Commentary: Why BA deal needs strings attached

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The Independent Online
Supposing British Airways is given the all-clear by the regulatory authorities to take over Dan-Air: 1,900 staff will lose their jobs, Dan-Air's charter business and more than half its scheduled route network will disappear and BA will have succeeded in knocking out its main competitor at Gatwick. That sounds more like ransack than rescue.

Who else benefits? Certainly not Dan- Air's shareholders, who were denied the opportunity to vote on the sale of their company for pounds 1. Certainly not most of Dan-Air's employees (even the 400 being taken on by BA are being offered markedly inferior pay and conditions). And certainly not passengers, who will have one fewer airline to choose.

Indeed, other than BA, the only obvious beneficiaries are Dan-Air's trade creditors and bankers, who will get their money back, since BA is paying pounds 35m to cover liabilities not met by assets.

We are told that since Dan-Air was a basket case and since BA was the only suitor in town, there was no obvious alternative to receivership. There is some force to this argument.

Richard Branson could have bought Dan-Air with the small change from the sale of his music empire to Thorn EMI but chose not to do so. British Midland, backed by SAS, could have done likewise but did not, maintaining it was denied the full access to Dan-Air's accounts required to reach a decision.

But the fact that only one bidder was left standing at the end of this particular auction should not obscure the real challenge to competition and the UK's so- called multi-airline policy.

BA, no doubt recalling the constraints that the European Commission imposed on its takeover of British Caledonian, has cleverly avoided the beady eye of Brussels this time round by structuring the deal in such a way that, on turnover grounds, it does not qualify for examination by the EC's mergers task force.

That leaves the ball firmly in the collective court of Sir Bryan Carsberg at the Office of Fair Trading, Christopher Chataway at the Civil Aviation Authority and, ultimately, government ministers.

It would be a sad reflection on UK competition policy if BA were allowed to proceed without making any concessions to safeguard consumer choice. That means making headroom at Gatwick and Heathrow for others to compete, if necessary at the expense of the dominant flag-carrier. For who is to say that this will not provide more variety, more jobs and superior air services in the long run?

BA says it will not accept any deal with strings attached. Realistically, it must expect some. The point at which these begin to outweigh the advantages of swallowing up Dan-Air remains, of course, a matter for BA's commercial judgement.

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