Cheaper fares on horizon as QF eyes global airline alliance

[Danger]

I couldn't find an online link so I'll reference as best I can.

The West Australian, 7 September 2010, p. 16 (state edition), by Geoffrey Thomas:

Negotiations are expected to start soon between British Airways and Qantas on the Australian carrier joining a global mega-airline group that could see fares slashed up to 30 per cent in the long term.

British Airways has identified 12 airlines as acquisition targets for the new London-based International Airlines Group which has been formed as a holding company. Those airlines are expected to involve all the partners in the Oneworld [sic] Alliance, of which Qantas is a founding member.

British Airways chief executive Willie Walsh said at the weekend that he expected the first deal between British Airways and Spain's Iberia to be "completed shortly". A Qantas spokesman told The West Australian yesterday that while the airline was not currently engaged in discussions, it was obviously interested.

"We have just renewed our joint services agreement with British Airways for flights to Europe and are cornerstone founders with BA in the Oneworld [sic] Alliance," he said.

Qantas and British Airways conducted merger discussions in 2008 but they were abandoned over concerns relating to BA's pension fund debts.

However, the new structure would keep airlines financially independent but allow for co-operation across a range of areas, including reservations, purchasing and maintenance, resulting in billions of dollars in savings.

According to industry observers surveyed by The West Australian, airfare savings "of up to 30 per cent could result".

One of the significant costs with planes is the customisation for airlines. Analysts say the savings for a bulk order of 500 planes for 12 airlines, instead of 50 for just one would be more than 20 per cent.
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[JohnK]

I don't think that merger/takeover is likely to happen anytime soon.

Call me a cynic but I also do not believe any airline in their right mind would pass on savings it has achieved through it's group bying power as airfare reductions. Why would they? They are gouging us now so I cannot see airfares decreasing just because of proposed mergers.

 

[samh004]

I still don’t understand why any of the other airlines in OW that are actually doing well, would want to join a holding company with a £4 billion blackhole because of BA’s mismanagement of funds?

And why does BA think every airline in the alliance wants to join them, after all, they’re not exactly the best! Should OW be worried, after all, it looks like BA is just trying to takeover the alliance… and when that happens I wonder what benefits might disappear… call me a cynic but there’s something fishy going on here.

The idea does have merit though.

And there is a thread on this already somewhere.

 

[JohnK]

I still don’t understand why any of the other airlines in OW that are actually doing well, would want to join a holding company with a £4 billion blackhole because of BA’s mismanagement of funds?

Isn't it all speculation for now? I don't believe this will get off the ground.

By the way didn't BA own shares in Qantas recently? Why would they want to get back in now? Private equity style?

 

[drron]

Reducing competition doesn't generally lead to lower prices.

 

[straitman]

I find it interesting that someone is finally pushing this as it was something I studied (I don't recall the subject name) as part of my Masters Degree in Aviation Management. The concept, in principle, has been around for quite a long time however like most of these things the implementation has proven to be difficult.

The alliances that we currently have are really just a first step in the process. Effectively what you end up with is two or three major conglomerates for the majority of the worlds aviation. For want of better names they can simply be called Red, Blue and White airlines.

 

[samh004]

Reducing competition doesn't generally lead to lower prices.

I think the idea is that they bulk order a/c and shave costs by using the same maintenance providers and such, while keeping individual brands. It’s a great concept, though I agree it probably wont go down like that at all.

It’s a shame airline alliances such as OW can’t do basically all of that without owning all the airlines in the alliance.