[transtraxman]

I am afraid there is too much rubbish being published on the subject of IAG

-Firstly some forget that BA did not get the lion´s share of the merged company because it had such a large pension fund deficit – that is why the percentage went down from 60 to 54-55% of the merged company. IB was in much a better state at that time.

-Now BA has sorted itself out and has to still do the job with IB. The pilots in IB are particularly bolshie and could not give a monkey´s uncle about anybody else. They have to be tamed one way or another.

-IB has good/excellent connections to so many cities in Central/South America and the Caribbean. This has to be built upon. If LATAM is part of “oneworld” and co-operates with IB and BA the market can be assured from both ends – America and Europe. TAP is a bit player entering into Brazil but nowhere else of note so not so interesting.

Maybe there was a bit of “picking up the pieces” with the merger with IB but remember that BA was the first to promote the consolidation of the European airline market. BA tried twice to merge with KLM and was unsuccessful – mostly due to the fault of the EU authorities. However, almost immediately the merger AF/KLM happened and the sunami of LH with Austrian, Swiss, Brussels and BMI happened one way or another leaving BA gasping.

To add to this Heathrow was opened to competition from any US airline while nothing was obtained by Brussels from the US to compensate.

I would say this – stop moaning about a “fait accompli” – it was always on the cards and is only a reflection of the government ´s easy appeasement.

I should say that despite this I am still a pro-European.

Let us go on from here and act in our own interests and b-gg-r the rest.

[BigDog.]

Not so Transtraxman.

As is clear from the restructuring just announced for IB (along with previous large pay-offs), it appears BA were required to get its house in order wrt restructuring and pensions prior to the nuptuals but IB did not. Further, all businesses are cyclical, the final strike price was at a low for BA and high for IB.

So all in all a very bad deal for BA shareholders. And let us not talk about HQ, financial reporting and control.

Secondly, I understand the IB pilots merely want the same deal as given to the BA pilots. That is to keep the same T&C throughout the organisation for pilots.

Strange how Hippocampus et al commented on how well BA pilots supported Walsh and reached agreement yet when the IB pilots seek a similar cross IB entity deal, they are regarded as bolshie and couldn’t give a monkey’s uncle. Unfortunately it is rooted in Walsh’s decision to take the easy option and not to restructure BA pilots to include a separate low cost element.

As to connections, TAP has I believe routes to 6 of the 10 largest South American cities including Sao Paulo, Rio, Caracas, Salvador, Belo H, Brasilia. Whereas IB flies to 5. More importantly, as to economic power Brazil is number one, to get an equivalent the next 5 largest South American economies would need to be added together! ie Add Argentina, Columbia, Venezula, Peru and Chile together and you will have an economy the size of Brazil. IB may access more countries but TAP accesses more economic clout.

http://www.airlineroutemaps.com/Europe_2/TAP_Portugal.shtml

http://www.airlineroutemaps.com/Europe_2/Iberia.shtml

The LATAM option is on the table with either with a IB or TAP linkup.

In 2007 Daimler Benz managed to unhitch itself from the disasterous 1998 wedding to Chrysler. I would hope BA could do the same though I doubt if the Spanish authorities would allow it as BA will be a significant source of funds for a while to come.

(Yet again there has been forum manipulations. My previous post 18:27 was top of this page, now it is at the bottom of the previous one – more manipulation by the usual suspect methinks)

[JohnHarper]

Good points BigDog.

IAG must be seen to treat employees equally for the same work.

The reality is that BA were left behind in the European consolidation of air travel and as transtraxman so clearly puts it ‘left gasping.’

That should not have resulted in them jumping in to bed with just about the sickest airline that was left no matter what they brought to the table. Do remember that at one time they were also offering management support to Olympic which was bizarre.

There were others out there like Finnair who have developed a great range of destinations to the east and that together with BA’s range across the Atlantic would have been a firm base for more expansion and development. Of course, maybe Finnair who seem to be doing quite nicely did not want to know.

[BigDog.]

And the situation deteriorates further..Now major shareholders are concerned.

“The Spanish situation is much worse than we thought,” said one top five shareholder. “The deal [to merge BA and Iberia] hasn’t gone that well, that much is clear. Given what has happened the structure should probably have been very different.”

A fierce battle has broken out between International Airlines Group and its workers after the owner of British Airways warned it would have to cut at least 4,500 jobs at Iberia because the Spanish carrier was in a “fight for survival”.

http://www.telegraph.co.uk/finance/newsbysector/transport/9668483/British-Airways-owner-IAG-battles-staff-over-plans-to-cut-4500-jobs.html

Surely the major shareholders should be looking at Walsh’s decision making and governance.

Walsh called the economic situation totally incorrectly.

To date Walsh had been painting a rosy picture of the merger with IB yet it had major systemic issues which were apparent even before the merger. Any astute CEO would have called off the nuptuals before the wedding – why didn’t Walsh? His desire to empire build without doing (or ignoring) rigorous research has cost BA shareholders dear.

Time to follow Entwistle and Andrew Mitchell?

[transtraxman]

CAPA, as usual, has come up with an analysis of IAG today.
“IAG seeks full ownership of LCC Vueling as its cuts Iberia to the bone”

http://centreforaviation.com/analysis/iag-seeks-full-ownership-of-lcc-vueling-as-its-cuts-iberia-to-the-bone-87985

@Henkel.Trocken – 09/11/2012 09:26 GMT
You queried, “I’m not sure how Vueling would fit with Iberia Express….”
The article categorically states that there will be no integration between Vueling and Iberia Express.

Having said that I should also say that I saw yesterday a different (in Sp.) article saying the exact opposite – there will be integration of the two. However,I tend to believe CAPA.

Two things are not mentioned.

-The other major shareholder of Vueling(at 23%) is NEFINSA SA who is the major shareholder of Air Nostrum (Iberia Regional)at 75.2% (here Iberia has never had any shareholding). What will Nefinsa´s price be for handing over a profitable shareholding? Will IAG have to accept Air nostrum which has been heavily dependent on public subsidy for the last five years? This airline has also had to reduce staff as a cost cutting measure. The positive is that the airline´s caché is good, for a regional airline.

-The other thing not mentioned are IAG´s intentions with BA´s short-haul fleet. Following many comments made on this forum I see that not many posters are satisfied with the short-haul product, especially when it runs from Gatwick. Vueling has bases outside Spain in Amsterdam and Rome. Will IAG use Vueling as the model for its short.-haul fleet e.g. BA Express, or even set up a subsidiary Vueling UK?

The only thing we can be sure of is that things will change at BA as well.

http://www.vueling.com/en/

http://www.airnostrum.es/home.asp?idioma=2

[CityRiskBoy]

Looking at recent IAG reports its clear to see that the problem is not IAG as such but Iberia. I believe Willie Walsh has already said in not so many words that they are going to go back to the drawing board, completley strip Iberia back to its bones and re-build. Its been a long time coming if you ask me….How can you have BA with a OP Profit of 270 Million in one breath and Iberia a 270 Op Loss is another….clearly both airlines not on the same wave length

[VintageKrug]

It’s not difficult to see that these statements from both IAG management and other shareholders are actually very supportive of each other in positioning Iberia for dramatic restructuring, including a comprehensive re-assessment of its cost base.

Without doom-laden prognostications, the patient would never be persuaded to stomach the medicine.

Dealing with the cost base is long overdue, and is exactly where the value lies within Iberia.

BA’s management has taken nearly a decade to turn around British Airways. Having now addressed its own structural problems, albeit not as decisively as I personally would have hoped, there is now an opportunity to look to the broader group beyond taks of extracting value by centralising services.

I would hope that with that experience under their belt, BA’s management will turn around Iberia with considerably more alacrity, although they are facing even tougher economic circumstances than anyone could have imagined.

I’d imagine the recent purchase of vueling is central to that plan, and indeed will inform the approach to Gatwick Shorthaul when that particular boil is lanced.

[Henkel.Trocken]

“VintageKrug- 12/11/2012 14:32 GMT

BA’s management will turn around Iberia with considerably more alacrity”

I do wonder why BA’s management would be turning round Iberia.

Surely that’s for IAG to do. Let’s hope they have learned from their significant mistakes at BA and don’t alienate the workforce at IB.

[BigDog.]

A quick look back at the history between BA and IB

Over 15 years ago, July 1997 plans were revealed for BA to link up with Iberia.

14 years ago BA purchased a stake in a privatising Iberia – around 8-9% valued $370million.

http://news.bbc.co.uk/1/hi/business/202642.stm

10 years ago a full on courtship started.

http://news.bbc.co.uk/1/hi/business/3165488.stm

then in 2003 BA’s CEO Rod Eddington announced BA may merge with Iberia.

Walsh became CEO in 2005.

The BA IB nuptials completed on 1st Jan 2011

So frankly the leading protagonist Willie Walsh has had over 7 years intimate involvement with Iberia, ample time to fully understand the company, understand the restructuring required and associated costs and value it correctly.

In reality Iberia was grossly overvalued, to the detriment of BA shareholders.

Everyone, including my Spanish au pair, knew a couple of years ago that Spain was becoming a basket case, everyone that is bar delusional Walsh, who went ahead with the wedding and even then continued to fiddle without a plan whilst Iberia burned.

So let’s be brutally honest – the IB debacle has happened on Walsh’s 7 year watch, he is accountable for the huge loss of value BA shareholders have incurred. He has had 5 years to prepare a plan plus a further two, as AIG CEO, to get it implemented…but didn’t.

The money and talent wasted on his Iberia adventure could have launched BA’s potential, plus added TAP to the network giving access to the huge Brazilian economy, plus retained control in the UK.

The Lemon isn’t in BA’s ad, it is in the AIG CEO office.

An utter omnishambles.

[Henkel.Trocken]

Oh, come on BigDog, Walsh isn’t quite that stupid. He managed to ensure that he got a fairly huge payrise as part of the deal!

He may have stuffed both the workforce and the shareholders in the doing of it but he certainly remembered how to look after number one!

[BeckyBoop]

http://www.bbc.co.uk/iplayer/episode/b01nmcjp/The_Bottom_Line_Series_12_Episode_5/

[BigDog.]

Very fair point Henkel.Trocken. It appears symptomatic of our industry leaders, not just Walsh, that no matter their omnishamble leadership, how bad a state they leave the company in and how much they have destroyed shareholder value, as CEOs they will come out of it handsomely richer plus multi-million pound pensions.

[AnthonyDunn]

@ Henkel.Trocken – 13/11/2012 11:21 GMT
@ BigDog. – 14/11/2012 14:15 GMT

It is indeed a deeply objectionable aspect of the Anglo-Saxon business/ corporate/management culture that those at the top continue to extract ever larger rents at the same time as imposing markedly worse terms and conditions on “the little people” below them. This is, in itself, a reflection of the poverty of ethics across many boardrooms and the narrow range of people from whom boardrooms are selected. From my time at LBS, it became clear that if you wish to take on a non-exec role in any FTSE listed company, you had first …to be an executive director at another FTSE listed company.

As I have characterised it” “management from behind rather than from in front…”

[canucklad]

AD….I agree. Without consequence of failure I’m afraid mismanagement will be continually tolerated by shareholders and markets

Amazingly, I find it incredible that certain execs fail and not only is there no shame in their poor performance, more than likely they will be bunged off out their failed role ( sacked) to re-emerge almost immediately at another company!

If the normal worker gained a reputation for shoddiness the only thing he will pick up financially is his dole check!

[canucklad]

AD….I agree. Without consequence of failure I’m afraid mismanagement will be continually tolerated by shareholders and markets

Amazingly, I find it incredible that certain execs fail and not only is there no shame in their poor performance, more than likely they will be bunged off out their failed role ( sacked) to re-emerge almost immediately at another company!

If the normal worker gained a reputation for shoddiness the only thing he will pick up financially is his dole check!

[Author]

Posts