It is just typical. You wait years for a big airline industry take-over story and then you get several arriving all at once.
First you had upstart Ryanair lodging a hostile bid for Ireland’s state favourite Aer Lingus. Then Flybe announced it had taken over BA Connect, the ailing regional services operated by British Airways. In America, US Airways launched a take-over bid for Delta Airlines. Now Australia’s own Qantas finds itself the target of a bid led by a private equity firm.
This in turn has led some to speculate that British Airways, the world’s favourite airline (sic), will itself become the next major player in the queue for a take-over attempt.
It is especially ripe for a take-over now that BA has got rid of the Connect operation that has been swallowing money for years (http://business.guardian.co.uk/story/0,,1954652,00.html).
Is this good news for us frequent and not so frequent flyers?
Although I hate to say it, the answer is on the one hand yes it will but on the other no it might not.
There is little doubt that the Flybe-BA deal could be very good for passengers, especially if the Exeter-based budget operator manages to iron out the various problems that has stumped British Airways in recent years.
Flybe has a very good track record of delivering cheap, efficient, customer-friendly services on short-haul UK and European flights. If it manages to transfer that winning formula across the new, greatly expanded route network it inherits from BA, then passengers will see the long-term benefits – as, of course, will Flybe itself (I deal with the possibilities and pitfalls facing Flybe in the posting The Mile High Risk Worth Taking elsewhere on this site).
It is difficult to see any long-term gains in the Ryanair-Aer Lingus scrap, other than for the no-frills pioneer Michael O’Leary himself. His early attempts to get Ryanair off the ground were almost scuppered by a concerted state-backed campaign in Ireland to safeguard Aer Lingus. It would be a personal triumph for the outspoken Mr O’Leary, who has a habit of rubbing the authorities up the wrong way, if he was to take-over Aer Lingus.
Whether the passengers would see any benefits remains to be seen. But Mr O’Leary is undoubtedly a shrewd businessman and there has to be more in his take-over bid than spite.
Qantas is a prime take-over target simply because it has proved very good at what it does. Both the long-haul operations and domestic services within Australia are successful, reflected in the reported £4.2bn approach from a consortium led by the Australian investment bank Macquarie and the US private equity firm Texas Pacific.
The bid is without doubt a serious attempt to take-over Qantas as it is structured in such a way to by-pass the tough regulations prohibiting international companies from acquiring more than 49% of the airline.
This type of approach would also need to be adopted by anyone considering a bid for BA and there are likely to be many parties watching the Qantas deal with interest. Indeed, the speculation alone saw BA shares rise by 2.1% to 491p.
Any bid for BA would easily top the Qantas deal, however, as British Airways hold the rights to highly-prized take-off and landing slots at Heathrow and by 2008 the airline will see all its operations consolidated at the airport’s new Terminal 5.
In terms of both the Qantas approach and any bid for BA, it is a case of “wait and see” for passengers as to whether it will improve services.
There is one large cloud obscuring the long-term picture for all airlines and that is climate change.
The environmental lobby has all our major forms of transportation firmly in their sights and the increase in air travel, both short-haul budget flights and long-haul services, has prompted a debate on whether airlines should be hit by higher taxes. This would have an obvious impact on passengers as a green tax would have to be passed on by the airlines.
Throw in the on-going uncertainty on the price of oil and fares could begin to rise sharply again as airlines struggle to meet operating costs.
There are huge potential short-term gains to be made by those launching take-over bids with profits soaring sky-high.
But the long-term situation is less assured and airlines could face turbulent times in the years to come.