Company Watch - British Airways

AirGuide Business, May 5, 2008

May 5, 2008

British Airways came bottom in the Association of European Airlines[sup.1] table for punctuality and baggage-delivery for the January-March period. The carrier has mislaid 28.9 bags per 1,000 passengers since January, the disastrous launch of Terminal 5 being a large contributing factor. May 4, 2008

British Airways share price rose 9.25p (4%) this morning May 1 as it confirmed it is in talks with US competitors to co-operate more closely. When Continental broke off merger talks with United Airlines on Monday the carrier[sup.1]s chairman and CEO Larry Kellner indicated that a change of airline alliance may be on the cards to see the airline through the current tough economic times: [sup.3]We are considering alternatives to SkyTeam as we carefully evaluate which major global alliance will be best for Continental over the long term,[sup.2] he said. May 1, 2008

Delta Air Lines and Northwest Airlines, which struck a merger deal earlier this month, received approval earlier this month from US transportation regulators to broaden their alliance with Air France KLM, Alitalia and other overseas partners. A full merger between British Airways and one of the US carriers is unlikely, given that US law caps foreign ownership of US airlines at 25 percent of voting stock. European carriers are hoping that the second stage of "Open Skies" will lift those limits by 2010, but US union groups and politicians are broadly against it. Earlier this year Lufthansa bought a 19 percent stake in US discount carrier JetBlue Airways, but no full-scale trans-Atlantic mergers have been attempted. The British Airways spokesman would not comment on the possibility of a full-blown merger. ABN AMRO analyst Andrew Lobbenberg said that it would not be allowed by regulators. British Airways Chief Executive Willie Walsh told a conference earlier on Wednesday that restrictions barring the possibility of a merger with a US rival should be lifted. "Airlines may be more sympathetic to consolidation than in other eras (due to the tough climate)," he told the Institute of Directors conference in London. May 1, 2008

British Airways to boost fuel surcharge on flights British Airways says its newly announced increased fuel surcharge reflects the company's efforts to combat the high price of oil. Prices for flights outside Europe will increase by as much as $60 per round trip, BA said in a statement. The increased surcharges will apply to all flights booked after Friday. Apr 30, 2008

British Airways today increased its fuel surcharge on all tickets issued from Friday 2 May. Surcharges on British Air[sup.1]s short-haul services rise by [pounds sterling]3 to [pounds sterling]13, by [pounds sterling]10 to [pounds sterling]63 on long-haul flights of less than nine hours, and by [pounds sterling]15 to [pounds sterling]79 on all longer flights. A host of airlines has been raising fares, fees and fuel surcharges in recent weeks as the price of oil keeps hitting record highs - it was nearly $120 ([pounds sterling]61) on Monday. And this morning[sup.1]s news was that both Shell and BP announced better-than-expected first-quarter profits of [pounds sterling]3.9bn and [pounds sterling]3.31bn respectively. Apr 29, 2008

British Airways, also quick to offer help to Eos passengers, is planning on starting business-only flights from London City to New York in 2009, the flag-carrier has obvious advantages over those that have fallen. It ordered two Airbus A318 aircraft to operate the route - each to be fitted with 32 seats - and British Air CEO Willie Walsh said when he announced the service: [sup.3]As well as the business market, we are confident that there will also be a demand from premium leisure customers for this service. [sup.3]The A318 is the perfect aircraft for these flights. It is large enough for us to provide the number of business class seats required to make this a viable operation.[sup.2] Apr 28, 2008

American and British Airways already have an alliance through the 10 member OneWorld alliance, but have twice tried and failed to win antitrust immunity for it. If Continental opted to join with British Air and American Airlines, it would likely spell the end of its trans-Atlantic codeshare arrangement with British Air's rival Virgin Atlantic. Limited immunity from US antitrust laws permits air carriers to coordinate schedules, route planning, and services over international routes. It offers more seamless connections and other benefits that can maximize revenue. Alliances with immunity have been coveted and lucrative, and easier to pull off internally and with regulators than a merger. Regulators have long been concerned that stronger American/British ties would jeopardize competition at London's Heathrow Airport for other US carriers. But air travel restrictions have eased under a US/EU "Open Skies" agreement that took effect in March, creating new opportunities for trans-Atlantic air services. May 1, 2008

A British Airways and American closer alliance would be highly competitive in the new Open Skies market. Sir Richard Branson, Virgin Atlantic president, said: "When BA and American first tried to get together a decade ago, the regulators ruled it was against the consumer interest. Nothing has changed. A link-up between BA and American is still anti-competitive and now they have the cheek of trying to add Continental to the mix too. [sup.3]This triple whammy would reduce effective competition across the Atlantic and the regulators should make it absolutely clear that it would have no chance of getting off the starting grid. This combination would act against the interests of passengers and Virgin Atlantic will fight tooth and nail to ensure that regulators say no way British Air/American/Continental.[sup.2] There is media speculation that a full merger between British Air and American is back on the cards, but their previous attempts were thwarted by regulators demanding too much in return in the form of relinquished Heathrow slots. May 1, 2008