Ask Simon Calder: BA & Iberia merger
This morning the aviation world changed, when the first shares in IAG – the new company combining British Airways and Iberia – began trading. But the merger raises all kinds of questions that could worry the traveller. First, how are the airlines’ very different styles of service going to be reconciled? Will fares rise because the two airlines are cooperating, not competing? How will the staff, who are in the firing line as potential cost-savings, respond? And surely the new organisation is off to a pretty poor start with the threat of yet another cabin-crew strike at BA? Simon Calder answered your questions; see his answers below.
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More, cheaper flights to Spain? No chance, but fortunately there’s plenty around already. In fact the combined BA/Iberia offering from the UK is tiny compared with that of easyJet and Ryanair. The full-service airlines have retreated from almost everywhere except Madrid, Barcelona and Malaga. There will be no significant impact on links to Spain, but I don’t think either airline considered that an important part of the deal.
Both airlines have shiny new hubs at Heathrow and Madrid, but unfortunately the combined LHR-Spain service runs from Terminal 3. No change likely there. -
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What reputation for reliability would that be, Easy Flier? I imagine there are hundreds of thousands of people holding future bookings for BA that are jeopardised by a possible cabin-crew strike who are wishing they’d booked with someone else.
But if you mean the astonishingly good reputation for safety: like other UK airlines, BA will keep it. -
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BA is no longer a company that can go bankrupt, and it is extremely unlikely that IAG (the combined BA/IB operation) will go bust any time soon. Both airlines have spectacularly advantageous rights that help to exclude competition and keep fares high; BA has the most slots at Heathrow, and both airlines have bilateral rights on many lucrative routes. That's partly why they must remain apparently independent airlines, by the way.
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Willie Walsh, boss of the group, is very keen on getting new airlines on board (empire-building, some would say). What would make sense is an Asian player, helping to complement existing services. Possibly someone like Eva Air of Taiwan or Asiana of Korea, but potentially even Qantas could be tempted.
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I'm surprised IB makes a three-star rating! From my experience the short-haul service is sub-easyJet (at least easyJet has shiny new planes and staff who smile), while after my last long-haul flight (12 hours Montevideo-Madrid in a packed A340) I now pay a substantial premium to avoid Iberia. We can only hope that BA show IB how to improve, rather than BA adopting IB's bad habits.
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When (or if) a strike is called, the susceptible services will be short-haul from Heathrow. BA will re-book some affected passengers on other airlines, which could include Iberia - allowing their customers to sample the robustly no-frills approach on the Spanish side of the operation.
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"Flak? What flak?," might be Mr Walsh's response. Sure, he's been slammed by the cabin-crew union, Unite, and the dispute has been very personal. And I'm one of many journalists who have criticised BA's apparent inability to engage with its cabin crew to avoid all the disruption. But investors looking to maximise long-term prospects appear very content with him, and since it's their money I guess they do think he is the right man.
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Hi Simon, sorry you're not a fan of IB but I wouldn't consider Iberia a 3-star rated airline at all, in my opinion nowadays its 1st class is of a higher standard that BA's. Hopefully, both airlines combined will improve and offer a better quality for money, and increase the number of destinations. Cheers :-)
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@TheIndyTravel Might we see a consolidation of services, i.e. cutting down the number of flights on routes both airlines cover? #bacalderby nickytrup via twitter 1/24/2011 1:20:32 PM -
The combined airline has many options, one of which is for BA to abandon Latin America to Iberia (and conversely for Iberia to leave north Asia to BA). But in fact BA is doing the opposite, introducing and now increasing flights from Gatwick to Cancun in Mexico, and crucially uprating its LHR-Sao Paulo-Buenos Aires service to a daily non-stop to both destinations.
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I'd see it more as a continuation of the wave of mergers in the US and Europe, seeing United & Continental, Delta & Northwest, Air France & KLM and Lufthansa sweeping up everyone it can. For the first 90 years of commercial aviation, as a business proposition it was hopeless. Only with consolidation can the airline industry get sensible returns. And poor Virgin Atlantic is caught in the middle, with an ageing fleet and no growth, so little surprise that Sir Richard Branson is after a big, rich partner.
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(For people outside the industry, FA = Flight Attendant = Cabin Crew). Not a chance, unless they want to force a walk out at Iberia as well! BA has published its strike-fighting plans: www.britishairways.com These include in-house volunteers, chartering in extra capacity and rebooking passengers on other airlines. But not bringing in crew from Iberia.
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Heathrow isn't that overcrowded at the moment, due to the slump in traffic; I was at T4 on Thursday and it felt like a ghost terminal. BA has long banged on about shifting flights to Madrid because the government ruled out a third runway, but I can't see that happening; the yields at Heathrow for a flight to, say, LA, are far better than Iberia can get from Madrid.
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What, another one? Iberia is currently on (I think) its third attempt in the shape of Vueling, which is battling hard against easyJet and Ryanair at its home base of Barcelona. BA set up Go in 1997, then sold it a few years later to easyJet because it was considered to be toxic to the operation as a whole. The history of full-service airlines starting low-cost offshoots is pretty depressing, as United, Continental, Delta and many more will testify,
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The market will decide if IAG has done enough to save cash - the main cost savings will be from eg ordering new aircraft (you get a much better deal ordering 50 Boeings than you do if you only want 25), back-office redundancies and shared airport costs. But there's also a revenue upside, they hope, from passengers switching to IAG because of seamless connections. We shall see.
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Everything about it is focused 10, 20, 30 years down the track. BA and Iberia HAD to team up, in order to have any hope of competing with the European giants (AF/KL and LH), and more to the point the global challenges. In particular, the US airlines are resurgent after their consolidations, and the Gulf-based carriers are focussing on US-Asia traffic at the expense of European carriers. So, it's merely a start - with much more to do.
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