Monday 8 October 2012

Qatar for IAG...or IAG for Qatar?

There have been a few rumours around over the last few days that Qatar Airways might sign up with IAG.

Initial gut reaction is-"Why would they consider forsaking their independence?  Are they mad (or bust)? Qatar Airways run by Walsh &Co ? No chance, the notion is absurd".

Then if you start thinking about it , how is this for a clever, indeed world- changing ,plan.....................? (The figures and percentages shown are purely illustrative for the sake of simplicity although were this scenario to happen they might not be far out)................................

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- Currently IAG owns the BA (now including BMi) and Iberia brands.

-IAG's shareholding is diverse. The majority is probably with various institutions and the rest with individuals.

- Qatar Airways becoming part of IAG would mean the issue of an ADDITIONAL block of shares, -say forming 33% of the IAG total,- in exchange for the assets and business of the airline.

-Qatar Airways shareholders, aka the State of Qatar, then own 33% of IAG . Qatar would be by far the largest single shareholder.

-The State of Qatar then goes shopping for an additional 18% of shares to give it 51% and thereby control of IAG.

- Qatar is then a leading world player out of all proportion to its geographic and population size but very much line line with its recent thinking, actions and ambitions.

One could go on to speculate that...............

-Qatar Government hands IAG to (former) Qatar Airways management and the trojan horse takeover is complete.

Upsides:

-IAG secures a 24/7 base capable of vast runway and terminal expansion in the Gulf,- the new crossroads of many of the world's air routes.

-Qatar has, thanks to its vast gas reserves, funds to invest whatever it wants in this diversification and expansion of its position in the world's aviation business . It has the space and money to build or buy anything.

- Qatar has an aggressive stance on investment and expansion, things lacking in the current European psyche. The BA and Iberia brands would be developed to their full potential. No more agonising over whether to buy  8 777s or whether to make do with 6. Qatar's totally different mindset could revitalise and revolutionise both brands which are currently heading nowhere in particular. Current  IAG strategy appears to be to squeeze better results out of the existing businesses by a mix of cost and staff cutting ,reducing overheads (all much needed) , squeezing investment by under-serving  markets, and pushing up yields by spilling much of the lower yielding  business. The lack of expansion in capacity and network has allowed BA in particular to shrink from a/the number1 global player to primarily a trans-Atlantic business rather than maximising its potential. Even the product itself lacks the sort of inspiration we have seen from the Gulf and Asia.

Just think about what BA with money could look like.

In all this possible scenario there are obvious regulatory, who gets what slice of the cake and control , and other issues. There would be arguments about national interests, ownership of traffic rights but all of these are rapidly being swept away by open skies agreements and attitudes . De-regulation has been a massive boost to the industry, business and tourism and something as ground breaking as the possibility we have described would be a logical and exciting.

This is all Airnthere speculation of course and what, if anything , is afoot is not yet on the surface  Could something like this be happening ? We should know before long.  If it isn't.... .well there's an idea for someone as they drive home this afternoon.

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