Spain Studies Annulment of Iberia, BA Merger, Confidencial Says

[dsk7]

Spain Studies Annulment of Iberia, BA Merger, Confidencial Says
2012-11-14 07:03:11.653 GMT

By Sharon Smyth
Nov. 14 (Bloomberg) -- Spain’s Ministry of Public Works is analyzing clauses that would allow for the merger between Iberia and British Airways to be annuled, El Confidencial says.
* IAG is laying off 4,500 workers
* Clauses in contract state both parties may undo the merger
within period of five years from Oct. 2010
* Confidencial cites unidentified people close to government
* Spokesperson for Public Works Ministry wasn’t available for
comment when contacted by Bloomberg News

Interesting article - right on the heels of this one from yesterday:

CEO Says Iberia Only Earns Money on 10 Routes, Expansion Says
2012-11-13 07:02:30.537 GMT

By Charles Penty
Nov. 13 (Bloomberg) -- Iberia only earns money on 10 of its
53 routes, excluding its low-cost airline, Expansion reports, citing CEO Rafael Sanchez-Lozano.
* On long-haul flights, pilots cost 21% more than rivals,
cabin crew 56% more, Expansion cites CEO as saying
* Iberia to begin talks with pilots, cabin crew, ground staff
on Nov. 19, newspaper says

[Petrus]

One wonders why Spain would consider such a thing?

[chongcao]

Originally Posted by Petrus

One wonders why Spain would consider such a thing?

Socialist civil servant. Those pilots and cabin crew may pay a lot to the unions.

[surryson]

As part of IBs move to T5, BA altered their schedule to end crew and aircraft nightstops in MAD. Big cost saving.

IB continue to nightstop 1 aircraft and 2 lots of Crew at LHR.

IB Flight Crew stay at a 5* Hilton in Central London.
IB Cabin Crew stay at a 4* Crown Plaza in Central London.

2 different, costly hotels & transport, not to mention traffic delays to LHR.

Go figure.

[Kgmm77]

Wirelessly posted (iPhone 3G: Mozilla/5.0 (iPhone; CPU iPhone OS 6_0_1 like Mac OS X) AppleWebKit/536.26 (KHTML, like Gecko) Version/6.0 Mobile/10A523 Safari/8536.25)

If the marriage is being annulled, does that mean it was never consummated?

There's a Wee Willie joke in there somewhere.....

[Swanhunter]

Originally Posted by Petrus

One wonders why Spain would consider such a thing?

Or indeed what power the government would have over a private sector commercial arrangement.

[dnajockey]

Trying to keep the unions happy be appearing to do something?

[Swiftsure1786]

Only making money on 10 out of 53 routes, its frankly embarassing.

That business clearly needs major shake-up. Take em down Willie.

[Flying Doctor]

They could de-merge - however IB will then have to get state support or go bust within weeks at that rate. I read somewhere it is haemorrhaging over €1.5M a day.
As I previously stated they need to cull all the L/H to the USA with perhaps the exception of 1 flight/day to JFK, MIA and ORD (MIA and ORD for AA connections) and the South America programme needs to retrench and focus on the main hubs in South America - GRU, EZE, SCL, GIG, LIM etc. The routes served 2-3x/week all need axing.
Short haul the night stops all need removing wherever possible. LHR is an obvious example where they could do this.....
FD.

[dsk7]

Not the best news for the sovereign either given they need Bankia to sell their 12% stake in IAG, something that will presumably be made more difficult with headlines such as these.

[Rambuster]

Perhaps BA would actually be happy about this ?
Without insider details this merger seems like quite a tactical blunder with the benefit of hindsight?

[Habemuspapam]

Good. Move my LUX flights back to T5 when those ugly IB birds go.

[BahrainLad]

Originally Posted by Rambuster

Perhaps BA would actually be happy about this ?
Without insider details this merger seems like quite a tactical blunder with the benefit of hindsight?

It does beg the question whether BA needs IB now at the bmi slots can be used to start up direct LHR-South America flights once the 787s arrive (crewed by MF).

[ian001]

Originally Posted by Rambuster

Without insider details this merger seems like quite a tactical blunder with the benefit of hindsight?

With the benefit of hindsight it certainly wouldn't have been on its original terms, but BA was not in good shape three years ago. The balance sheet was weak and prior to the merger it had to issue a convertible bond to raise £300m+ in cash.

What IB did bring was a relatively strong balance sheet with little/no debt. At the time of the merger, as a percentage of annual revenues, IB's cash balance was twice that of BA.

It's easy to forget that three years ago many were writing off BA as consigned to a slow decline into irrelevance (with whatever personal bugbear about the airline to blame). Things have been turned around, and whilst it won't be pretty, there's no reason the same can't happen with Iberia. IAG management certainly aren't oblivious to the fact that revenue performance and the product needs to be addressed as well as the cost base.

[pennineuk]

Originally Posted by BahrainLad

It does beg the question whether BA needs IB now at the bmi slots can be used to start up direct LHR-South America flights once the 787s arrive (crewed by MF).

There are other benefits to the merger, in terms of back office savings, joint procurement etc.

I sometime wonder whether the merger was a good idea, especially at the 45-55% share ratio, but there is a bigger picture!