Posts Tagged ‘BA’
Do JAL’s suitors understand that sometimes you can’t always get what you want?
JAL's future could be solely a Japanese question (Photo C. Stewart 2009)
At the American Airlines Fall Management Conference, CEO Mr Gerard Arpey stated that JAL would not benefit by leaving the OneWorld alliance. A day later AA CFO Tom Horton followed-up by saying JAL would “have have difficulty clearing regulatory hurdles if they sought antitrust immunity for closer business ties with another alliance. ” In fact, AA has clearly alluded it would oppose any such move.
There is no argument that JAL is in serious financial trouble, and perhaps even less of an argument that Japan may yet be the next sovereign national default. That could even be part of the AMR strategy, as they begin to see their chances with a mutual AA/BA eclipsed slightly by BA/Iberia- and the delay U.S. governments official ruling on this important subject.
Even in that light, Mr. Arpey’s recent comments represent, at best, a fundamental misunderstanding of his Japanese partner’s cultural approach to business. At worst they demonstrate yet again a narrow U.S.-centric view of the global aviation industry. Even if JAL would make a comment, which they wouldn’t, statments of this calibre would generally only serve to further isolate AMR from this important strategic partner both culturally and financially.
I personally know the ladies and gentlemen of AMR to be clever, erudite, and savvy people. I respect them. In my opinion, however, I have seen them demonstrate a repeated weakness through the years. This weakness comes in two parts. First is to unabashedly apply US style business approaches in places where an alternate approach may be advisable, and the second is to rely on US O/D traffic on most int’l routes to an excess that isolate them from some local markets. Ironically, this appears to not a mistake shared by all of their US competitors.
I do not believe that AMR, DL and the rest of JAL’s recent suitors could have been unaware of Japan’s much stricter foreign ownership rules, which make U.S. ownership appear positively liberal. They also could not have been oblivious to the complexities of lobbying a new Diet that has barely taken office for a change in laws related to restrictions on simple equity stakes. Add into mix the potential suitors intense interest in Haneda, and then overlay the already contentious presence of Macquarie Bank in Haneda financing chain, and I think what you will find is a perfect storm. In my view, it is a storm that has already taken both JAL and the new Japanese Government to a more isolationist stance.
I would even go so far as to hypothesise that JAL simply and strategically used the OneWorld and SkyTeam interest to their own political advantage, never fully intending the follow through with a financing offer without first doing what the foreign carriers could not- lobbying their own government.
JAL knew that the guaranteed financing was in place prior to the landslide election victory by the Opposition Democrats. Now that that money had evaporated in a single August evening, a sense of careful self preservation became the focus. JAL had to demonstrate contrition for their failures through management shake-ups and uncomfortable cultural issues around lay-offs and pension issues, and painful semi-public audits.
Simultaneously, however, it also began to draw a picture the new Hatoyama government what life might be like with another major Japanese company, some say even the “flag-carrier”, being funded by non-Japanese- and with access covenants that may not have been in best interest of any Japanese carrier.
The manner in which the Opposition Democrats have responded to the JAL crisis only further proves that there are discrete and delicate cultural issues at play here that must not be ignored. The most telling demonstration of this is the first radical change in government in over fifty years was swept to power on a wave of promises to reform government handouts to corporations chose to break with their own platform of reforms within weeks of taking office. This very public break with policy came in the form of mixture of guarantees and promises of further support measures for JAL on the condition of reform.
One of the most painful reforms is the requirement for JAL to cut their pension by a two thirds consent of it’s retirees. It is this requirement that has JAL seeking professional mediation.
While most western carriers such as BA and AA are no strangers to pension shortfalls, this is a more difficult issue in Japan. Japanese culture still holds on to the idea, even if it is an illusion, that a company has a tacit understanding to look after the employee during the course of their lives. While the reality has been quietly changing over the past decade, and represents one of the core changes occuring in Japanese society, it is difficult for for the culture as a whole to adapt to this particular change.
Overall JAL has most likely “shelved these discussions” with AMR and DL and moved on to chart it’s own course. It is a mixture of national pride, culture, and their potential to turnaround that make it plausible that JAL can chart an independant course.
As for AMR and Mr. Arpey, you would think that he of all people should know that threats, no matter how veiled, rarely will win you many friends in Japan- much less help you conclude a successful deal.
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JAL charts an independent course to find clear air
JAL does it "Their Way"
What a month it has been for Japan Air Lines! Prior to the Japanese elections at the end of August, which swept Yukio Hatoyama and the Opposition Democrats to power for the first time in 54 years, JAL believed it was to be the recipient of a carefully crafted short-term financings package with the previous government.
This left the normally conservative JAL with a serious problem, and as other carriers have already long ago realised – there were very few places to turn for funding. So what is Asia’s largest carrier to do when it finds a new government that came to power on a promise to wean Japanese Corporations off of preferred public funds?
A Helping Hand
Well we did not have to wait long to find that other carriers were more than interested in lending a helping hand. From OneWorld partner American Airlines leading the charge to Tokyo, to SkyTeam’s Delta it suddenly seemed that there was ample opportunity for JAL to forge new partnerships. Soon, some of the larger members of the major alliances were scrambling to put together a deal. In that frenzy of activity, including AA’s major liquidity drive which found them with 2.9MM USD in cash for various strategic moves, a few finer points seemed to be being papered over. To keen observers of Japan, none of these ovetures really seemed to fully add up. From talk of mergers to liquidity buyouts it seemed as though the principals and the mainstream reports all but ignored some of the more practical issues with Japanese ownership laws, which make US foreign ownership rules look positively liberal.
I would not want to play chess with JAL
The whole affair also seemed to focus on the partnership possibilities and missed some of the all important cultural cues that caused some to wonder if JAL were not just strategically playing their suitors. Surely JAL has to know at the start that without a swift and unlikely change in Japanese law, at best, they could only accept well under 10% of any liquidity offer that included stocks and other securities.
Also surprising was the move by JAL’s potential suitors, as none of the carriers involved in the negotiations could actually be accurately described as in a position to throw a financial lifeline to a new partner. Of particular mystery was AA/BA’s combined approach, with AA’s health only now beginning to stabilise and BA being self described as being in a “critical cash position”. So tenuous is BA’s position that they recently asked staff to voluntarily forego a month of pay, or work a part-time schedule. Delta is still wrapping up the final costs from it’s acquisition of Northwest Airlines. So what was in it for them? Access to the lucrative Japanese market and the coveted slots of Haneda were a good start. Having a foothold in once of the densest markets in Asia was certainly another.
I did it ”My Way”
During the past month none of this ever really added up for us at TWC. Now in the wake of the Japanese Government and the Japanese Development Bank’s latest promise of support and assistance, and the caveats that come with it, will JAL be able to navigate its way to clear air? We would argue that while cultuarally Japanese companies, and their employees, still want to fulfill the covenant of lifetime employment, it is no longer practical. It is a positive sign that JAL make the hard choices that other carriers have already had to make in recent years. I do not think that we should underestimate the pain and cultural complexity that they will have to negotiate while cutting the bottom line. In many ways it will be harder than in the right-to-work culture found in the U.S.
So as JAL’s President steps down- some would say in less-than-honourable circumstances- the carrier is this month intensifying the scale and depth of its voluntary restructuring. Having been with three carriers who stared down insolvency, and two who succumbed, all I can think is no matter how hard the cuts, there is no replacement for charting your own voluntary course through these hard times. I wish JAL nothing but luck as they do things “their way”.
la demande d’immunité antitrust de AA/BA est justifiée
pourquoi la demande d’immunité antitrust de
AA/BA est justifiée
Art © TWC 2009
Lorsque American Airlines (AA) et British Airways (BA) ont déposé une demande d’immunité antitrust en 2002, l’espoir était mince qu’un accord puisse être conclu avec les autorités chargées de la réglementation aux USA et dans l’Union Européenne. Les nouveaux venus sur le marché UE-USA étaient interdits, et AA et BA étaient des sociétés concurrentes approchant un monopole effectif détenu sur les départs quotidiens entre Heathrow et les USA.
Au bout du compte, les passagers ont désormais un choix plus vaste que jamais de transporteurs, de niveaux de services et de nouvelles destinations sans escale. En conséquence, les clients des deux côtés de l’Atlantique devraient inciter leurs législateurs à approuver la demande d’immunité d’AA/BA.
Malgré ces changements concurrentiels, certains groupes de consommateurs et des concurrents tels que Virgin Atlantic (VA) se sont opposés avec véhémence à cette proposition. Virgin Atlantic prétend que si l’accord devait être approuvé, AA/BA auraient une mainmise sur les services Londres Heathrow-US, et pourraient suffisamment coordonner leurs plages horaires pour augmenter la demande, et donc les tarifs. Alors que l’immunité antitrust aurait, sans aucun doute, un certain impact sur la fréquence et les horaires que coordonneraient les deux transporteurs, au bout du compte, la demande des consommateurs et la pression des nouveaux concurrents permettrait de surveiller les tarifs et de fournir un choix alternatif de compagnies aériennes aux passagers à une échelle auparavant indisponible.
Depuis la mise en œuvre de l’accord Open Skies, nous avons vu de nombreuses compagnies telles qu’Air France, Delta, US Airways et Northwest commencer à défier les compagnies établies sur le marché Heathrow-USA. Alors que le ralentissement économique a temporairement réduit les efforts d’expansion de certaines compagnies comme Air France, ils sont l’exemple d’une concurrence saine découlant des marchés ouverts.
De plus, il existe un sérieux candidat potentiel sur le marché Londres-USA. BMI (BD) a redoré son blason auprès des passagers professionnels durant les derniers mois. En tant que seconde compagnie aérienne d’Heathrow, établir des liaisons directes vers les USA serait-il si lointain pour elle? La récente augmentation par Lufthansa de sa participation dans BMI est une autre preuve de la force et de la concurrence émergentes de Star Alliance qui travaille déjà sur le marché d’Heathrow en bénéficiant de l’immunité antitrust.
Ces dernières années ont également vu d’importantes expérimentations avec les liaisons transatlantiques entre d’autres aéroports londoniens tels Stansted et Luton, avec des résultats mitigés. Un changement tout à fait radical s’est produit à Gatwick lorsque des compagnies ont transféré, sous la forme d’un quasi-exode, leurs opérations de Gatwick à Heathrow peu après la mise en place de l’accord final sur Open Skies. Virgin Atlantic a également une opportunité unique de redéfinir l’expérience aéroportuaire Londres-USA puisqu’elle dirige un consortium qui propose de racheter l’aéroport de Gatwick à la British Aviation Authority (BAA). Si son offre est acceptée, la société aura l’occasion de faire préférer un autre aéroport qu’Heathrow à ses clients, grâce à une expérience aéroportuaire supérieure.
Globalement, nous pensons qu’il n’existe aucun argument convaincant pour s’opposer à la demande d’AA/BA pour la même immunité qui a déjà été accordée à de nombreuses autres alliances dans l’UE et aux USA. Nous pensons que son approbation permettra aux alliances des compagnies aériennes de lutter à armes égales, augmentera les pressions et au bout du compte, bénéficiera aux consommateurs.
Clause de non-responsabilité : les opinions exprimées reposent sur l’analyse continue de l’équipe de TWC et sont soumises à nos Conditions d’utilisation. L’auteur ne possède pas de contrats actifs, d’actions ou de titres dans l’une des sociétés mentionnées dans ce rapport au moment de la rédaction de cet article. Cette analyse/ce rapport sont uniquement rédigés à titre informatif.
BA AVRO RJ100 loses nose gear during “hard landing” at London City Airport
LATEST UPDATES:
14 Feb 0700 Local: London City Operations Officials advice they are returning to normal- flights subject to delays.
14 Feb 12:15 Local: Sources close to the situation have confirmed that one passenger was hospitalised overnight, and one was treated at a local hospital and quickly released.
BA8456 after nose gear collapses on landing at London City - Reuters
The Situation
This evening at approximately 1810 local, a BA CityJet AVRO RJ100 suffered what BA called a ”nose gear failure on landing at London City Airport.” The flight was BA 8456 operating from Amsterdam to London City.
Current reports from BA public relations manager on duty, Sophie Greenyer, indicate that there were 67 passengers and 5 crew members involved in the incident. Upon landing the front nose gear appears to have failed causing the aircraft to skid to an halt on the single runway at London City in with a shower of sparks.
Eyewitness Accounts
One airport worker described turning toward the single runways after he heard a “loud noise” and saw sparks flying from the bottom of the aircraft as is skid to a stop just over halfway down the useable runway.
Passenger Justin Fletcher who was on-board the flight from Amsterdam to London City has been quoted by The BBC as saying he heard “a loud thud” that was presumably the front of the aircraft hitting the runways after the gear failure. He also advises that all passengers “evacuated immediately” and also that some suffered cuts and bruises.
The Official BA Statement
The official statement from BA Media Relations advises the following:
“The nose-gear of a British Airways aircraft suffered a failure on landing at London City Airport this evening.
The BA8456 from Amsterdam had 67 passengers and four crew on-board; all of whom were evacuated.
As a precaution the emergency slides were deployed and the passengers were evacuated down the slides onto the runway. Unfortunately one passenger sustained a minor injury and is currently on the way to hospital.
There was one other minor injury.
We don’t know the nature of the injury or how it was caused yet.
Our priority at the moment is to ensure all the passengers involved in the incident are well cared for by our ground staff”
London City Airport Closed as a result of the incident
London City Airport, which has a single runway, has reported the airport is now closed to both inbound and outbound traffic. Airlines are making appropriate provisions to land at alternate London airports.
Note on Scene Photo 13 FEB: We were contacted by the BBC today and advised that we had “taken or used” their photo of the scene. We would like to clarify that we received the photo via MMS from a local airport contact w/ ramp access (when you have been in the airline business as long as we have you get to know people) At the time we were not aware that he was sending it to the BBC- or others- and we made a choice to publish the photo. We are now using a stock photo that we purchased from our supplier Reuters.
Why Airlines will continue to have mergers issues: Pensions Plans and Outdated Union Contracts
Executive Summary
- There will be wave of additional industry consolidation in Europe over the next year
- Pension Underfunding is playing a key issue in failed merger talks from BA/Iberia to even BA/Qantas. While it is talked about as “valuation issues”, one of the largest is pensions and benefits
- While the EU Competition Commission is not likely to have changed its view on EI/FR, another suitor could put together a new bit Irish and EU regulatory backing
- Failed startup carriers like Silverjet and Eos may have been underfunded, but they avoided some of the legacy cost issues now plaguing the industry.
- BA needs to gain approval for its Merger with American Airlines- which we support fully. That union is becoming even more important as the economic climates- and cargo and passenger numbers fall
- There are parallel lessons for the airline and auto industry when it comes to organized labour.
To say that Aer Lingus has been on defense as of late is an understatement. I am personally impressed by both the airlines management and Irish Governments handling of the Ryanair bids, with the exception of the golden parachute for senior execs, that was later retracted. Today there is even rumour of fresh takeover talks from the Merrion Stockbrokers team.
No potental takeover bid can be successful until the potential suitor has an answer for what will happen with under-funded pensions and long-term labour contracts. Until this happens nearly all airline merger talks will end in tears.
In the case of Aer Lingus, the Irish State should not be left holding the bag for the debts, Alitalia style. Nor should the good people of Ireland need to face up to what US Authorities did with United Airlines in 2005, where the Federal Pension Guaranty Corp took over the airlines pensions for an exchange in a stake in the new United Airlines.
There are some also some new harsh realities out there that airline labour needs to face up to. No where is this more true than at Air France where pilots routinely appear to strike due to minute changes in retirement dates and work rules.
This is a now all too recurring theme in the airline sector, as earlier this week BA was said to have been valued below fellow oneworld partner Iberia. One of the key reasons for this financial faux-pas is that BA owes its pension fund a good deal of cash and is not current with contributions. While Walsh is out there claiming the any deal that does not value BA above Iberia is “not acceptable” to BA shareholders- why are those same shareholders not demanding answers on the pension underfunding?
I am no fan of these pension obligations, and were I a shareholder I would be asking management some serious questions about how they are going to solve this pension shortfall, or ultimately it is not the shareholder, but rather the EU taxpayers that will start footing the bill.
One of the reasons that we as consumers should be sad to see some airlines like Silverjet, Eos, and Sterling go is that that they knew the secret: don’t create a labour contract or pension plan that you cannot afford. Instead, be good to your employees, and create an innovative, agile, and fun environment in which to work. We feel that Virgin may well have the right balance here at the moment. In addition, American Airlines has managed to create through shared-sacrifice a stronger relationship with its organized labour, at the cost of ousting of their former CEO (Bob Crandall) in order to regain credibility.
This bring me back to a key point that I plan to continue supporting which is the AA/BA anti-trust application should be given fast track approval by the EU Competition Commission, as they currently are in a position to make a merger work. They have the cash, the teams, and will be able to get concessions to harmonise workforce rules. These are going to be keys to long-term viability. Other truly viable applications should also be given the same treatment. Ryanair and their bid were unrealistic and bad for EU consumers.
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