[VintageKrug]

I’m quite puzzled why we see no mention of Africa; it has huge growth potential.

[Bullfrog]

Hippocampus

Indeed the world is far bigger than Europe. Since the formation of IAG, Walsh has mooted on a majority of occasions about adding European carriers. Nothing materialises.

India and China together with Brazil offer huge passenger numbers.

This week it is media coverage of IAG taking a share in American.

Let’s see action .. not just media hype.

I’m a great fan of BA, one of the finest carriers in the world & as a share holder I’d like to see it improve & grow. That requires commitment and action by IAG.

[VintageKrug]

Last time I checked, bmi was a major European carrier.

Iberia has good South American coverage for Brazil.

BA also serves several Indian destinations, and has three services per day to HKG.

I think there’s a lot of strategic change going on at IAG, but to take on too much change all at once is just as dangerous as doing nothing.

[BAorBUST01]

walsh is all talk and no trousers, maybe because Geroge at Asda havent got the school uniforms in his size yet 🙂

[LuganoPirate]

Thanks CallMeIshmael, I can’t really add to what Simon has said already. To me the company seems stable, has good cash reserves, a good cashflow and a very strong brand.

30% of the shares are held by institutions (maybe more but below the 3% mark at which they have to declare their holdings) including Black Rock and Shroeders, so good names. Bankia holds 12% and it is this stake i think will be sold sooner raster than later. I don’t think this sale will have much effect on the share price.

The share price is often more dependent on investor and / or market sentiment than anything else, so HC, I’d not worry too much about that, unless you bought in at 250p that is!

As an investor I would not buy IAG, if you want airline shares I’d go for Easyjet or Ryanair, and perhaps Aer Lingus as a speculative move.

If I did buy IAG, which I have no intention of doing, then I’d look to sell the 140/160 puts and calls in December which would bring in about 22p. That’s about 14% for a 4 month hold and would have you deliver the shares effectively at 182, or have them put on you effectively at 118.

IAG’s market cap is about that of LH and KLM/AF combined and should IAG wish to make a major purchase they certainly have the firepower to do so.

In summary HC, as companies go, BA is in reasonably fine fettle and probably better placed than most of its industry peers.

[LuganoPirate]

CallMe, the increase in liabilities could be for any number of reasons, perhaps they are taking a bit longer to pay their suppliers, aircraft purchase commitments which may or may not ultimately turn into leases, forward purchases of kerosene etc.

[BeckyBoop]

I thought the idea behind the Iberia purchase was not only have greater presence in Europe but to also have increased availability to South America.

There was considerable speculation by some members on this forum (on another thread sorry but I can’t find it) that Qatar would buy the remaining shares when Bankia off load their holding in IAG. With IAG share price at such a low share price, it must look appetising for QR. This could seriously work especially when Qatar’s boss has a strong professional relationship with their CEO.

With a QR merger they could collectively take over Gulf Air and have a stronger challenge to the likes of Emirates, in addition to joining OneWorld. So even if the JSA between BA and Qantas discontinues alternatives either through the Middle East or even through Asia with Malaysian?

[VintageKrug]

I’m impressed, Becky.

A very perspicacious (don’t worry, that’s a good thing!) analysis, and one I think others would do well to pay attention to.

Though the key issue is whether the JSA would have to be broken up at all. Emirates isn’t the only option for Qantas…..

This thread is like a scene from “Trading Places”.

Buy Pork Bellies!

[Bucksnet]

A far better buy for BA would have been TAP, as long as its past debts were left with the Portuguese state.

TAP are number one to Brazil, which is the leading economy in South America, and could under BA’s management easily start routes to Uruguay, a former colony, and other destinations.

[VintageKrug]

No airline was a better buy for BA than Iberia, with its unrivalled South American network. TAP is a minnow in comparison.

It is notable that no-one else has yet put in an offer for TAP, so the fat lady has yet to sing.

[edited, meant TAP]

[Bucksnet]

Who’s talking about TAM?

As as for putting in an offer for TAM, it merged with LAN a few months back.

[Bucksnet]

A quick check reveals that IB only flies to 9 destinations in South America and TAP flies to 11, so what is this unrivalled network you speak of VK? Also, most South American destinations IB flies to have enough demand to support a non-stop BA service from LHR.

When will you accept that IB is a massive dead weight around BA’s neck and the merger was a bad idea?

[Bullfrog]

Bmi a’ major carrier’. If that gives IAG the impression of significant expansion, then I think they’re deluded. BMi was a loss making airline with it’s only saving grace being the 14 % LHR slots.

Iberia has great flights from Madrid to South America. More importantly the opportunity is having a carrier within South America.

BA serves India well from it’s main hub .. LHR.

That’s where those of you who seem to be so impressed with IAG are missing the point. Ryanair and Easyjet have created numerous hubs within Europe. IAG may have it’s two hubs but that is where IAG falls down. IAG needs to have ‘continental hubs’ that can spread a greater network of flights.

Dubai occupies a ‘pinching point’ between Europe, Africa & Asia & with Emirates operating to at least 6 or 7 UK cities from Dubai, they’ve got a huge advantage over London based BA.

[CallMeIshmael]

The merger of BA with IB has been viewed as having high potential by some, others see BA being shackled to a corpse.

Before I postulate on the house of cards, may I go off thread and state firstly I believe it is myth that it was essential for BA to merge with IB Whether to stop it being taken by AF/KLM or LH/Swiss or to survive.

– The European competition authorities would never have sanctioned a European super airline. Adding IB to either LH/Swiss or AF/KLM would have created a dominant carrier to the detriment of all others European allegiances.

– The politics and strong national allegiance of LH and AF would never sanction the HQ and reporting of its national airline being moved to Spain as demanded, despite BA being the larger partner.

– Both LH and AF had well established links into South America. LH through links with TAM and TAP; AF through links with Aerolíneas Argentinas. A link with IB would therefore have bought fewer benefits for LH and AF.

Secondly, to Bullfrogs point, add in documented research, published by Grubb and Lamb in their book, which shows that only 20% of the cross border mergers/consolidations actually succeed the rest erodes shareholder value. (And Walsh is no Jack Welch)

http://www.amazon.co.uk/Capitalize-Merger-Chaos-Competitors-Consolidation/dp/068486777X/ref=sr_1_2?ie=UTF8&qid=1344254349&sr=8-2

Mergers create synergies, reduce operational costs and enhance market share. On the other hand it results in the genesis of agency problems as the leaders can cause mergers for their own benefit. It also results in decentralisation of power that reduces responsibility and accountability.

Therefore am of the view Walsh proceeded with merger more for his own self aggrandisement than shareholder enrichment, job creation or employee welfare.

I understand for Walsh an annual bonus element was conditional on a BA/IB merger. Period. Did his desire to achieve that bonus at any cost, mean he ignored….

– The Spanish market was widely tipped to fall badly. (Which it did and will continue to do)
– He could have waited, missed his bonus for a while then negotiated a far better deal for BA shareholders.
– The deal equity split was assessed at the high cyclical point for IB whereas BA was at a low.
– The Euro was losing value against sterling.
– There were no other viable suitors, there was no urgency for the immediate merger.

Regardless IAG is the fact on the ground now. (to be continued)

[Bullfrog]

BeckyBoop .. you’re spot on !

When the BA share price was about £1 & before IAG had appeared, I was surprised not to see Qatar Airways or even Etihad take a large share of BA or even buy BA.

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