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British Airways Chairman Warns Of Oneworld Breakup


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Aviation News Release

 

 

BA Chairman Warns Of Oneworld Breakup

 

Jan 7, 2009

Jens Flottau/Frankfurt jflottau@freenet.de

 

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British Airways Chairman Martin Broughton warned in an interview that the Oneworld alliance could split up if BA's bilateral deal with American Airlines does not get regulatory approval this year.

 

"The most important deal (for BA) is the American deal," he told the Daily Telegraph. "It's worth a lot of money--hundreds of millions--and prevents the break up of Oneworld." Without AA and BA being able to coordinate fares and schedules in the future, "there has to be a big question mark over the future of Oneworld," Broughton believes.

 

Unlike Lufthansa and United or Delta and Air France-KLM, American and British Airways have not gained anti-trust clearance because of what was regarded by authorities as an already dominant position in the London-Heathrow market. Two applications failed, but AA and BA launched a third attempt following the implementation of the Open Skies deal between the U.S. and the European Union in 2008.

 

BA hopes approval will come in time for AA and BA to start deeper cooperation in the coming winter timetable.

 

In addition to BA and American, a break-up of Oneworld would make important carriers, such as Cathay Pacific, Qantas, Iberia, Japan Airlines or LAN, available for the other two alliances--Star and SkyTeam--which would dominate the international air travel market. But such a development could ultimately also make an even more isolated BA a target for takeovers.

 

Broughton pointed out that he considers the AA deal as more important than the planned merger with Iberia. The Iberia link-up would result in around 500 million pounds in synergies, slightly more than what would have been possible in a merger with Qantas.

 

The BA chairman indicated that current BA shareholders would expect to control more than 60% of the new entity. "There is no magic number but below 60% it would be a struggle to sell it," he hinted.

 

Separately, Chief Executive Willie Walsh said that he was confident both the BA and Iberia proposals will go through. But if both failed, BA would still not be left behind in the consolidation process, Walsh believes. "There is no shortage of airlines for acquisition. I get phone calls from CEOs all the time saying please buy us. We have to be picky."

 

Air France took over KLM in 2004 and the combined group Air France-KLM is now close to being selected as a minority shareholder in Alitalia. Lufthansa recently bought Brussels Airlines and Austrian and will become the majority shareholder of BMI this month. By contrast, BA has divested assets rather than invested in the past few years and consequently lost significant market share to its primary competitors.

 

In spite of the downturn in demand for premium travel from London, BA will launch its planned business class-only Airbus A318 service from London City Airport to New York next summer, Walsh said.

 

Photo: Oneworld

 

 

AVIATION WEEK Copyright 2008, The McGraw-Hill Companies, Inc. All Rights Reserved.
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