind regards.
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 7:49 am

Quoting anstar (Reply 81):
So whilst it may be the best at LHR it is certainly not great compared to the better airports out there.

For executive card holders with access to the lounges, Club World and First class passengers travelling frequently to various destinations around the world Terminal 5 is a world class facility. Combined with BA's lounges at the other end or beginning of a flight the experience matches or in many cases beats any other airline in quality.

Considering the % of revenue derived from BA premium travellers and the space available for construction I'd say they got it right perfectly.

As for those of us not fortunate enough to be in this category the Terminal in my experience is a joy.

I love shopping and I love watching aircraft (Terminal 5 commands excellent views) and you can do both these things to your hearts content !!
 
TYCOON
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 9:20 am

Applause are in order for Pihero for pointing out this oft forgotten fact of UK government subsidies and protectionism of BA as it was being privatized and even after.
In 1987, I wrote my thesis at the London School of Economics on 'Air Transport Policy in France' and a subsequent enlarged thesis in 1991 at MIT on 'Comparative Air Transport Policy in the US, UK and France' and spent alot of time in research. What was evident is the level of protectionism and subsidies in all three countries. One should also read the Monopolies and Mergers Commission report on BA/BCAL... shocking the extent to which BA had to give up little for alot. A very biased piece of "investigation"... but so be it. BA fitted into a political agenda of the governments at that time, and had to be profitable when privatized, so considerable debt was written off (or assumed) by the govt.
I am not saying the French government never has protected their 'chosen instrument' (that would be naive), but to deny the BA has benefitted from government largesse in the past is intellectually dishonest!
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 9:48 am

Quoting TYCOON (Reply 87):
Applause are in order for Pihero for pointing out this oft forgotten fact of UK government subsidies and protectionism of BA as it was being privatized and even after.
Quoting TYCOON (Reply 87):
I am not saying the French government never has protected their 'chosen instrument' (that would be naive), but to deny the BA has benefitted from government largesse in the past is intellectually dishonest!

No one would disagree with you. However, you point is only valid up until the year 1984.

Air France (not KLM before you compare AF-KLM to IAG) is racking up BILLION euro losses NOW. Why ? Because their management has failed in light of massively increased competition and changing economic reality. AF's peers i.e BA and LH are in the black comfortably.

As for BCAL it was 'unfortunate' that they failed as an airline but just like BD it was equally 'fortunate' (for all concerned) that BA were there to pick up the pieces. France and Germany undertstandably wouldn't understand this because their civil aviation isn't as competitively healthy (by a long shot) as the UK. These islands have seen the introduction of Ryanair, Easyjet, Virgin Atlantic and now their off-shoot 'Little Red' The UK government also aided VS by granting them access to LHR and even in some cases taking landing rights away from BA to allow VS to commence operations.

So you see all that considered your argument really falls rather flat especially when comparing to rather monopolistic environment AIr France has enjoyed. (and they are stilll losing millions)

Cheers.

[Edited 2013-03-04 02:43:21]
 
TYCOON
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 10:42 am

1400mph, I don't see how you have demonstrated that my argument "falls flat" as it still holds... the UK govt has in the past provided financial support to BA...That was all I was saying... Doesn't really matter when or how or why... but I am just stating that it did in fact exist. Are state subsidies OK during one point in time and not in others? As Pihero pointed out, AF's aid was in the form of a loan that carried detailed stipulations and conditions as to its repayment and what AF could or could not do during the period it was indebted to the state for that amount. In the '80s, BA didn't have to make any similar commitments...
AF has had competition beginning in the 1980s, as many have pointed out, via government subsidized (and owned) French national railways which have seen many of AF/IT's bread and butter local routes (Paris-Lyon, Paris-Marseille, etc...) shrink ... And then the arrival of Ryanair and Easyjet with bases in France has certainly added to the problems...
AF is now going through the pains of restructuring as they can within the limits of French regulations (which I admit are difficult ones)... But I guess only time will tell... but I think for instance the further development of Transavia France, which has just recently turned profitable and whose presence is expected to double, will be a credible reaction to the LCCs.
 
Pihero
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 10:49 am

Quoting 1400mph (Reply 88):
No one would disagree with you. However, you point is only valid up until the year 1984.

Rubbish. The British government protected BA for a much longer time : See the slot allocations at LHR (no airline that wasn't prersent before 1977 was allowed to bid. See also the protected BA's presence at LGW, all state decisions that have little to do with fair competition.
As I said,; they had the vision to do BA restructuration in 1987 as three years later, the EU commission would have had a lot to say about it : See the restrictions imposed on AF for a recapitalisation which was lower than BA beneficiated.
To recap : 20bn Francs in four installements from 1993 onwards against 25.45 for BA.

Quoting 1400mph (Reply 88):
Air France (not KLM before you compare AF-KLM to IAG) is racking up BILLION euro losses NOW. Why ? Because their management has failed in light of massively increased competition and changing economic reality. AF's peers i.e BA and LH are in the black comfortably.

Two remarks : Can't really separate entities that are now in a group. There is AFKL, then IAG or BAIB and there is LH Group which we could call LHAUSW...The losses incurred by the first two groups are, in spite of your very weak argumentation, very similar if not downright identical. To say that BA is comfortably in the black is disingenuous. They will be, and in the near future because I honestly believe that, after restructuration and better integration / synergies, IAG could well hold its ground against the other two European alliances. Time will see it that I'm not overly optimistic.
As for success, just have a look at the evolution of the two businesses : In terms of market share, in terms of evollution of size, the "world favourite airline" hasn't fared better than AF, has it ?

Quoting 1400mph (Reply 88):
The UK government also aided VS by granting them access to LHR and even in some cases taking landing rights away from BA to allow VS to commence operations.

I have a feeling, the EU commission had something to say about that point. Otherwise, why the dirty tricks ?

Quoting 1400mph (Reply 88):
So you see all that considered your argument really falls rather flat especially when comparing to rather monopolistic environment AIr France has enjoyed. (and they are stilll losing millions)

Again, your prejudice blinds you : About monoploly, didn't BA buy Air Liberté and TAT, with which they opened a potentially damaging competition with AF ? That they made a mess of that purchase, and basically all those of that time is another subject. And btw, that was at a time when AF was still constrained by the conditions imposed by the EU on its growth... BA had just about the field to themselves.
So, as VV701 said, isnt'it the matter of black kettles and pots ? ( and as we drink colffee, we don't have kettles so we don't really know what that means ).  
Quoting TYCOON (Reply 87):
In 1987, I wrote my thesis at the London School of Economics on 'Air Transport Policy in France' and a subsequent enlarged thesis in 1991 at MIT on 'Comparative Air Transport Policy in the US, UK and France' and spent alot of time in research

Thank you for your kind words, and boy ! what would I give to get a hand on your thesis !

Cheers and regards.
Contrail designer
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 10:56 am

Quoting TYCOON (Reply 89):
Are state subsidies OK during one point in time and not in others?

Rather depends on with whom the beneficiary is in competition with and whether the two are governed under the same juristiction..................

However, for what it's worth I personally think that a country should be at liberty to provide assistance to any company that is of significant national importance and vital to a nations economy.

Before the predictable responses flood in it is only in my humble opinion that airlines like AF, LH and BA are vital to their respective nations economy. I am sure there are those here that would argue all 3 could vanish overnight with no impact whatsoever to the EU coffers..........
 
jumpjets
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 11:01 am

Quoting TYCOON (Reply 87):
I am not saying the French government never has protected their 'chosen instrument' (that would be naive), but to deny the BA has benefitted from government largesse in the past is intellectually dishonest!

Please, what has this to do with BA-IB merging? If you want to debate who got most subsidies [albeit in some cases 20 years ago] please start a new thread.

BA and IB to me seem a good fit with little overlapping markets. The whole merger process took too long [mainly I believe because of the BA pensions issue] with the result that by the time the merger took effect the unforeseen financial 'crisis' had arrived and the financial performance of both airlines, but particularly IB suffered greatly,

Once IBs internal issues are resolved, which may take 3 or 4 years, and the European economies start to recover then I believe the full benefits of the merger will be felt .

All that has to be resolved then will be the IAG European shorthaul strategy which seems to be in a mess - Iberia Express, Vueling acquisition , BA Gatwick etc all in the melting pot.
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 11:36 am

Quoting jumpjets (Reply 92):
BA and IB to me seem a good fit with little overlapping markets. The whole merger process took too long [mainly I believe because of the BA pensions issue] with the result that by the time the merger took effect the unforeseen financial 'crisis' had arrived and the financial performance of both airlines, but particularly IB suffered greatly,

Mmmm....IB got a damn good deal if you ask me and now their workforce has the effrontery to blame BA for their losses. I like everyone else do not want to see anyone lose their job or take a pay cut but just as with BA the time for negotiation came and went. The alternative is for everyone at IB to lose their job.

In fact from what I have seen and from what I fear is to come there is just too much ugliness involved here. Combined with the now long suffering Spanish economy and the mood of the Spanish people I think BA should head for the door. (whether that is possible or not I do not know...........?)
 
TYCOON
Posts: 499
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 11:36 am

1400mph, I actually agree with you on government support for certain key industries... believe it or not!
Markets can solve some problems, but not all... as we have all too often seen throughout modern history and even lately...
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 12:00 pm

Quoting TYCOON (Reply 94):
1400mph, I actually agree with you on government support for certain key industries... believe it or not!
Markets can solve some problems, but not all... as we have all too often seen throughout modern history and even lately...

Well it's all just a mess isn't it. Do we really care at the end of the day how they survive as long as they don't go bust and throw everyone that works for them on the scrap heap. I mean do EK's ticket sales really support financially the order of 100 A380's and their other orders ??
 
LHRFlyer
Posts: 1041
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 12:07 pm

Quoting 1400mph (Reply 93):
Combined with the now long suffering Spanish economy and the mood of the Spanish people I think BA should head for the door. (whether that is possible or not I do not know...........?)

In theory, there's nothing preventing IAG from disposing of Iberia (not that there would be willing buyers) or shutting it down (which may feature as some sort of "Plan B").

The Spanish economy is by no means out of the woods yet. But at least, compared to say Italy, things are heading in the right direction and Spain has political stability. The budget deficit is under control. The prospects of Spain leaving the Eurozone or a bailout have diminished. A lot of work still to do and times are still very hard, but Spain is making progress.

So, I think there's reason to be ultimately sanguine about the prospects for Iberia.

[Edited 2013-03-04 04:09:50]
 
1400mph
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 12:28 pm

Quoting LHRFlyer (Reply 96):
So, I think there's reason to be ultimately sanguine about the prospects for Iberia.

Yes I do understand that.

BA is 'finally' in a strong position I mean lets face it the last 15 years or so have been a nightmare. I just think it is a shame that now just when they are in this strong position they have lined themselves up for another load of flak !! Someone else here said that if they had known they would acquire the BD slots would they have still merged with IB ?

Granted the benefits if realised will be significant but with the additional BA slots at LHR in mind is it really that necessary for BA ? I guess the city thinks so judging by the share price rise.
 
r2rho
Posts: 3096
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 12:58 pm

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

Exactly! People are overreacting because IB is going through bad times right now, but they are only seeing an instantaneous picture, without the long-term perspective. IB was profitable for many years up to shortly before the merger, and can return to that profitability if succesfully turned around. The BA-IB route networks are perfectly complementary. MAD is a great airport with plenty of room for growth. LatAm is cited in many market outlooks as the future next big region for air traffic growth. As soon as things at IB can get fixed, there is lots of potential.

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 don't see any disadvantage. Leave North Atlantic and Asia to BA at LHR, LatAm to IB at MAD. Perfectly complementary split. In addition, I think MAD has a still untapped potential as Africa gateway. All of West Africa can be covered by A319's from there. IB has already launched some routes like that but could do more IMO. The market is not huge but the yields are high and competition small.

Quoting realsim (Reply 83):
Another key point here is that BA/IB are, by far, the airlines with most LCC competition in their countries and home cities. Just until recently, apart from IB, JK, UX, FR and U2 had all bases in MAD

Indeed, this is often overlooked. U2 expanded into France much later than Spain, and AF dominated the French regions for a much longer time than IB did in its own market. In Germany, U2 are virtually non-existent except at SXF, and AB is hardly a big enough competitor for LH to worry about. Even today, hardly any LCC dares to fly to LH's FRA or MUC fortresses, while IB has had to fight U2 & FR at MAD and BCN for years.

Quoting realsim (Reply 83):
BA is the largest European airline from Europe to North America, and Iberia is the largest airline from Europe to Latin America. If you own both, then you are the largest airline from Europe to America as a whole.

   And add AA via OW from North to South America into the mix, and you close the triangle!

Quoting realsim (Reply 83):
the train competition will increase and this is why IB's domestic network will continue to be a problem.

IMO MAD needs to get a HSR station à la CDG/FRA, then IB could just make rail&fly deals with them and stop the bloodbath. It is a shame (and missed opportunity) that Spain's AVE network is not linked up with the major airports. In any case, VY and IB Express seem to be doing well in Spain. Mid-term, IB mainline short-haul cannot survive, it will have to go to those two subsidiaries.
 
LHRFlyer
Posts: 1041
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RE: BA/IB - A Marriage Made In Hell.

Mon Mar 04, 2013 1:09 pm

Quoting 1400mph (Reply 97):
just think it is a shame that now just when they are in this strong position they have lined themselves up for another load of flak !! Someone else here said that if they had known they would acquire the BD slots would they have still merged with IB ?

I agree. But it just wouldn't be BA if there wasn't some sort of financial or operational crisis to be dealing with!

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