British Airways must seek to merge with or buy up rival carriers if it is to match the growing global dominance of airlines in the Arabian Gulf, the company's chairman said yesterday.
Sir Martin Broughton also admitted that the decision to admit Qatar Airways into the Oneworld Alliance this week marked the culmination of a strategic shift for BA that amounted to "If you can't beat them, join them".
BA has in the past criticised Gulf carriers, claiming that they enjoy government support that gives them a competitive advantage over international rivals.
"We decided, I suppose, to look through the other end of the telescope in a sense," Sir Martin told The National.
"The consumers are not interested in whether [Gulf carriers] are a strategic threat, whether they are subsidised or not subsidised. They like Gulf carriers, and if we want to have an alliance that meets our consumers' demands, we thought we ought to have one here."
Qatar Airways made the announcement that it was joining the Oneworld alliance a day after Etihad Airways signed a 10-year "major strategic agreement" with Air France-KLM, and only weeks after Emirates Airline and Qantas signed a deal that will result in the Australian carrier routing its flights to and from Europe through Dubai rather than Singapore.
Gulf carriers have already begun to take market share from more established players by leveraging their geographical position and more modern fleets to fly passengers between Europe, Asia and Africa more cheaply.
Sir Martin, who was speaking as BA marked its 80th anniversary of flights to the region, said that for his airline a "key part" in contending with Gulf carriers' growing stature in the industry would be deregulation and the permitting of acquisitions, as well as allowing airlines to "go bust".
"[Acquisitions are] a key part," he said, declining to name any potential targets for BA.
"Airlines suffer from financial problems. It seems to be an inherent part of the industry; part of it is down to the inability to do mergers and acquisitions. Airlines which should be allowed to go bust … get propped up, very often by governments, [which] very often means they are subsidised."
BA tied up with the Spanish airline Iberia in 2010 and the two carriers now sit under the umbrella of the International Airlines Group (IAG).
IAG is in the process of restructuring Iberia after a €390 million (Dh1.84 billion) loss for the group in the six months to the end of June.
Outside Europe, the ability of airlines to merge or acquire other carriers is limited because of the political sensitivity connected to taking over a national carrier.
In the United States, foreign ownership of airlines is limited to 25 per cent, and in the European Union the limit is to 49 per cent.
In other parts of the world, job losses and damage to competition are often cited as concerns over acquisitions.
"One of the key things is government regulation around the world which limits shareholdings of foreign nationals," said John Strickland of JLS Consulting, based in London. "Airlines are not as free around the world to buy into each other as they might wish. That's why we see these alliances and code-shares."
Even in the Indian market, where carriers are struggling under the weight of US$20bn (Dh73.45bn) of debt, the government only last month announced it would allow foreign airlines to invest in private carriers to a maximum of 49 per cent.
Sir Martin said carriers such as Air India and Alitalia had "no right to exist" in a competitive and free market. He added that he "did not know" if Gulf carriers were subsidised.
"India is a classic example. Air India has no right to exist, it should have gone bust a while ago. It's been propped up time and time again by government subsidies," he said.
"Those government subsidies [have] cut the prices to uneconomic fares which have driven Kingfisher and Jet [Airways] et al into financial difficulties. The players that could have made it … have been driven either to bankruptcy or to the verge of it by an inefficient subsidy."
BA's first flight to the region touched down in Sharjah on October 7, 1932, under the banner of its predecessor Imperial Airways.
rjones@thenational.ae
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Director: Alfonso Cuaron
Stars: Cate Blanchett, Kevin Kline, Lesley Manville
Rating: 4/5
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Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
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Through Her Lens: The stories behind the photography of Eva Sereny
Forewords by Jacqueline Bisset and Charlotte Rampling, ACC Art Books
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UAE currency: the story behind the money in your pockets
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Director: Amith Krishnan
Rating: 3.5/5
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Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
MATCH INFO
Liverpool 4 (Salah (pen 4, 33', & pen 88', Van Dijk (20')
Leeds United 3 (Harrison 12', Bamford 30', Klich 66')
Man of the match Mohamed Salah (Liverpool)
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RedCrow Intelligence Company Profile
Started: 2016
Founders: Hussein Nasser Eddin, Laila Akel, Tayeb Akel
Based: Ramallah, Palestine
Sector: Technology, Security
# of staff: 13
Investment: $745,000
Investors: Palestine’s Ibtikar Fund, Abu Dhabi’s Gothams and angel investors
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Killing of Qassem Suleimani
The biog
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IPL 2018 FINAL
Sunrisers Hyderabad 178-6 (20 ovs)
Chennai Super Kings 181-2 (18.3 ovs)
Chennai win by eight wickets
How it works
Each player begins with one of the great empires of history, from Julius Caesar's Rome to Ramses of Egypt, spread over Europe and the Middle East.
Round by round, the player expands their empire. The more land they have, the more money they can take from their coffers for each go.
As unruled land and soldiers are acquired, players must feed them. When a player comes up against land held by another army, they can choose to battle for supremacy.
A dice-based battle system is used and players can get the edge on their enemy with by deploying a renowned hero on the battlefield.
Players that lose battles and land will find their coffers dwindle and troops go hungry. The end goal? Global domination of course.
