We’ve all seen the recent press coverage about British Airways’ proposed merger with Qantas, the Australian flagship carrier, that would create an airline network that would span the globe.  Is that good news or bad news for travellers?

Well it’s certainly a further sign of the stresses now facing the world’s airlines. With profits sapped by weakening economies and volatile prices for fuel, they are under huge pressure to cut costs and consolidate.

Consolidation
Ryanair renewed its bid for Aer Lingus recently, while Lufthansa has made advances towards Austrian Airlines and BMI.  And it’s not just Qantas that British Airways has in its sights.  Rumours persist that it is working towards possible mergers with Iberia of Spain and awaits antitrust approval for a planned alliance with American Airlines.

Growth in Asia
American Airlines, British Airways and Iberia signed a joint business agreement for flights between the United States and Europe in August 2008 and are presently seeking antitrust approval for that arrangement.  Some experts have said that a deal between BA and Cathay Pacific, which is well positioned for growth in China, would make more sense than one with Qantas.  But Qantas, with its reach into Asia, would complement British Airways with its strength on routes to North America and Africa, while Iberia would bring a broad network in Latin America.

A Global Carrier?
A British Airways/American Airlines/Qantas combination would deliver a genuinely global airline covering all time zones in both hemispheres flying 223 million passengers a year on a fleet of 1,565 aircraft.   There are existing relationships in place between British Airways and Qantas and others in the OneWorld Alliance.  Those ties do deliver advantages that would seem to be hard to improve upon if both companies merged.  The Australian government clearly intends to stick to a limit of 49% on foreign investment in Qantas to ensure that the airline remains majority Australian owned and controlled.  They do not seem to be opposed to one foreign airline buying 49% of the national carrier though.

Advantages?

Much as that might be seen to be a stumbling block to the deal actually going ahead, dual stock market listings could help the airlines get around that rule, but would complicate the situation for possible links with American and Iberia.  On the up side, at least a merged operation would continue flying and might even expand long haul routes throughout the world.  Operational synergies in booking, flight transfers, luggage handling etc would also make life a little easier.  Economies of scale should also operate across the new airline, so prices needn’t be impacted too heavily, even though choice could be reduced in terms of departure times, flight numbers and choice of departure airport.

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