Merger british airways and iberia
Páginas: 6 (1435 palabras)
Publicado: 30 de enero de 2011
Description of the negotiation parties
Created in 1974, British Airways is the national airline company of the United Kingdom. It operates domestic and international flights to 150 destinations from its main hub Heathrow London. BA is the third largest European airline after the group Air France – KLM and the German Lufthansa. Experiencing economic troubles and several employees strikes thoselast two years, BA’s 2010 revenue were closed to €9.1 billion (down 11% of the previous year).
As the flag carrier airline of Spain, Iberia operates domestic and international flights from its main hub in Madrid-Barajas airport to 120 destinations. Founded in 1927, Iberia is the leader for the transportation of passengers between Europe and South America. Although its turnover in 2009 was €4.2billion, Iberia recorded a loss of €273 million.
Description of each party’s goals
Due to the tremendous difficulties those last two years for the airline industry, both British Airways and Iberia’s main goals are cost savings. The combined company estimates that from year five the new company will save more than €400 million through synergies. Besides, the merger would lead to more efficiency andenable both companies to extend their routes so as to better satisfy their customers and generate more revenue. Then, by creating the third largest European airline, BA and Iberia will be able to compete more efficiently with other major airline companies. Finally, an important point for completing the merger was the influence and power each company will have. Both companies wanted their currentexecutives and CEO to become the new leading managers of the new company. Moreover, the place of the global airline headquarters is essential for both companies in order to keep control over the operations. Finally, since British Airways own 13% stake in Iberia, BA struggled in order that its shareholders retain 56% ownership of the new company.
Description of each party’s realisticalternatives
The best and more realistic alternative for British Airways was to explore potential mergers with other airline companies. A relevant potential partner for British Airways was the Australian flag-carrier Qantas that would have allow BA to combine its strength in Europe and across the Atlantic with Qantas’ presence in Asia. At the same time that British Airways was negotiating with Iberia andQantas, the company was also in talks with American Airlines so as to create a joint transatlantic business.
Iberia was quite surprised with the talks of BA to merge with Qantas. Besides, BA’s pension problems - deficit of £3.7 billion (€4.2 billion) – alarmed the executives of Iberia. Thus, Iberia’s alternative was to call of the merger. The company didn’t enter in talks with other companies.Description of the indirect actors and interested observers and their stake in the negotiation
American Airlines: Since 1996, the company has been in talks with British Airways to operate jointly on flights between Europe and the United States. The negotiations between BA and Iberia have an important impact on the future relationship of the companies: AA had a key role in the negotiation.
Qantas:The airline was in talks with BA at the same moment than Iberia. It had the power to offer a better alternative to BA.
The European Commission: The European Union has rules on fair competition; the European Commission stated some objections regarding the merger between BA and Iberia, plus the partnership with American Airlines; the companies needed its approval to merge.
Competitors:Competitors have been consulted by the European Commission and the US government on concessions that the three companies are willing to do so as to avoid monopoly and encourage fair competition.
Description of the negotiation process
The collaboration between British Airways and Iberia started in 1998 with BA taking stake in Iberia. In 2003, both companies started cooperating on routes between Spain...
Created in 1974, British Airways is the national airline company of the United Kingdom. It operates domestic and international flights to 150 destinations from its main hub Heathrow London. BA is the third largest European airline after the group Air France – KLM and the German Lufthansa. Experiencing economic troubles and several employees strikes thoselast two years, BA’s 2010 revenue were closed to €9.1 billion (down 11% of the previous year).
As the flag carrier airline of Spain, Iberia operates domestic and international flights from its main hub in Madrid-Barajas airport to 120 destinations. Founded in 1927, Iberia is the leader for the transportation of passengers between Europe and South America. Although its turnover in 2009 was €4.2billion, Iberia recorded a loss of €273 million.
Description of each party’s goals
Due to the tremendous difficulties those last two years for the airline industry, both British Airways and Iberia’s main goals are cost savings. The combined company estimates that from year five the new company will save more than €400 million through synergies. Besides, the merger would lead to more efficiency andenable both companies to extend their routes so as to better satisfy their customers and generate more revenue. Then, by creating the third largest European airline, BA and Iberia will be able to compete more efficiently with other major airline companies. Finally, an important point for completing the merger was the influence and power each company will have. Both companies wanted their currentexecutives and CEO to become the new leading managers of the new company. Moreover, the place of the global airline headquarters is essential for both companies in order to keep control over the operations. Finally, since British Airways own 13% stake in Iberia, BA struggled in order that its shareholders retain 56% ownership of the new company.
Description of each party’s realisticalternatives
The best and more realistic alternative for British Airways was to explore potential mergers with other airline companies. A relevant potential partner for British Airways was the Australian flag-carrier Qantas that would have allow BA to combine its strength in Europe and across the Atlantic with Qantas’ presence in Asia. At the same time that British Airways was negotiating with Iberia andQantas, the company was also in talks with American Airlines so as to create a joint transatlantic business.
Iberia was quite surprised with the talks of BA to merge with Qantas. Besides, BA’s pension problems - deficit of £3.7 billion (€4.2 billion) – alarmed the executives of Iberia. Thus, Iberia’s alternative was to call of the merger. The company didn’t enter in talks with other companies.Description of the indirect actors and interested observers and their stake in the negotiation
American Airlines: Since 1996, the company has been in talks with British Airways to operate jointly on flights between Europe and the United States. The negotiations between BA and Iberia have an important impact on the future relationship of the companies: AA had a key role in the negotiation.
Qantas:The airline was in talks with BA at the same moment than Iberia. It had the power to offer a better alternative to BA.
The European Commission: The European Union has rules on fair competition; the European Commission stated some objections regarding the merger between BA and Iberia, plus the partnership with American Airlines; the companies needed its approval to merge.
Competitors:Competitors have been consulted by the European Commission and the US government on concessions that the three companies are willing to do so as to avoid monopoly and encourage fair competition.
Description of the negotiation process
The collaboration between British Airways and Iberia started in 1998 with BA taking stake in Iberia. In 2003, both companies started cooperating on routes between Spain...
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