Airline mergers

One of the big tragedies for those of us flying regularly between London and Warsaw was when Lufthansa took control of BMA, they took away this third option of a direct route between Warsaw and London, and instead made the only alternatives to fly through Frankfurt, Amsterdam and at that time Paris or further afield. To have gotten BMA into the Virgin fold would have been potentially good news, to provide more competition for the large players. I think getting Etihad into the competion with Virgin would be good for the public flying in Europe where its either the real cut price airways or the expensive ones.

I'm somewhat disappointed by this news. I admit that I'm a United Airlines (Star Alliance) frequent flyer from the US. This will make connections more difficult to other destinations in the UK that bmi was serving and make it more expensive due to lack of competition out of Heathrow. As much as it is a gain for IAG, it's a loss for consumers connecting to other UK destinations via London. I am fully aware of the low cost operators in the UK (easyJet and RyanAir) but these are not real options for passengers coming from across the pond to reach other UK destinations. As much as I would like to see bmi continue as a Star Alliance partner, for competition's sake, I think that it would be in all consumers' best interests that it be sold to someone other than IAG.

I think that this analysis is flawed because creating a 4th alliance (which is essentially what Virgin, Lingus and Etihad would be doing, though a very week one) would not address how most people travel today. The lack of strong hub and spoke networks with easy 1 stop connections (though many travelers favor direct routes) is the flaw in this proposed 4th alliance. The small 4th alliance would be handicapped because of the need to route travelers through too many hubs to get to destinations that can’t be reached via direct flights. It would be far better for travelers, from a cost and ease of travel perspective, to have 3 strong alliances. Thus, the British authorities should look for disposal of gate slots to one of two other strong alliances.

"two near-monopolies do not justify a third."
Not sure of the near-monopoly logic here. When you regard airports with a lot of connecting flights, for it to be a near-monopoly, you need to look at all the origin-destination traffic - globally. The BA/BMI presence at LHR, COMPETES with the connection traffic at Frankfurt/Munich, Amsterdam, Paris etc. Add to this the connection options through the fast-growing Middle East - especially Emirates.
The options for a London resident like myself, I also can fly from Stansted, Luton and Gatwick - and have done so on many occasions. So Heathrow isn't that near-monopoly as often used as an argument. Also keep in mind, when looking at price competition, taxes often make up over 50% of an airfare, which is not in the control of the airline. Price rises are often not down to airline competition (or lack of), it is the airport authorities and governments that have their hand in the till as air travellers are easy targets.
The proposed BA/BMI combination makes sense. It allows BA (and Britain) to compete against strong, aggressive competitors on the Continent, as well as the Middle East. Restricting BA from competing at Heathrow won't stop other countries from stealing passengers, or protect consumers from rising airfares.
It is a global market (I am surprised The Economist has to be reminded of this) and a 'near-monopoly' at a single airport is, in my opinion, a very simplistic and narrow view.

Air Lingus, Virgin & Etihad together would be a substantial competitor; but the best overall, long term solution, surely, is to opt for one mega airport in the Thames estuary? Costly, yes; but given Britain's geographical position as the world's major hub, to bite the bullet is surely the logical thing to do.

Trunty,

Nonsense.

Virgin and Aer Lingus are both very efficient operations - they would leverage assets more intensely, by getting the planes to spend more time in the sky (quicker turn around times), getting more bums on seats, getting rid of excess staff, getting rid of the Lufthansa labor regulations overhead, and using airport slots more intensely.

BA has higher operating costs and fewer passengers per plane than Lufthansa or BMI. Operating costs would probably increase as a result of merger. BA would profit by increasing its market power, and reducing alternative provision of flights from UK airports. That might involve more BA flights to Asia - or not. Either way, the British public can only lose.

Neither - I'm a student who enjoys flying in the marginal seats (I've never paid more than 50 GBP for a return flight in Europe, and I've been all over Germany, to Sweden, to Poland, to Bulgaria, to Spain and to Italy).

I would love it if there was more competition in short hall - BA still has exclusive rights to a majority of take off capacity at UK airports.

BA constitutes an enormous waste of resources - it is an anticompetitive entity which reduces living standards in the UK significantly. I'm not sure why there isn't more active campaigning for a forced break-up. I guess it's a combination of trade union sympathy on the left, warped nationalism/ dirigism on the right, and pure apathy/ resignation in the middle.

But at very least, this merger can't go ahead. And if anybody reading this has influence, realize that - while there's plenty of controversy in tackling special interest groups - the average person will benefit tremendously. Political support might not be forthcoming, but it will come afterwards - once people see the benefits.

This merger makes sense.

The article fails to mention a number of points:

The air transport market to and from London does not just consist of Heathrow. London is also served by Gatwick, Stansted, Luton and City making London much more competitive than Frankfurt (Main & Hahn) or Paris (CDG, Orly, Beauvais). BA's dominance at Heathrow is offset by a high level of competition from low cost carriers at the other airports. London is both Ryanair's and easyJet's largest market.

There is currently only limited direct competition between BA and bmi. BA will gain a monopoly on services between LHR and Edinburgh, Aberdeen and Manchester. These three destinations are also served by other carriers from other London airports.

bmi does not fly to and from the US. There will be no reduction of services between LHR to the US if BA buys bmi.

BA can use the new slots to strengthen its Asian network thereby offering more competition to Air France, Lufthansa and the Gulf carriers. BA's current Asian network is limited compared to its competitors.

Virgin and Aer Lingus makes very little sense.

We mustn't permit this merger.

IAG already has far too much market power. BA is incredibly expensive and uncompetitive, with average short haul ticket prices some 4 to 15 times the equivalent fares from Ryanair, Easy Jet or Air Lingus.

BA has ancient and fuel thirsty planes; their planes spend most of their time sat about on the ground; they have one of the worst on-time records in the UK (and that's from routine operations - not counting the industrial disputes); the company is over-staffed; they hemorrhage cash; they have enormous market power (combination of having bought up exclusive slots at most existing airports, and government regulation that prevents new airport construction); most of their planes are half empty.

BA is already far too powerful, and needs to be broken up by the competition authorities.

The merger with Iberia should never have been allowed; the proposed merger with BMI must never happen. At that level, there are no real scale economies in the airline industry, and no efficiency savings that could benefit consumers. This is all about market power and monopolistic pricing.

It is not in our interest. Block this merger!!!

The UK aviation industry is uniquely competitive with the extensive presence of low cost carriers, the 170-odd airlines that operate into London and in having two scheduled longhaul carriers based from its principle airport. The industry, and particularly the full-service segment, faces significant structural issues as well as the additional pressure of the highest airport duty in Europe and extremely volatile financial performance. If we are to ensure a sustainable, diverse marketplace then consolidation is an inevitable consequence and we should not be afraid of allowing BA to grow its presence at Heathrow.

Gulliver I apologize if I digress a little here, but I hate the alliances. I recall a famous cartoon from Australia in the late 70s, when the government only 'allowed' two airlines to operate domestic services. So restricted was the market that the two airlines (Ansett and TAA) even had to operate flights at essentially the same times between city pairs, and offer the same fares. The cartoon then, borne of the public's frustration, was of two planes (one of each airline) joined together by a common wing.
Then came deregulation, and all the relief it brought to the traveling public, in Australia and elsewhere. But now it seems the wheel has turned full circle.
Aer Lingus, Lufthansa, British Airways, United, Air France... who cares? What's the difference? Government regulation has been effectively replaced with de-facto private regulation in the form of these incestuous 'alliances', forced upon us by limited market capacity (availability of physical slots, noise curfews, etc).
Real deregulation has become a cause without a rebel. In the US, Virgin America has come closest in recent years, but we need more. Much, much more.
Whatever happens here with the bmi slots, I don't hold out much hope for real change.

Being from Ireland I welcome any action that saves Aer Lingus, a very necessary bulwark to Ryanair monopolizing the routes to the continent, also interesting about these cartels, it makes sense that Irish flights tend to be quite cheap compared to the rest of Europe when you consider the two biggest airlines (Ryanair & Aer Lingus) are highly competitive.