UK carrier in $33 billion US takeover, says the newspaper headline. Britain's leading carrier is to acquire 100 per cent ownership of its US alliance partner. The newly merged company will be domiciled in the UK but board meetings will alternate between the two countries.
US competitors are lobbying the authorities not to approve the transaction, but the partners believe that the merger will be permitted, on the basis that the deregulated UK market is open to competition from US players.
Does this story refer to British Airways and American Airlines? Of course not. It refers to carriers in a different business altogether - telecommunications. The deal, of course, is the proposed merger between British Telecommunications and MCI to create Concert.
This merger has sent shock waves through the telecommunications industry and the world's stock markets and is likely to increase the pace of globalisation. But the deal ought to set the airline community thinking, too.
There are many similarities between telecoms and airlines. Both sectors have been dominated by state-owned companies but are being deregulated and are shifting from monopoly markets to tough competition. Each is a high-technology business requiring substantial capital investment and customer-oriented employees. Both anticipate strong growth yet have a perishable product. There is a high public awareness of both industries.
It is astonishing that the Concert merger could not even be considered in the airline business. Airlines which seek to go global try to beat the ownership and control rules by forging alliances. Yet the BT/MCI deal offers yet more evidence that minority equity stakes do not go far enough; BT already owns 20 per cent of its US partner.
If the Concert deal is consummated, airlines had better look out. There is no fundamental reason why this deal should be permitted while cross-border airline mergers are disallowed, and it can only be a matter of time before this situation is remedied.
Arguments about national security no longer carry much weight, since governments could always charter airline capacity if required. Countries which feel that they need air links for strategic reasons tend to favour the current nationality-based system, but surely the same strategic considerations apply to telecoms?
The fact that the European Union has commenced an aviation dialogue with the US may provide a catalyst for the long-awaited overhaul of the ownership and control regulations. An EU-US open skies deal would have to include a common policy for airline ownership, in just the same way as any airline based in an EU country can be majority owned and controlled by any EU nationals. This would precipitate a worldwide collapse of the ownership rules, since there would be pressure on third countries to accept a US-owned, European-based carrier's request to serve those countries from Europe.
The chinks are now appearing in the armour of airline nationality restrictions. Next time you make a phone call, ask yourself whether the nationality of the telephone operator really matters.
It's all in a name
When the first transatlantic airline merger is eventually permitted, it cannot now be called 'Concert'. A quick look in a thesaurus reveals few alternative names that convey the same sense of unity.
Concord is out for obvious reasons. Harmony is a hair-spray and Unison is a UK trade union. That leaves Affinity, Amity, Empathy, Friendship, Melody, Rapport and Unity. No wonder today's airline alliances have resorted to such uninspiring epithets as Global Excellence, Worldwide Reliability and the now-defunct European Quality Alliance.
Quotable quotes
November's Iata AGM provided a rich source of quotations.
In discussing the Internet and ticketless travel, AMR chairman Bob Crandall introduced a note of sobriety by saying: 'There is no reason to believe that technology will make airlines more profitable.'
Jeff Shane, who is lobbying for Virgin Atlantic against the BA/American alliance, described the pair's Heathrow position as 'the world's most delicious oligopoly'.
Nikolai Gloushkov, deputy general director of Aeroflot Russian International Airlines, was unsure about foreign investment in Russian carriers: 'The legislation doesn't say yes and doesn't say no.'
A KLM official remarked: 'Airline liberalisation is too important to be left to airlines and civil aviation authorities.'
Singapore Airlines deputy chairman Dr Cheong Choong Kong wins first prize. 'Before I joined the airline, I was teaching logic at the University. Now you see how far I've come.'
Source: Airline Business
