Originally Posted by
orbitmic
Not really - the exact quote is that: "The airline was in pole position from the start but neither read the situation accurately nor was able to propose a solution that would turn AZ into a healthier and leaner airline whilst being acceptable by the Italians." [emphasis not in the original post]
You only focus on the second point but the first one was just as important ie 1) I think that AF misread what it would take to turn AZ around and how hard it would be and 2) indeed did not find a solution that managed that whilst being acceptable to the airline in question.
I would have thought that showing that either limb constitutes an unwarranted criticism would suffice to show that the overall criticism is unwarranted but, in any event, even the first limb is just as questionable, and this on two grounds:
- I am not sure on what you base your assertion that 'Air France misread what it would take to turn AZ around and how hard it would be' but, in any event, this is beside the point: let us not forget that AF did not take control of AZ: it was not an AFKL subsidiary and AF was not the majority shareholder. Indeed, AF was rather frustrated at moves taken by other shareholders and it precisely because it felt that there was no clear viable plan put forward that it refused to contribute to the last injection of capital in the pre-Etihad era. Whether AF correctly evaluated what it would take to turn AZ around and how hard it would be is neither here not there: even if they did, they were not in a position to implement it anyway.
- Going back to 2008, who exactly is that clairvoyant that could see that Berlusconi would block the AF acquisition and that he would manage to twist enough hands to mount the C.A.I. solution? Who knew exactly what the Alitalia would be under C.A.I. and what room there would be for AF to shape it or not? Who is that truly gifted individual that would have foreseen that EY would successfully acquire a quasi-controlling stake in AZ?
So what you point out as the "broader question" really is the one I was referring to in that quote too. My personal perception is precisely not that AF merely wanted to channel Italian customers to Paris (if so, frankly, I would have hoped that they could have done without the silly charade of claiming that under the right conditions the point was to merge AZ into AF-KL) and in fact I think that AZ would have refused that from the start. I think AZ wanted to be the third partner in an AF-KL emporium transformed into an AF-KL-AZ emporium, and I personally think that this is exactly what JCS had in mind even though he was careful to point out that AZ was not ripe for it yet. My point is that with the behaviour exhibited by both parties, I do not think that it was a credible outcome that it ever would be. Maybe you are right and AF was just being cynical and just interested in stealing the market and simply lied all along about the ultimate integration prospects, but I'm not sure that I would have any more sympathy for them if that is indeed the case.
What I said is that AF wanted to anchor the Italian market into the AFKL group. This is not the same thing as channelling Italian customers to Paris. As long as AZ remained alive, this meant integrating AZ into the AFKL group and this was very clearly AF's ambition. I do not share your view that this always was going to be a non-starter. Going back to 2008-09, It was very clear that Berlusconi was against it but it was far from clear at the time that a non-AF/KL alternative could and would be worked out.
Was it a strategic error at the time for AF to take a 25% stake in the new CAI/AZ in order to keep a foothold in AZ? I do not think so. It seems to me that there was still a realistic prospect medium term of AZ joining the AFKL group and, from that perspective, the participation of AFKL made sense. The question was always going to be: at what cost? And when it looked like the cost was in danger of spiralling out of control, AF refused to go any further and refused to take part in the capital increase.
In other words, AFKL took a calculated risk in participating in AZ back in 2009 and, when the risk increased to unacceptable levels, they refused to go further.
Further, it was anything but clear that the EY bid would succeed. It seems to me that AF's approach to AZ has, on the whole, been pragmatic and sensible throughout. Sure, what they expected out of it did not materialise, But this does not mean that it should be regarded as a "failure" if what is meant by that is evidence of wrong decision-making.
Let me return the question in any case. I've outed my perception and called AF's AZ saga a failure. Would you call it a success?
The success/failure is just a touch too manichean for me. I would call it neither a success nor a failure. A calculated risk was taken which did not pay out its full potential. There is nothing fundamentally wrong with that. This is within the realm of "win some; lose some."