BA chief sees Asian carriers next on the merger radar

PUBLISHED : Thursday, 13 January, 2011, 12:00am
UPDATED : Thursday, 13 January, 2011, 12:00am

Willie Walsh, chief executive of British Airways, said carriers on the mainland, in India and the Middle East were on the radar after the merger between BA and Spain's Iberia.

International Airlines Group, the holding company of BA and Iberia, will list on the London Stock Exchange on January 24.

Walsh will become chief executive of IAG on that day. BA's last trading day will be January 21.

The company is expected to take a lead in industry consolidation.

IAG has identified 12 airlines as potential targets.

'We would love to see carriers in the Asia-Pacific region become part of IAG because this is a truly exciting area for the industry today and over the longer term,' said Walsh in an interview with the South China Morning Post. He said he expected further consolidation to take place in Europe and Latin America.

Walsh said that the 12 identified carriers included ones in mainland China, India and the Middle East. 'India and China are fantastic markets though they are not very profitable at present,' he said.

'But we are looking at the long-term growth in these markets.'

He said potential partners must be profitable and have strong brand names. He declined to disclose further details as the carrier has yet to kick off any formal discussions.

Walsh denied that BA had held talks with Gulf Air over a potential merger. 'We are not interested in acquiring broken airlines and spending time to fix them,' he said.

'Our objective is not getting bigger but better and stronger. Ideally we are looking for airlines that are profitable and structurally capable of long-term profitability.'

Consolidations could be carried out in different formats, Walsh said. It could be done by simple acquisition or via share swaps, such as the merger between BA and Iberia. It could be a combination of both, he said.

He also said that it was possible low-cost carriers could merge with IAG because some of them had strong brands and made money.

Walsh has not taken a holiday since October 2005, when he became chief executive of BA.

He intends to take a couple of weeks off, but the bad weather in Europe has kept him busy and ruined his long-awaited vacation plan.

The attempt to merge BA with Sydney-based Qantas went sour in December 2008 as Australia's top carrier was keen to take a majority stake in the holding company. Walsh said in October that they were still interested in returning to talks with Qantas, though the latter is tied up with its own restructuring.

BA has its own problems to overcome, as it slipped into deficit in the 12 months ended March last year, reporting a GBP531 million loss before tax, the first pre-tax loss in the past 22 years. The huge increase in airport passenger duty imposed on all British airports since November last year also dented the number of passengers transferring through BA, adding to the woes of the airline.


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