India to allow foreign investment in airlinesBack to Forum
Anonymous18 Jan 2012
I wonder how long it will be before IAG makes a bid to invest in Kingfisher?
It would certainly make sense – they must have a lot of knowledge about the airline since British Airways acted as the sponsor for Kingfisher to join oneworld18 Jan 2012
BA already code share. I hope they dont buy the airline because they will probably lay of thousands of people in the UK and Spain and shift all the work to India to cut cost ;( xx18 Jan 2012
If it hastens the departure of Walsh then IAG should go for it. The industry is full of the detritus of airlines who grew too quickly and well beyond their capability and capacity.
The only airline to have posted 30 consecutive years of profit and share value growth (beating both Microsoft and Intel over the same period), even post 9/11, is Southwest Airlines. Southwest grew and continues to grow within its capabilities.
IAG will borrow more money and when interest rates rise will blame the markets for its own lack of foresight. The leadership haven’t delivered on a single thing, it has significant continuing long term internal issues, it is trying to get a loco division in the air in Spain, it has the BMI buyout to manage, planning for the likelihood of losing its most critical alliance American Airways, delivering on the synergies with Iberia, managing a debt mountain, and yet it can’t even handle such minor tasks as its shareholder discount strategy after a year trying.
The only thing significant things Walsh has delivered is a significant increase to his pay package and a significant decrease in shareholder value.
So if getting into bed with Kingfisher is the bridge to far, then hopefully Walsh will do it and it will be goodbye Walsh.18 Jan 2012
Doing due diligence on Kingfisher would take years. It’s an integrated part of a very secretive and convoluted business empire — the main line of business is beer and spirits, a trade that is heavily regulated at state level in India. Since Kingfisher Airlines is teetering on the edge of bankruptcy, I agree that IAG will want to do something but I cannot imagine a quick, direct foreign investment. Maybe they have something pre-baked and ready to go?
Jet, Air India and several of the low-cost carriers are a different story. Jet looks the most attractive, probably to Lufthansa (remember the overlapping hubs at BRU). Jet is a well-established, standalone business with existing foreign investors (not airlines).
That would leave AI without Star and without its LH codeshares. The government hasn’t yet said that it is willing to sell part of AI (it’s a 100% state-owned corporation), the unions will go nuts but it is probably somewhere in this new plan. Has anyone got the money and the political nerve?
The big winners will probably be carriers such as IndiGo which are making money and launching international operations.18 Jan 2012
Tete -choose your accolades with care – FYI Southwest who report Q4 tomorrow 19 January, reported a Q3 loss of substantial size on October 20 last when they admitted they had screwed up their fuel hedging. Yes still profitable at an operating level but a foul up that they are not unique in having, but still a major plot on their impressive record.18 Jan 2012
A few points:
– I think the chances of IAG acquiring a stake in Kingfisher are very low. Kingfisher is in a parlous financial state and the aviation industry in India is too volatile. History has shown acquiring minority interests in other airlines without management control is not the way to pursue consolidation.
– IAG has the lowest net debt of any of the three European majors. The acquisition of bmi is being funded entirely from IAG’s own cash resources, something BA would not have been able to do before the Iberia merger.
– Synergies between BA and Iberia in the first year are ahead of budget and the overall five year target has been increased by £100m.
– It you want an example of what happens when airlines avoid structural reform to remain competitive (however painful it may be in the process) take a look at Air France KLM.18 Jan 2012
For accuracy Hippo:
Market analysts do not view IAG as delivering on BA-IB synergies it committed to.
As to the BMI purchase. It is a bit rich to affirm it was “IAG’s own resources” when BA/IAG are using a line of credit previously secured and is currently in debt to around half a billion. “IAG’s loaned resources” would be more appropriate.
As to structural reform – it was certainly needed, however the method and execution was absolutely appalling. The debilitating division, poor morale and fear Walsh has inculcated will take years to address even after he has gone.
BB – I do not hate Walsh, how can you hate someone you don’t even know. It just grieves me that such a great British Company is led by such an incompetent. Someone who is clueless in motivating and inspiring people should not be at the helm of a people centric business.
Contrast Walsh’s bullying, controlling, divisive, burn and churn approach with that of a proven, long term, highly successful airline ….
“Our people are our single greatest strength and most enduring longterm competitive advantage.” Gary Kelly, CEO Southwest Airlines
Walsh is an egotistical bloviating baffoon who has taken the worlds favourite airline down from 5 stars to a third division outfit. Unfortunately as the board hired him, ejecting the guy would be an admission of their failure. Meanwhile, shareholders, employees and to some extent customers are suffering the consequences.18 Jan 2012
I would not put any investment in India due to TAX the western companies to hell when they buy in to companies India Vodaphone plc has got busted on this and others.
If I was at IAG I would go after Aer Lingus, Dublin would make a good extra hub for the USA-EU routes
Think IAG played a good card with BMI take over BA get backs a lost routes that where BA then BA dropped the routes due to deal with there franchise partner.
IAG should take a 25% in AA to keep at bay any takers of that airline.18 Jan 2012