Chris Jasper/LONDON
British Airways has placed European merger ambitions ahead of its long-held transatlantic objectives, signalling a further break with the strategies of deposed chief executive Bob Ayling. New boss Rod Eddington says BA wants to be part of the consolidation poised to take place in its own "backyard", while well-placed sources at the airline add that a codeshare deal with oneworld partner American Airlines is now a lower priority.
Dutch carrier KLM recently reiterated its plans for establishing an alliance via a merger with another European carrier - despite the failure of its deal with Alitalia. Some sources say it and BA are already engaged in talks aimed at securing an agreement in the near term. An alternative deal could see BA link with Swissair, which is not yet part of a global alliance.
Eddington, speaking as BA announced its worst result since 1987, said there had been "significant changes in the European aviation landscape". He thought more were likely, including "consolidation", adding that with Europe "our backyard" and "central to our alliance thinking", BA should engage in the merger process.
Eddington says that with new US-UK open skies talks set for mid-June, "we remain hopeful that there will be a breakthrough that will allow us to have our North Atlantic alliance on reasonable terms". BA sources say, however, that the new chief executive's lukewarm endorsement of the AA codeshare plan indicates a sea change in thinking.
"The European game is a higher priority than transatlantic matters," says one source. "There is room for consolidation in Europe, because it hasn't happened yet as it did in the USA 10 or 15 years ago. For us, there is more financial benefit there than from transatlantic matters in terms of revenue."
The source adds that BA sees "several opportunities", adding that although timing is not yet critical, "we have to be ready and able".
Eddington himself identifies three further targets for BA in addition to taking a leading role in European consolidation and meeting the challenge of competitors on North Atlantic routes. These, he says, are to rebuild staff trust, to foster network growth and to "adjust" the short-haul business to allow for the impact of low-cost carriers.
The emphasis on growth appears to formalise a shift away from strategies aimed solely at raising yields (Flight International, 16-22 May), although it is not clear whether BA's short-haul approach will see it expand low-cost subsidiary Go or modify London Heathrow and Gatwick-based European operations to take account of new market realities.
BA's results for the year saw the airline report a £5 million ($7.4 million) pre-tax profit, down by 98% on last year. Revenues were slightly up, at £8.94 billion.
Before exceptional gains, the carrier made a loss of £244 million. Operating profit fell by 81% to £84 million.
Source: Flight International
