Tuesday, November 17, 2009

BA Iberia Company Union - Air Freight Triumph or Cargo Disaster?

As Two Giants Attempt to Merge can it Succeed in Today’s Market?
Shipping News Feature

UK – SPAIN – The most talked about airline merger for some considerable time will see BA and Iberian Airlines tie up to form a powerful alliance. Or will it? And how will it affect the air freight business the two carriers currently handle. The answer appears to be – who knows?

The arrangement between the two has a definite whiff of panic about it when one considers that the whole deal has to be agreed by the EU. OK, maybe that might be a shoe in considering the parlous state of air traffic today, but the get out clause which the Spanish company has is a palpable sign of doubt as to the validity of the deal. If BA can’t sort out its pension fund deficit, and at £10.5 billion that seems no easy task, then Iberia walk away.

BA World Cargo reported first quarter results down over 28% in terms of revenue, 11.5% in terms of tonnage and results for the period only available on the last day of July, compared to other, much more rapid, reporting. Overall Iberia themselves posted third quarter losses of over $24 million making the cumulative loss for 2009 to $269 million as opposed to last years profit of almost $76 million. Cargo volumes for both companies shrunk by varying degrees in the periods, up to 25% and their logic for the union is economy of scale.

With both groups claiming less bad cargo figures than earlier in the year as a reason for hope, but with unions saying no job cuts to achieve desired results as essential, it is hard to see this being a marriage made in heaven. Since dropping the name British Airways and chopping the Union Jack from the tail planes of their aircraft, BA have been harassed and hassled on all fronts, particularly by the cheap passenger services. In the tough world of freight, with many traditional users now relying more and more on faster rail, road and sea freight links one cannot envisage a less than bumpy take off for this new attempt at rationalisation.