BA & Iberia sign off on AA deal

Dino D'Amore
By Dino D'Amore September 29, 2010 00:28

BA & Iberia sign off on AA deal

British Airways and Iberia have finally signed a strategic alliance with American Airlines to cooperate on flights between Europe and North America.

“The joint business will launch this October,” British Airways said in a statement this morning.

“It will … enable the airlines’ alliance Oneworld to compete on an equal footing with the other main global alliances that have had regulatory approval to operate transatlantic joint businesses for several years.”

BA of course agreed an $8 billion merger with Iberia in April, creating the world’s third biggest airline and bringing it a step closer to a tie-up with AMR Corp’s American Airlines. The three airlines won approval from the US government and the European Union to work together in July.

BA shares are up on the news at 246p a share. BA shares have seen massive trading volumes over the past 12 months with a price ranging from 174.2p to 255.8p as the market tries and tries again to guess what is happening between the three airlines. AMR Corp shares are down slightly on the news.

There is no question that BA, AA and Iberia combined control the Atlantic (North and South) is bad news for the likes of Virgin Atlantic. At the time of publication Virgin Atlantic had not made comment – you can bet that this will change in the coming hours.

As consolidation (belatedly) gathers pace we are reminded of the fact, as mentioned by this team a few years ago, that this recession is the very best thing that could have happened to all airlines looking to consolidate. The very fact that deals of this sort are going through all across the globe reiterates the fact that government bodies cannot just stand by and let major flag carriers fail. As consolidation continues to gather pace we will see airlines carving out their own little corner of the globe of core routes, and of course we will start to see airlines left by the wayside, Aer Lingus looks that little bit weaker this morning and word is that the airline may go public during 2011 with a number of approaches to form closer ties, although we maintain that the best course of action to strengthen the Irish flag carrier is to tie the knot with Ryanair – something that could still happen as the Irish economy continues to slow.

See tomorrow for the view from an investment manager – a view that may now be tempered as he bought into BA/Iberia last week as the Spanish strikes were announced dipping the prices…

Dino D'Amore
By Dino D'Amore September 29, 2010 00:28
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