Julius Baumann
3 December 2008
Johannesburg — BRITISH Airways (BA) said yesterday it was in merger talks with Australian airline Qantas, leading a fast-consolidating airline industry battling to shed costs as the global economic downturn takes its toll on profits.
BA said that it would also continue talks with Iberia to form the world's third-largest airline. Together the airlines are in talks with American Airlines on a transatlantic alliance.
"BA has previously said it is determined to be at the forefront of industry consolidation," said Blue Oar Securities airline analyst Douglas McNeill.
"They are out to create a global player, which is an audacious goal that would be difficult for any management team to pull off," he said.
A severely stressed airline industry struggling to come to terms with a sharp drop in passenger volumes, and the lingering effects of record- high fuel prices, have sparked consolidation and increased competition in the sector.
Last week the International Air Transport Association (Iata) said that in the first three quarters of the year losses in the industry totalled $4bn, with recession the greatest threat.
"Since the middle of the year traffic has fallen precipitously, with first air freight and then passenger markets declining," Iata said.
As a result airlines have reduced growth in capacity as carriers continue to trim their networks.
Iata said reduced capacity on international markets, together with large cuts on domestic US markets, was reflected clearly in the surge of aircraft being parked. Almost 200 aircraft a month were parked in September and October, up from an average of six last year.
BA's news follows Aer Lingus's rejection on Monday of a fresh approach from rival Irish low-cost carrier Ryanair, and October's move by Germany's Lufthansa to become British BMI's majority shareholder.
Lufthansa is vying with rival Air France-KLM to strike an alliance with Italy's bankrupt national carrier Alitalia.
Lufthansa announced last week that it would launch Lufthansa Italia, a full-service airline that will fly to eight European cities next year from Milan's Malpensa airport in an effort to take advantage of the gap left by the failed Alitalia.
The airline also plans to acqure Austrian Airlines.
With Reuters
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