British Airways has dealt a further blow to Gallic pride by winning the battle to take over insolvent Air Liberté, thereby strengthening BA's position in the French market.
The commercial tribunal in Creteil opted for BA's recovery plan for Air Liberté over a rival bid from Virgin Express. The BA plan aims to save 1,250 jobs at the troubled airline and return it to profitability within three years. BA will invest FFr440 million (US$85.9 million) of share capital in Air Liberté for a minimum 67 per cent holding, with French banking group, Rivaud, adding FFr190 million.
Marc Rochet, chairman of BA's French affiliate, TAT, will add the role of chairman and managing director of Air Liberté to his responsibilities. Apart from codesharing on Paris/Orly-Toulouse, the single route on which TAT and Air Liberté overlap, BA intends to keep the airlines as separate entities for now. However, Bertrand d'Yvoire of Consultair predicts that 'BA will definitely merge TAT with Air Liberté in two to three years'.
Air France responded by stating 'that it's up to us now to retaliate' against BA which now has 22 per cent of domestic capacity at Orly. The flag carrier may be preparing a defensive response by launching a bid for another domestic rival AOM, when the former's state aid restrictions are lifted after 31 December 1996.
BA is also strengthening its position in the German domestic market by restructuring its German subsidiary, Deutsche BA. The subsidiary is to launch eight daily flights from Munich to Hamburg and Cologne in 1997 and drop unprofitable routes from Munich to Paris and Madrid, and Berlin to Oslo. The airline will withdraw its Fokker 100s by late 1997 and focus its fleet on B737s. Managing director Richard Heidecker has stood down and has been replaced by Wolfgang Grund.
Deutsche BA says the changes are not a direct response to the revamp of Lufthansa's intra-European services, which includes a relaunch of business class. 'We're discussing other methods to react to Lufthansa's business class,' hints marketing director, Fred Itzeck. And with Deutsche BA focusing more on the domestic market, Carl Michel, head of business development, plays down Lufthansa's new premium product. 'It focuses on the European product - I haven't see any improvements on domestic services yet.'
Meanwhile, Virgin Express has consolidated its position in the Belgian market by securing a deal to operate Sabena's Brussels-Heathrow service. Sabena is wet-leasing three B737-300s from Virgin for its nine daily frequencies. Both carriers will sell seats on the flight but Sabena has an option to take its block-seat allocation above the 50 per cent level to cater for connecting traffic at Brussels. In a unique arrangement, only Sabena will sell the new business class product with Virgin attempting to retain its focus by selling economy seats only. 'This [deal] opens up a market we could not gain access to,' says chief executive, Jonathan Ornstein. He says the carrier is also developing interchangeable tickets with the Eurostar rail consortium, in which Virgin chairman Richard Branson has a stake, on the route. British Midland has a similar deal on London-Paris.
The outsourcing of a key Sabena route should send a positive signal to Swissair management, which had threatened to write off its 49 per cent stake in the Belgian carrier unless its unions agreed to restructuring.
Lois Jones
Source: Airline Business
