European Airline Consolidation

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This topic contains 19 replies, has 11 voices, and was last updated by  FaroFlyer 17 Apr 2018
at 18:32
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Viewing 15 posts - 1 through 15 (of 20 total)

  • transtraxman
    Participant

    Today the BBC announces that IAG has taken a stake in Norwegian with a view to a possible full takeover.
    “British Airways owner considers Norwegian bid”.

    http://www.bbc.com/news/business-43739254

    This has been rumoured as a possibility for months, especially after Ryanair´s CEO questioning Norwegian´s viability.

    Various questions are posed. Any such takeover will fill in many gaps in IAG´s European network but not in the East so what are they planning on doing about that? Will they retain Norwegian as a seperate airline or merge it with Vueling? I would think maintaining Norwegian seperate would be wiser as then there would be two main bases – one in Southern Europe and the other in Northern Europe.

    Would Norwegian´s long-haul flights be split off and merged into LEVEL, or would it be the other way round? I would think merging them into LEVEL would make for a better long-haul operation.

    What will be done with the Argentinian operation? A potential 157 routes(or so) in that country would pose a strong threat to oneworld partner LATAM.
    What would be done with the long-haul operations which compete with the legacy airlines of IAG – BA, Iberia and Aer Lingus? Or would they be considered complementary?

    This is a potentially a very interesting taskeover but with great difficulties to be sorted out. What will IAG´s biggest shareholder (Qatar Airlines) have to say, especially as it also has a shareholding in LATAM?


    canucklad
    Participant

    This reeks of predatory protectionism, not consolidation or long term investment in a up and coming brand.

    I’m not an aviation analyst so I might be off the mark, but it seems to me that IAG is once again resorting to their tried and tested tactic of removing a threat to their favoured child.

    Not sure how profitable the New York states routes from EDI are, but I’d bet a healthy wager that if IAG take control these routes would soon vanish.

    Will Norwegian follow BCal and BMI down the swanee?


    LuganoPirate
    Participant

    I think IAG are covering their backside here. With the new routes and bargain fares ex LGW (and elsewhere) they are surely a threat to BA.
    Norwegian are also starting a new route from MXP to New York and I wonder what would happen to that?


    transtraxman
    Participant

    Another point not considered yet is any competition to IAG for Norwegian from other potential suitors.

    Ryanair, Easyjet, Vueling, Wizz, Blue Air, Germania, Primera Air as well as Norwegian (without taking into account other smaller competitors)makes one consider that there are too many LCCs in the European market. Of the the main groupings IAG has Vueling and Lufthansa has Eurowings, which it is growing quite agressively. Air France-KLM has Transavia and the pledgling Joon so seems the less well placed to take advantage of the LCC short and long haul markets.

    Thus I would consider AF-KLM as a possible competitor for IAG with nothing to lose and a lot to gain. Easyjet is also well placed but is involved in an attempt to take over part of Alitalia. If it is really interested in Norwegian then it might have to drop its interest in Alitalia. Wizz is also strongly based to gain from consolidation with Norwegian but probably lacks financial muscle to go through with it. Thus it would be left open to interest from elsewhere.

    I tend to agree with Canucklad and LuganoPirate that any bid from IAG for Norwegian smells of predatory purchase with the aim of protecting one´s backyard. There does not seem to be much benefit to be gained by the travelling public. This should be a serious concern for competition authorities, especially in the UK.


    Tom Otley
    Keymaster

    Good piece in The Times of London on this…

    It celebrates Norwegian’s achievements, details its challenges, and explains why the bid makes sense for IAG.

    BUSINESS COMMENTARY
    april 13 2018, 12:01am, the times
    IAG bid must be on regulators’ radar

    Alistair Osborne

    It ends…

    Just think what it would bring: aircraft orders to replace BA’s ageing fleet, spanning Dreamliners, Airbus’s long-range 321LR and the Boeing 737 Max jet; an instant low-fare long-haul service under the Norwegian brand that would take ages to build via IAG’s fledgling Level carrier, itself an admission it was too late into this market; the biggest position at Gatwick, alongside Easyjet, to go with its dominance of Heathrow; and an entry into new Nordic markets.

    Moreover, it would take out a pesky rival. And Mr Walsh could shelve passenger-friendly services to Buenos Aires, say, and use Norwegian planes on other routes. Rival carriers may now join the bid fray —Air France KLM, say, or even Ryanair. But it’s not obvious that IAG ownership would be in consumers’ interests.

    If Mr Walsh fancies himself as the new face of Norwegian, regulators should take a long, hard look.”


    BugAdvisor
    Participant

    I’ve flown Norwegian and found them to be very good. I wonder how they feel now that their brand could be devalued by association with a collection of poorly-run no-frills airlines such as Vueling, Iberia and British Airways!


    FDOS_UK
    Participant

    The Times of London

    ???????????????????????

    The Times. (period, as you seem to be going American).


    transtraxman
    Participant

    @FDOS_UK,

    If you were really concerned about Americanisms creeping into British English then you would not say…..
    …..The Times. (period) …..but
    …..The Times. (full stop)


    FDOS_UK
    Participant

    @FDOS_UK,

    If you were really concerned about Americanisms creeping into British English then you would not say…..
    …..The Times. (period) …..but
    …..The Times. (full stop)

    Whicn part of the line below is hard for you to understand?

    (period, as you seem to be going American).

    Let me know and I’ll do my best to explain.


    LuganoPirate
    Participant

    There’s also a good article in the Lex column of today’s FT.

    Norwegian/IAG: pioneering for the fjords

    Airline needs financial support as much as BA needs to protect its cross-pond service


    AMcWhirter
    Participant

    canucklad – Those transatlantic flights could remain if IAG were to use aircraft like B737 Max8 / A321LR.


    canucklad
    Participant

    Afternoon Alex
    The premise of my original comments was based on the fact that historically BA’s management, and now by proxy IAG tend to fear competition rather than embrace it .
    They don’t see competition as an opportunity to improve their own offering by adopting innovative new approaches to their own business model.
    Simple thinking means their response to threats tend to be reactively adopting the same approach or worse, (as I fear in this case ) buying themselves out of the perceived problem/ threat .

    I’d imagine that Norwegian’s long haul flights are perceived as high risk to BA’s LHR hub model. Especially their lucrative Trans-Atlantic routes.
    As I’ve mentioned before , BA has got to be hurting, as the ME3 leech away what was their natural domestic market that used to transit BA when heading eastward and southbound .
    Could it be that this pesky Scandinavian is the proverbial straw that breaks the BA Hubs back ?

    In conclusion I doubt that IAG are going to allow customers a LCC choice originating in their own backyard (even if they own it) that rivals BA’s dominance westward .

    Oh, and I totally agree with BugAdvisor. Norwegian is a great airline , and I suspect is far superior in almost every regard than Vueling ??


    Flightlevel
    Participant

    A good fit for IAG and a way to compete longhaul from other airports than LHR without expanding Level.
    We all know it will reduce competition however if IAG controls less aircraft than LH the EC can hardly refuse the takeover.
    IAG may have to give up a few slots as a token gesture?
    It may have been a blessing in disguise that FR got Niki!


    LuganoPirate
    Participant

    This reply was modified 1 hour, 17 minutes ago by  Tom Otley. Reason: Added the link for you

    Thanks Tom.


    LuganoPirate
    Participant

    We all know it will reduce competition however if IAG controls less aircraft than LH the EC can hardly refuse the takeover.

    I’m not sure. Does the EU have a say over a takeover of a Norwegian entity?

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