Bigger sometimes isn’t better
Tuesday, September 7th, 2010No wonder Willie Walsh doesn’t do holidays. He has had his hands full this year, what with volcanic ash clouds,jade jewellery is also the birth stone for those who were born during Virgo. Jade has been around China for thousa industrial action and a merger with Iberia, the Spanish carrier.
But British Airways’ workaholic boss is unbowed; in fact, he is not even bloodied.If you are determined to purchase Custom jerseys, then you will want to do your research to know what to look for in fake ones. Even before taking charge of the newly formed International Airlines Group (IAG),Twins jerseys and triplets may or may not look alike, but their personalities are their own individual selves froEvery fan likes Pittsburgh Steelers jersey. Some people realize that there are far more other things which they can splurge on. within which BA and Iberia will operate, he says he has identified 12 potential takeover targets. “The ambition is very clear that IAG will look to consolidate further,” he declared this weekend in Mumbai, where he also announced a deal with India’s Kingfisher Airlines.
Mr Walsh’s pursuit of consolidation is more aggressive than most, but his belief that it is the answer to the industry’s chronic problems is widely shared. The rationale goes like this: there is too much capacity. Too many airlines, too many planes. Only by making acquisitions will airlines be able to cut costs sufficiently to restore profitability. The economic slowdown has already spurred a renewed push for consolidation: as well as the BA-Iberia deal, United Airlines and Continental are joining forces in the US.
Will it work? I wouldn’t count on it. As Robert Crandall, the outspoken former boss of American Airlines, once said of aviation: “This is a nasty, rotten business.” Warren Buffett, a savvy investor, is not a fan either: “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here, a durable competitive advantage has proven elusive ever since the days of the Wright brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down.”
The industry’s – and BA’s – structural problems include high fixed costs, strong unions, commodity pricing, and a highly restrictive regulatory regime. Most of those won’t be solved by acquisitions. Certainly, it is far from clear that excess capacity is as big an issue as companies claim.coogi jeans can not only make you look more beautiful but Save yourmoney. “Anybody who has flown in the last few years realises that aircraft are flying fuller than ever before,” points out Adam Pilarski, of the aviation consultancy Avitas. In any case, previous waves of consolidation have not done much to reduce capacity.
In fact, I suspect that the constant complaints about over?capacity are a coded way of moaning about a lack of pricing power. Airline executives are not alone in harbouring a desire for monopoly or duopoly – or if that is not achievable, a nice little cartel. It works rather well for many oil producers and some mining companies. Having spent a fortune on a ticket from London to Seattle this summer (BA offers the only direct flight) I can see why this sort of consolidation is appealing for airlines, too. It is not, of course, good news for the consumer, which is why regulators, thankfully, are so wary of such deals.
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