Former BA shareholders wonder where their profits went.

Those of ICAG's shareholders who hold their paper by virtue of having had it swapped for the BA equivalent on takeover day must be wondering whether they might not have been better off if the the consolidation of the BA and Iberia, and now BMi brands into Spanish registered ICAG had never happened. If so they can only blame themselves. The "merger" went unchallenged at the two precedeing BA AGM's. The floor's focus was on cabin crew gripes about terms and conditions being threatened by wicked Willie, staff travel and other laments. The "merger" barely featured and was never challenged.

Now they must view the overall ICAG 2011 performance with some disquiet and thoughts about about what might have been if BA had carried on alone with a new determination to reassert its former worldwide international market dominance.

ICAG more than doubled the previous year's BA and Iberia pre tax operating profits to Euros 542 million. That's good. To achieve this the BA brand made an operating profit of Euros 592 million while Iberia contributed a loss of Euros 61 million. Iberia continues to be a high cost carrier with a lot of built in problems with restrictive labour agreements and the problems of Spanish labour laws which makes slimming down very expensive. For the ex BA shareholders that's not good.

2012 doesn't look any less cloudy. Iberia's pilots are protesting about the arrival of the brand's new low cost domestic and short haul operator via twice weekly strikes on Mondays and Fridays. These stretch through to the end of July and will knock a hole in the second and third quarter brand and ICAG corporate results. There will be some clawback by moving bookings forwards or backwards a day and thereby achieving very high load factors. There will also be savings from aircraft simply not being in the air on those days. Neither of these will cover the downside loss of customer confidence,loyalty and revenue.

BMi being rolled into the conglomerate and the BA brand isn't going to help ICAG's short term results either. It brings a unique and very valuable portfolio of Heathrow slots with it but to keep them they have to be operated. That means that for some time to come the bulk of the unprofitable (£100-130 million a year)largely short haul BMi network has to continue as is. Some corporate Head Office overheads will be stripped out through large scale redundancies but that itself won't close the gap. To make its case for being allowed to proceed with the takeover, ICAG has majored on the opportunities to enhance Heathrow's position vis-a-vis rival hubs by opening more services to high growth areas, notably Asia and South America (wasn't that meant to be Iberia's speciality from Madrid?). The truth though is that BA has not got the spare long haul aircraft to do that. There is also the question of its real taste for the east. As we have noted previously, spooked by the 1997/8 Asian downturn and despite the post 2000 boom, BA has withdrawn from Osaka, Fukuoka, Seoul, Taipei, Manila, Kuala Lumpur and Jakarta and reduced its frequencies to Bangkok and, recently, to Hong Kong. It has shown little enthusiasm for the east with its high business travel volumes and yields to some cities but patchy demand and low yields to others. It has felt more comfortable and familiar with the North Atlantic which is easier to understand and operate. Also BA has added very few long haul aircraft to its fleet in the past ten years. The much trumpeted arrival of 6 777-300ERs in the last twelve months is hardly world dominating stuff and is around the equivalent three months added capacity for Emirates. BA can revive a few 747-400s and retain some more of these and some 767-300ERs which were due to be retired when the first A380s and 787s begin to dribble into the fleet in 2012. That though is a while away yet, even if they do bite the bullet and really go for long haul expansion in the east from then on. In the meantime ICAG is likely to continue losing money on what was the BMi operation and the BA brand is going to have carry on funding its two less healthy sisters.

Those former BA shareholders look like continuing to wring their hands and shake their heads for a while yet.

Meanwhile on a lighter note BA plans to introduce a 1948 theme to some of its menus. One wonders if any of these sitting around whatever conference table came up with this stroke of inspiration have any idea about the state of British cuisine in 1948. It was a year of extreme post WW2 greyness and austerity. People queued up for ration books for food and clothing. Small amounts of corned beef, spam, an egg or two were highlights of the weekly menu. Maybe this idea is a cover for new cost cutting in the catering department? Will those at the front receive reasonable, but not generous, portions of these items, those in the middle rather smaller ones of much the same and those at the back just be handed two ration coupons, one for a single bag of nuts and the other for a liquid cross between tea and coffee?