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Rising oil prices will lead to even more airline merger
activity in 2011 than there was in 2010, British Airways chief executive Willie
Walsh told The Transnational in an
exclusive Friday interview. Walsh also said he expects an increase in
international airline joint ventures and hit out at Virgin Atlantic for
"hypocrisy" in opposing BA's recent tie-ups with American Airlines
"2011 will be a year of significant
consolidation," said Walsh. "It may accelerate a little as a result
of the current high oil prices. 2010 was a busy year for mergers but 2011 will
be busier. Our industry needs to consolidate. It is part of the solution to its
structural financial problems, although it is not the only answer." Walsh
expects a rash of mergers in almost every region, possibly including Asia,
which has seen less consolidation than has other parts of the world.
BA plans to complete its merger with Iberia on Jan. 24,
following the September 2010 launch of an antitrust-immune transatlantic joint
venture with Oneworld partners Iberia and AA. European and North American
members of both Star Alliance and SkyTeam previously launched similar
transatlantic joint ventures.
Some corporate buyers have expressed concerns that the
consolidation of competing carriers into a small number of joint ventures would
stifle competition, but Walsh insisted that the Oneworld JV would have the
opposite effect. "Competition between three alliances on the North
Atlantic is most definitely a better position than between two alliances with a
third unable to join in," he said. "In all, there are 40 airlines
operating between Europe and North America, and we have seen no reduction in
capacity. In fact, we have seen it grow. The only way the alliances will
succeed is if they do compete on both price and service.
"Corporate customers have been looking to alliances for
deals," Walsh continued. "There has been clear evidence of that on
the North Atlantic."
Sounding Off On Virgin And AA's Distribution Battles
BA's fiercest long-haul competitor, Virgin Atlantic,
confirmed in November 2010 that it had hired Deutsche Bank to conduct a strategic review of its business. This followed comments from Virgin chairman
Sir Richard Branson that his carrier would no longer be able to compete
independently if BA's JV obtained antitrust immunity. Walsh heaped scorn on the
suggestion that diminishing competition is forcing Virgin's hand. "Virgin
raised the white flag on its independence many years ago because it is 49
percent owned by Singapore Airlines, which some people have conveniently
forgotten," Walsh said. "There are also other airlines in the Virgin
Group which participate in code shares. It highlights the hypocrisy of Virgin
that it is jumping up and down about this. What Virgin does not like is that
there will be more competition, not less. Their arguments are without any
Meanwhile, Walsh said he is reading with close interest
press reports regarding the disputes between American Airlines and various distributors but has not discussed the matter with BA's Dallas-based partner.
As to whether BA might pursue a similar direct-connect strategy, Walsh replied:
"We will continue to distribute our products through the global
distribution systems, but I am conscious that many airlines around the world
look at the value chain and see profitability in other areas when they are
suffering losses. One area highlighted recently by [International Air Transport
Association director general] Giovanni Bisignani was the profitability of the
global distribution systems, but at BA, we have no issues with our GDS partners
at the moment."
BA's current GDS participation agreements with Amadeus,
Sabre and Travelport each run to 2013.
Source: The Transnational