Iberia

Union support of US Airways' quest to take over American is a first step in a long merger process

Public support by American’s unions of a merger with US Airways is an unprecedented move, and reflects the years-long frustration that has built among American’s employees towards previous and current management. The employees see an opportunity to start fresh, and work with a management team that will cease blaming labour for the carrier’s plight. US Airways sees an opportunity to completely overhaul American’s lacklustre revenue management that has consistently produced results that pale in comparison to its peers. But many questions remained unanswered over the perceived strength of a combined network, and many tasks have to be completed before a merger gets remotely close to reality.

US Airways formally declared it was examining its options regarding American earlier this year, and tactically began courting the carrier’s unions to gain support for a merger of the two companies that would entail US Airways’ management taking charge of the new American. Unlike US Airways' attempt to take over Delta Air Lines in 2006 when it was restructuring under Chapter 11 and Delta employees rallied to block the deal, American’s employees are exhausted with methods management has adopted in negotiating new collective bargaining agreements during the last few years.

British Airways plans two phases to bring bmi, and its London Heathrow slots, to profitability

International Airlines Group (IAG) is targeting winter 2012/13 as its first opportunity to fully incorporate the 42 daily London Heathrow slots it will acquire as part of its purchase of bmi from Lufthansa, now approved by regulators with only minor concessions. The initial integration will look to bring the predominantly short-haul bmi operation to breakeven by increasing seat capacity on each slot pair, making network changes and leveraging IAG's marketing and distribution power on the inherited bmi network. The medium-term integration will see the short-haul bmi slots allocated for services on IAG carrier British Airways' (BA) long-haul operation, which is smaller than its major European rivals. BA will target emerging markets including Asia, Africa and Latin America.

This new and large increase in Heathrow capacity will require significant fleet adjustments, and already BA plans to delay retirement of Boeing 747 aircraft as well as to re-examine its purchase options, which it holds on 787 and Airbus A380 aircraft. It will also seek clarity from Boeing on its 777 successor programme.

Finnair’s new short-haul model has to be ‘ruthlessly’ low-cost, says CEO Vehviläinen

This is the year of Europe’s legacy carriers finally addressing their unsustainably unprofitable short-haul networks, and the answers so far have primarily been to strip costs out of existing models to make the carriers competitive against low-cost rivals. But Finnair’s decision to outsource its short-haul flying to a joint-venture partner suggests hybrid models can only achieve so much savings, while the structure of legacy carriers has inherent higher costs that cannot be taken out. Starting afresh becomes another, better, solution.

And a tabula rasa today in Europe, or at least Scandinavia, cannot be used to launch a hybrid carrier, Finnair CEO Mika Vehviläinen tells CAPA. Rather, when Finnair’s new short-haul operation commences in 1H2013, it must be “ruthlessly” low-cost, Mr Vehviläinen said. Yet this poses quandaries for Finnair’s business model of efficiently linking Europe with Asia as long-haul passengers, premium in particular, will be subject to LCC-style service on onward connections.

Conversely, lower-cost feeder flights could make Finnair’s long-haul services more price competitive.

airberlin makes no apologies for Etihad alliance after joining oneworld

airberlin this week proclaimed it would “take off for a shared future” with oneworld, but the carrier’s medium-term future is not with the global alliance but rather its new strategic partner Etihad Airways.

In the driver’s seat is airberlin CEO Hartmut Mehdorn, who after the carrier’s joining event in Berlin this week gave a frank assessment of the situation. “Of course,” Mr Mehdorn said of British Airways preferring to receive airberlin’s feed instead of Etihad. But conversely, few oneworld carriers serve airberlin’s namesake hub. “And we would prefer a flight to Berlin. It’s a give and it’s a take.”

airberlin can extract from oneworld only as much as member airlines fly to Berlin, which the majority do not do. The Berlin Government is working to incentivise companies to make Germany’s largest and capital city their home. From there more flights can flow, but this ambition has a long lead time. It is not irrelevant to ask if airberlin, knowing an Etihad alliance would eventuate, would have proceeded with oneworld membership.

airberlin joins oneworld alliance, but its full potential will not be immediately realised

The oneworld alliance on 20-Mar-2012 is welcoming airberlin as its 11th member, but the carrier's full potential will not be immediately realised.

airberlin's advantage is a continental European base, which oneworld lacks and barely had prior to the Feb-2012 collapse of Hungary's Malev. But the hub can only be utilised if oneworld carriers serve it, and so far they have been coy about adding services, preferring instead the country's –  and one of the world's – leading financial centres, Frankfurt, much to the disappointment of airberlin.

From airberlin's accession, oneworld will gain market share, but not only are SkyTeam and Star Alliance expanding as well, they are adding members in key growth markets. airberlin this week brings 38 new destinations to oneworld's network, although they are primarily leisure points and not the corporate destinations that bolster airline yields. The airline has evolved, with additional costs, from a low-cost carrier to a hybrid one targeting the corporate sector, but has yet to see a yield uptick.

American Airlines defends USD1 billion revenue growth plan

American Airlines has been under pressure to explain how it will increase annual revenue by USD1 billion by 2017. While the number may be daunting, it represents only a 4.2% increase in 2011's overall revenue of USD23 billion. Additionally, American has made revenue leaps before: a USD1.8 billion increase from 2010 to 2011 and USD2.3 billion from 2009 to 2010. It is difficult to separate out previous adverse trading conditions from structural changes, but American has outlined a very achievable agenda independent of revenue growth from any possible merger or acquisition.