Chris Jasper/LONDON
British Airways is to simplify its European franchises and subsidiaries network, confirming plans to buy the British Regional Air Lines Group (BRAL), and extending a deadline for bids for low-cost carrier Go, increasing the odds of it being bought by KLM. BA rival Lufthansa has meanwhile encountered regulatory hurdles in its bid for Eurowings, Germany's largest independent.
BA will offer £78 million ($115 million) for issued stock in BRAL, 26% of which is owned by British Midland chairman Sir Michael Bishop. Chief executive Terry Liddiard owns 6% and Schroder Investment Management 20%, with the rest floated. BRAL includes Manchester-based British Regional Airlines, a BA franchisee since 1995, and Isle of Man-based Manx Airlines.
BA is to merge BRAL with Bristol-based Brymon Airways, and retain Manx as a stand-alone operation, to "reduce fragmentation among subsidiary and franchise partners" and to focus on higher yield operations with smaller aircraft and higher frequencies. The BRAL and Brymon fleets include BA's first Embraer ERJ-145s, with 26 in service, four on order and 17 on option.
BA has also extended its franchise accord with Birmingham-based Maersk Air, originally due to lapse on 24 March, until the end of its summer season. The length of the extension calls into question the future of BA's relationship with Danish-owned Maersk, in doubt since BA began to build Birmingham into a second hub for wholly-owned Brymon. The airport is also a base for the BA Regional operation.
BA's decision to delay a decision on Go gives KLM more time to consider a bid for the London Stansted-based carrier. The Dutch airline's chief executive Leo van Wijk last week told Flight International that he was mulling a move for Go with the aim of merging it with Buzz as an enlarged low-cost airline. "We are exploring the options and we might decide positively or we might decide negatively," he says. "It's a complex issue and we will only do it if we can see the benefit. And the downside for us is certainly greater than for BA." BA has already rejected approaches for Go, with venture capital group 3i the other favoured bidder.
The UK airline meanwhile reports a good response to its new cabin product. With its fleet and in-cabin offerings restructured, analyst Chris Tarry says BA is now concentrating on retaining passengers. Capacity will be cut by 13% (rather than 10%) this summer compared with last, ahead of the expected US slump, although Tarry says it is now looking at growth plans for 2004 onwards.
German market consolidation is threatened after the country's federal cartel office said it would block Lufthansa's acquisition of 24.9% of Eurowings (with an option for 49%) in the absence of concessions to improve competition. CEO Jürgen Weber, complaining that similar purchases by Air France were waved through, says there will be no concessions, although talks will continue.
Source: Flight International
