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  • No Rush in BA, Iberia Deal
    Posted by Robert Wall 6:37 AM on Nov 13, 2009

    British Airways and Iberia are following the lead of Air France-KLM, about taking your time and not forcing the two entities together too quickly.

    There’s certainly been no rush in getting the deal cemented. BA and Iberia have been in talks about merging for well over a year before yesterday’s MOU was signed to have the merger take effect late next year.

    And while the glacial pace of discussions has frustrated some at times, the leadership of both carriers knew they had more pressing issues to deal with – namely seeing their own business through the current crisis – rather than get overly distracted by merger talks. Management is aware things have moved slowly. In announcing the agreement, Antonio Vazquez, Chairman and CEO of Iberia said that “it has been a long process where many people, both at British Airways and Iberia, have worked very hard to reach this agreement. But in the end it was worth it.”

    But does it make sense to take so much time looking forward to integrate the businesses? After all, BA and Iberia are promising €400 million in annual savings from combining the airlines, but it will take 5 years to get to that point.

    When looking at Air France-KLM, the answer would probably be yes. Mergers that had much shorter timelines to generate savings have generally appeared to stick out as failures, whereas the more moderate approach is more likely to let diverse cultures grow together and make for a less acrimnious marriage.

    It will be interesting to see where the savings are to be generated. At this point, the companies have spelled out only broad ideas. Joint selling, network and revenue management should yield one third of the savings, whereas the rest is to come on the maintenance, fleet, information technology side, and by consolidating back office functions.

    Much will depend on how the top management interact and manage to work through problems that are inevitable, as different work cultures try to come together. Vazquez will be group chairman, and BA CEO Willie Walsh will be group CEO. The CEOs of the respective airlines, which are to retain their identity, are Rafael Sanchez-Lozano and Keith Willliams. The other three key players in making the deal work will be the group CFO, Enrique Dupuy De Lome, and BA commercial director, Robert Boyle, now in charge of generating revenue synergies and Jose Maria Fariza, responsible for the same on the cost side.

    Tags: tw99, BA, Iberia, merger

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