Thurs, July 16 at 1:00 PM ET / 10 AM PTSponsored by: TripActions
Thurs, July 23 at 11am ET / 8am PTSponsored By: American Express Global Business Travel
Tues, June 30 at 11am ET / 8am PTSponsored in part by: Cvent and The Inception Company
Virtual Event - July 29, 2020
Virtual Event - September 9-10, 2020
Hyatt Regency Boston - October 12-14, 2020
Filter in or out as many as 200 cities, as well as hotel and car rental class and meals of the day and watch as the per-diem calculator automatically adjusts per diems to your program. Drill down into cost breakdowns and export the results.
A third mega commercial aviation group is emerging in Europe now that British Airways and Iberia signed an agreement on a merger deal they expect to close by year end. In the works since last year, the dealcombining the U.K. and Spanish carriers would create a multinational entity with the size and scope needed to keep pace with Air France KLMand the Lufthansa Group.
In the United States, United Airlines and US Airways reportedly revisited merger discussions. First reported by The New York Times, the hypothetical deal--should it withstand any challenges posed by regulators, labor unions, shareholders and other propsosals--would place the combined airline at the top of U.S. market, alongside Delta which this year completed the integration of Northwest Airlines.
"Mergers and consolidation is a must," according to International Air Transport Association director general Giovanni Bisignani, as quoted in a Reutersreport. "No other industry is so fragmented, so we have to consolidate in order to build more efficiency."
The proposed BA-Iberia deal--"structured so that it can take advantage of further consolidation in the global aviation industry"--would create an airline group that accommodates 58 million annual passengers with 408 aircraft operating to 200 cities, the companies said. It would cover BA's strong North Atlantic position and Iberia's operations to Latin America, and "have greater potential for further growth by optimizing the dual hubs of London and Madrid and providing continued investment in new products and services," according to a statement by BA CEO Willie Walsh, who would lead the new group.
BA and Iberia would maintain their own operations, brands and "existing national route licenses and traffic rights." The companies said the combination after five years would generate about €400 million (US$540 million) in annual savings, achieved in part by staff cuts and the elimination of overlapping and otherwise unprofitable routes.
Noting an existing BA-Iberia joint venture for U.K.-Spain routes, Advito vice president of business solutions Bob Brindley said, "There is not going to be that much of an impact" for corporate buyers on the London-Madrid and London-Barcelona routes. "The routes basically are already monopolized," he continued. "Because of that there are low discount levels, if any. If you get five percent discount off full fare, you are getting a good deal."
But elsewhere, "BA may want a piece of those U.S.-Spain routes that Delta may be getting today," Brindley added.
According to HRG North America president Tom Gleason, when combining Iberia's transatlantic operations between Latin America and Europe with partner American Airlines' U.S.-Latin operations, "then you have some more interesting synergies," especially if AA, BA and Iberia secure final approval for an immunized joint venture.
BA and Iberia plan to establish a new holding company called International Consolidated Airlines Group SA, majority-owned by BA and listed on stock exchanges in London and Madrid. Current Iberia chief executive Antonio Vazquez would serve as chairman. The transaction requires approval from the European Commission and both companies' shareholders.
Delta-Northwest Merger Was 'As Good As Any'
Should United merge with US Airways--or perhaps JV partner Continental, as many are speculating--it would follow Delta's acquisition of Northwest Airlines, which "went about as good as any merger of that size could have gone," according to Robert Polk, CEO of Polk Majestic Travel Group, who was more pessimistic on the prospects for United-US Airways tie-up.
"There was a little bit of hub competition for some flow traffic, but overall that was a relatively minor negative impact for corporate clients," Brindley said, discussing reduced competition in certain markets. "There really was very little overlap, from a route perspective. In some cases, it may have had a positive impact." U.S. companies with modest transpacific travel, for example, may not have had enough business to Asia to warrant discounts from Northwest or United, but now realize some incremental benefit when that traffic is packaged under the umbrella of a larger Delta contract, Brindley explained.
He suggested that the larger challenge for Delta's clients occurred a few years back, after Delta, Northwest, Air France and KLM established a joint venture and required accounts to work with all four.
HRG's Gleason said that JVs and/or consolidation along alliance lines "can become problematic because you may have had a great relationship with carrier A and B, but an awful one with C, and now you are being asked to have a relationship with A, B and C."
Purported United-US Airways Deal Collects Supporters, Critics
The next step in U.S. airline consolidation remains far from certain. Recent reports have United in talks to merge with US Airways. Many industry observers speculated that Continental instead would look to cement a UAL deal. Perhaps all three would merge.
J.P. Morgan analysts wrote that they had "long viewed a United-US Airways merger as both the most logical and feasible among potential legacy combinations. The merits ... are considerable." They wrote that the companies' "wages are already closely aligned and among the industry's lowest, requiring no ... labor approvals before integration can occur."
But United's pilot union already voiced opposition. "A United merger with US Airways is unlikely to achieve significant synergies," according to a statement issued by Capt. Wendy Morse, chairman of the United Master Executive Council at the Air Line Pilots Association. "The pilots of US Airways and America West have yet to achieve operational integration more than four and a half years after the airlines merged. United pilots certainly would not benefit by being drawn into that situation."
J.P. Morgan analysts also acknowledged that "concentration in the Washington metro area could prove problematic," as a combined United-US Airways would "control 60-plus percent of metro D.C.'s system departures." Moreover, "a proposed transaction between two carriers of size--neither of which is failing--is likely to prove difficult from a regulatory perspective." Possible remedies, they concluded, include "certain capacity/job-related promises," and involvement by a discount carrier like jetBlue "should divestitures be mandated."
According to Polk, whose company is headquartered near United's Denver hub, "the list of roadblocks is long and daunting. No one knows how the Obama Administration will treat the antitrust problems, and there will be many. What will new Star Alliance partner Continental, and a potentially a much better merger partner for United, think of this courtship?"
In terms of U.S. market domestic traffic, United ranks fourth behind Delta, American and Southwest. US Airways places fifth and Continental sixth. A United-US Airways or United-Continental combination (and certainly a three-way merger) would vault ahead of Delta, at least on paper, until the hypothetical entity started cutting capacity.
"The true value in consolidation comes in the savings associated with less flying," according to J.P. Morgan. "Cut 10 percent of flying, reduce expense by 8 percent and maintain 95-97 percent of revenue, and we estimate pro forma EBIT rises by $800 million to $1.4 billion."
UBS analysts, who wrote that "consolidation is very likely in the next couple years," projected that "a major merger" such as United/US Airways would "reduce industry capacity by 2-3 percent with most of the reduction in domestic markets."
JetBlue in October will end service currently operated at Long Beach Airport and move some of that...
Norway's largest airports are transitioning to a touchless experience for domestic travel, through...
Sixt is taking over 10 airport locations from the bankrupt Advantage Rent a Car, giving the German...