BA's dream of US alliance to take off at last
Willy Walsh is under seige, but his proposed deal with American Airlines will soon get the go-ahead
Sunday 23 May 2010
British Airways will receive approval to link with its rival American Airlines as early as next month – after a 14-year wait that will provide a rare piece of good news for its embattled chief executive, Willie Walsh.
Mr Walsh is banned from discussing details with the US carrier until American regulators formally agree the deal. But 7,500 staff are already being retrained and the alliance's roll-out, planned for August, will be run by an AA executive. BA, which recently agreed a merger with Iberia, has been trying to persuade regulators to allow the alliance since 1997, and has seen its share of transatlantic traffic decrease as rivals exploit open-skies opportunities.
Mr Walsh broke off from the airline's latest labour dispute on Friday afternoon to meet his biggest investors, telling them: "We're ready for this and ready to hit the ground running. We've done a lot or preparatory work." The go-ahead will contrast with the enormous problems Mr Walsh has faced this year. After freezing weather prevented many Christmas flights, the whole fleet was grounded by volcanic ash last month. On Friday, BA disclosed a record £531m loss as sales plunged by £1bn. Plans must be presented by next month for closing the pension fund's £3.7bn deficit – greater than BA's stock market value. The airline lost its legal attempt last week to stop cabin-crews striking from tomorrow, adding further costs.
Simon Talling-Smith, the BA vice-president, who will chair the new venture, said: "If we get our anti-trust immunity approval in June or July we expect to start rolling it out in August and have full implementation by October. We are now tantalisingly close to a dream we have had for 14 years."
Staff are being trained at Heathrow, New York and Dallas. They will sell the airlines as a seamless operation. The alliance will generate £5bn of sales and account for a fifth of transatlantic flights. "We are limited by the discussions we can have because of the anti-trust legislation but we know exactly how we are going to run the business as soon as we launch it," said Mr Talling-Smith.
BA, Iberia and AA will each have a representative on the management committee but the alliance will be run by an executive from the US partner, though he cannot take up the role until regulators give consent. Mr Talling-Smith declined to name him but said: "He's already been appointed."
Giving an American such a top role may concern some shareholders already critical that the Iberia merger will make BA a Spanish company with Spain providing the chairman, finance director and more non-executives.
The three airline brands will continue but their routes will be combined, adding 1,800 codes to BA's schedule. Staff, pricing, codeshares and management will be in place by October with timetables co-ordinated by next April. BA will have to forfeit four Heathrow landing slots to appease regulators.
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