Reply To: WHAT’S HAPPENING TO IAG & BA

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Whilst growth in the future will probably come from Asia, I believe the BA strategy of focusing on the Trans-Atlantic business is wise. Unless the EU would allow a free-for-all on 5th Freedom flights from anywhere within the Union to North America, I have a hard time seeing the true competition these days namely the Middle Eastern carriers eat away business, because I know few, if any that travel to JFK via DXB.

The US carriers have the distinct advantage of Chapter 11, and in combination with recent M&A activities finally have the house in order to compete. I’ve been pleasantly surprised by my last couple of AA flights, and their new kit on the B777-300ER (B77W) looks promising.

In many ways, BA seem to have aligned their cost base with the reality. However, they sure need to free up cash flow with the scheduled deliveries. My understanding is that even with off balance-sheet financing, each new aircraft require 20% upfront payment from the carrier.

The real issue is what to do with Iberia. Yes, its network to South America is an opportunity. However, the cost base mus come in line with the market.

Innovation is not only about technology or having the latest kit. A perfect example from my industry is Dell. They never invented anything from a technology perspective. They did however, innovate a successful business model that allowed them to lead the market for close to a decade. Yes, BA doesn’t have the latest kit and yes, they are not first to market with A380s or B787s. However, they seem to have a knack of creating value from older kit 🙂

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