The chief executives of Qantas and Iberia believe British Airways must choose one of them as its merger partner.

Publicly, Willie Walsh, BA chief executive, begs to differ as he tries to keep both sets of negotiations on track.
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Merger of equals plays well for Qantas chief - Dec-03
Australia open to Qantas and BA merger - Dec-03
In depth: Airlines - Nov-27
BA chief faces tricky juggling act - Dec-02
Structure to fly round ownership limits - Dec-02
One more effort to form a global carrier - Dec-02

“This is not an ‘either/or’ deal. When we announced our talks with Iberia, we said that we didn’t see it as the end game, and that any structure would have to be capable of expanding to deal with further consolidation,” he told BA staff.

Last week, Fernando Conte, Iberia chief executive, said it would become “too complex” to pursue both deals, however. And on Monday, Alan Joyce, Qantas chief executive, sided with Mr Conte and ruled out a three-way deal.

“BA and Iberia and us are all conscious that only one of the transactions can take place,” he said.

As executives from the three carriers wrestle with the details of the complex corporate structures needed for either deal to pass muster with regulators and politicians, analysts are trying to establish which deal might be more beneficial for BA to pursue.

“The benefits are less obvious to us [from a BA/Qantas deal] than from a BA/Iberia combination,” said Andrew Lobbenberg, aviation analyst at Royal Bank of Scotland. “BA and Qantas already have a joint venture on UK-Australia operations.”

Andrew Fitchie, aviation analyst at Collins Stewart, estimated the BA/Iberia merger could yield about £400m of combined cost savings. “Given the geographical remoteness of Qantas and its relative efficiency, it is unlikely that synergies would be as great, but could comfortably be in the range of £100m to £200m.”

Mr Lobbenberg said if BA and Qantas were to combine, Europe-Australia services would be wholly integrated, and the carriers could also support one another on Europe-Asia and Asia-Australia services.

Long-haul aircraft utilisation for the planes operating the “Kangaroo” routes could be improved, as the aircraft had long turn times.

Sales and marketing support would help the carriers gain in Asian markets that are served from both Europe and Australia, such as China and Japan. And sales, marketing and airport services could be centralised in Australia, Europe and in overlapping Asian markets.

On the costs side, there would also be procurement benefits in areas such as fuel, aircraft and airport handling services. Both carriers have ordered the Airbus A380 and the Boeing 787.

In spite of these benefits, Mr Lobbenberg remained sceptical about the advantage of the Qantas deal over Iberia. “The network thesis of this [BA/Qantas] combination is less obvious than a BA/Iberia, BA/American Airlines or even a potential BA/Cathay Pacific combination.”

A BA/Iberia deal offers the chance of channelling more passengers across the Spanish flag carrier’s hub in Madrid to Latin America. Iberia is the leader in the Europe/Latin America market, where BA is weak, while the positions are reversed on the North Atlantic, where BA leads the European pack.

Madrid Barajas airport, recently expanded from two to four runways, would provide BA with growth opportunities that are still denied to it at its own global hub at London Heathrow, where it faces interminable wrangling over the building of a third runway, which would not be in operation until 2020 at the earliest.

A merger with Iberia also offers BA the only realistic chance of significantly expanding its presence in Europe. It has slipped to a distant third behind Air France-KLM and Lufthansa among European airlines as its rivals have pushed ahead in the consolidation game.

Air France-KLM brought two of the big four European hubs, Paris Charles de Gaulle and Amsterdam Schiphol, into a common network, while Lufthansa is busy vacuuming up weaker carriers in neighbouring markets. Austrian Airlines is about to follow Swiss, Brussels Airlines and BMI British Midland into the German group’s grasp.

In Australia, some analysts are also sceptical about the gains Qantas would make from a tie-up with BA rather than first pursuing regional consolidation.

Philip Wensley, Morgan Stanley analyst in Sydney, said: “What perplexes us is why Qantas is considering a British Airways tie-up, when it would likely have more synergies with Singapore Airlines.” A BA deal carried risks including the UK airline’s pension fund deficit, which is also proving a problem in talks with Iberia.

Roger Maynard, BA director of alliances and investments, told BA staff, however, that each deal had its own merits and they were complementary to each other. “This is about creating a global business,” said Mr Maynard. “Neither deal is mutually exclusive.”

British Airways has announced it is planning to cut more than 100 jobs at Gatwick airport.

The company said it was planning to operate up to 15% fewer departures at the Sussex airport next summer. Four aircraft will also be withdrawn.

Ground operations staff including those working at check-in desks are expected to be affected by the cuts.

The GMB union said it was surprised at the announcement, adding it feared up to 180 jobs could be lost.

GMB official Adrian Baker said: “We will be seeking an urgent meeting with the company to find out more information and we will do all we can to keep job losses to a minimum.”

Voluntarily redundancy

BA said in a statement: “We have briefed our staff and their trade unions that the number of departures at Gatwick will reduce by 15% next summer compared to this summer.

“We are also reducing the number of aircraft at Gatwick by four from 41 to 37.

“In light of this, we are looking to reduce our ground operations staff at the airport by more than 100 people.

“We are committed to doing this voluntarily and aim to have a voluntary severance programme in place by the end of this year.”

The reasons for the move are thought to be the worsening economic climate and BA’s trend of moving operations in London to Heathrow Terminal 5, which has been sped up by the advent of the Open Skies agreement between the EU and the US.

In its most recently announced results, BA reported a 91.6% drop in six-month profits, blaming “incredibly difficult trading conditions” for the plunge.

Its pre-tax profit totalled £52m between April and September, down from £616m a year earlier.

BA is exploring a potential merger with the Australian flag-carrier Qantas Airways and is in discussion with the Spanish flag-carrier Iberia.

Source:  BBC

A combination of the low pound, high fuel surcharges and continuing credit crunch gloom has resulted in a sharp reduction of the number of Britons heading across the Pond to do their Christmas shopping.

Figures released by British Airways today showed that the number of passengers on the airline’s American routes last month fell by 46,000 to 558,000 compared with 604,000 in November 2007. Although those figures cover both North and South America, most of the routes are to North American destinations, including New York, traditionally a favourite spot for festive fun and shopping. Figures released by American Airlines today also showed a drop in transatlantic traffic.

A spokesman for BA said: “Like all airlines, we have been hit by the general economic downturn and this year’s increases in fuel prices. On top of that the weakening of the pound against the dollar will certainly have put some travellers off.”

Earlier this year the cost of fuel rose to $147 a barrel, an increase which was passed on to air passengers in the form of swingeing fuel surcharges that reached £156 for return economy BA flights to North America. Although the cost of fuel this week came down to less than $50 a barrel, the fuel surcharge on those routes is still £136 return.

On top of that, whereas this time a year ago the pound was worth about $2, it’s value this week fell to below $1.50 – a drop in purchasing power of 25 per cent.

“There just isn’t the same buzz about a shopping spree in New York this year,” said Maggie O’Sullivan, the Sunday Telegraph travel editor, who has recently been to New York to hunt for some pre-Christmas bargains.

“It didn’t feel like the treasure trove it used to when the pound was worth more. All I bought was a diary and some earrings. The prices weren’t that attractive and I couldn’t help feeling I could probably do better in the London sales.”

A more comprehensive survey by the Post Office last month, however, found there were some items that remained cheaper in the US.

The Post Office study found that fashion items offered the biggest savings: a pair of Ugg boots was almost £50 cheaper in New York, while an Abercrombie & Fitch “hoodie” was 45 per cent less.

Electrical goods – which previously offered British bargain-hunters substantial savings on London prices – were found to cost only marginally less. A Wii console + Wii Fit was just £5 cheaper in New York, while an Apple iPod Nano 8GB was just two per cent cheaper, the survey found.

Source:  Telegraph

Tourists stranded in Thailand are set to arrive home on the first British Airways flight since anti-government protests closed the country’s main international airport.

British Airways said a relief flight carrying about 160 passengers would land at Heathrow airport.

The airline sent an empty plane to pick up customers from Phuket in southern Thailand.

It organised free coaches for tourists in Bangkok to take them to Phuket to catch the flight.

A BA spokesman said: “We have laid on a special flight from Phuket to Heathrow for our customers who have been unable to travel.

“It is a 272 seater aircraft with about 160 passengers on board. We bussed customers Bangkok down to Phuket so that they can catch the flight.”

The Boeing 777, capable of carrying 272 passengers, is due to land at Heathrow about 2.05pm.

The spokesman said the flight was not full because the airline’s partner Qantas had already flown passengers home via Singapore.

Thailand has officially reopened its main international airport though it was only running at about 50 per cent capacity and scores of flights have been cancelled.

About 5,000 Britons were estimated to have been stuck in Thailand following the occupation by anti-government protesters of the main international Suvarnabhumi airport on November 25 and the smaller Don Muang airport a day later.

Both facilities were shut down and the capital cut off to air traffic.

The situation has eased after Prime Minister Somchai Wongsawat was forced from office.

Thailand’s Constitutional Court on Tuesday convicted the top three ruling parties of electoral fraud in the 2007 vote that took them to power.

Mr Somchai was banned from politics for five years.

Protesters accused him of being a proxy of ousted Prime Minister Thaksin Shinawatra, their original target.

They were largely middle-class citizens who said Thailand’s electoral system was susceptible to vote-buying and argued that the rural majority - the Thaksin camp’s political base - was not sophisticated enough to cast ballots responsibly.

The protesters were led by the royalist People’s Alliance for Democracy (PAD), members of which spent months camping outside government buildings before embarking on the airport protests, which it described as the “final battle” in its campaign against the government.

Mr Wongsawat, who is Mr Shinawatra’s brother-in-law, agreed to disband his political group, the People Power Party (PPP), which won the most seats in last December’s election, but which PAD argued was being controlled by Mr Shinawatra from behind the scenes.

Mr Shinawatra fled to the UK in 2006 after he was deposed in a military coup and earlier this year a Thai court convicted him in absentia of corruption offences.

Aside from the corruption, Mr Shinawatra has come under fire from PAD supporters for - it is claimed - trying to compete with Thailand’s revered King Bhumibol Adulyadej.

Some PAD activists even believe he has a secret plan to turn the monarchy into a republic.

Source:  Telegraph

Budget airline Easyjet has seen its annual profits fall because of higher fuel costs, despite carrying 17.3% more passengers over the year.

Pre-tax profits in the year to 30 September fell 45% to £110m ($165m).

The firm said future economic conditions would be “difficult” and it would concentrate on offering passenger value, cutting costs, and saving cash.

Airline founder Sir Stelios Haji-Ioannou, at loggerheads with directors, refused to back the company’s accounts.

Shares in Easyjet were down 10% at the close in London, at 251 pence.

‘At odds’

Last week Sir Stelios raised his stake in the firm to 26.9%, and called for a more-cautious outlook.

His business proposal also included proposals for reducing orders for new planes.

Sir Stelios is also said to want to make future dividend payments in conjunction with a cessation of slowing of growth.Following the financial results, he said accounting policies adopted by the board were “at odds with current commercial realities and the macro-economic environment”.

He said the accounts could potentially overstate the value of Easyjet’s landing slots at Gatwick Airport.

Sir Stelios is in discussions with the Easyjet board about his request to appoint two non-executive directors.

‘Competitive capacity’

Andy Harrison, Easyjet chief executive said: “Easyjet delivered a good trading performance in the financial year ending September 2008.”

He said winter bookings for the first quarter of 2009 were slightly ahead of last year, “partly a reflection of the reduction in competitive capacity on our routes and partly our own decision to restrict our growth in seats flown”.

Mr Harrison also said there was evidence of a “flight to value” for both business and leisure passengers.

He also said Easyjet had a “flexible approach” to fleet growth, which it intended to “make full use of” in the present economic conditions.

Times are hard in the aviation industry, so the chancellor’s foray into taxes on air travel was bound to be controversial.

Alistair Darling had been considering a major reform of Air Passenger Duty (APD) but industry insiders say the more modest changes announced in Monday’s pre-Budget report “make a bad situation worse”.
Aviation is a lightly-taxed business, so even small changes can have a big impact.

Mr Darling had signalled that he would replace the duty on air passengers with a tax per flight.
The industry liked that idea.

Airlines would still have passed the cost on to passengers, but they said it would have positive environmental benefits.

Consider, for example, an almost empty flight. To be discouraged.

But under the current rules, no APD is paid for the empty seats.

Under a per-plane tax, it makes no difference how many passengers are flying, the same tax is payable.

The airlines say this approach more closely reflects the fact that it is the flight that has the environmental impact, not the passengers.

Green tinge
Instead, APD has been ‘tweaked’ based on how far passengers fly.

This introduces a greener tinge to the tax, in that it discourages passengers from taking longer, more polluting flights.

So fly from London to most of Europe, the western edge of Russia, or North Africa and you remain within a 2,000 mile radius, and pay £11 in economy or £22 in the posh classes.

Most of the American east coast, Pakistan, Afghanistan and equatorial Africa are within the next band, which will cost £45 (economy) and £90 (business class) in tax.

For the US west coast the tax is £50 and £100 respectively. Australia - more than 6,000 miles away, would be £55 or £110 under the new system.

These figures are higher than last year’s APD and are due to rise further in 2010.
‘Tax planes not people’

So why did the government not reform APD?

It would be too disruptive, according to the pre-Budget report.

It also avoids hitting freight flights, which continue to escape the tax. This is viewed as a helping hand for struggling importers and exporters.

The response from some airlines was scathing.

Easyjet has been at the forefront of those calling for APD to be scrapped.

“All parties agreed that APD needed to be changed to a tax on planes not people, but now the Government has succeeded in bodging-up the reform of an already bodged tax,” said Easyjet chief executive, Andy Harrison.

“He has made a bad situation worse by increasing the burden of APD on hard working families.”

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The pound rose against the dollar and the euro this week as traders bet interest-rate cuts by the Bank of England will enable the U.K. to emerge faster from a recession.

The pound climbed 0.5 percent to $1.4803 late yesterday in London, from $1.4727 a day before and $1.4740 a week earlier. Against the euro, the pound weakened to 84.91 pence, from 84.56 pence, paring its gain in the five days to 0.6 percent.

British Airways has announced the launch of a BA Miles sale, with flights offered for half of the usual BA Miles.

Members of British Airways Executive Club can book flights in any cabin to any destination using their miles, starting at 4,500 miles (usually 9,000) for several European destinations. Tax is not included and must be paid separately.

The sale is on now, finishing on 28 November. There are no travel restrictions and bookings are available up to 350 days in advance.