BLBG:BA-Iberia Puts Deals On Hold As Euro Crisis Dents TAP Appeal
British Airways’ parent is holding off on plans to buy more airlines as the European debt crisis damps travel demand and the appeal of carriers in the region.
“We aren’t looking at any acquisitions at the moment,” Willie Walsh, the chief executive officer of International Consolidated Airlines Group SA (IAG), told reporters in Beijing today. “I don’t see there’s anything likely to be available in the short term that would be of interest to us.”
The company’s enthusiasm for buying Portugal’s state-owned TAP SGPS SA has “significantly waned” over the past 18 months because of the economic downturn, Walsh said. The International Air Transport Association yesterday almost doubled its 2012 loss forecast for European carriers, citing recessions in countries including the U.K. and Spain, and concerns the debt crisis may widen.
IAG is “highly unlikely” to bid for TAP, Walsh said. “Even if competitors in Europe express interest in it, it wouldn’t change my view.”
The company, which also owns Spain’s Iberia, had expressed interest in buying TAP to bolster its long-haul operations and add flights to Brazil. It has now added more slots at its London Heathrow base through the acquisition of BMI.
European airlines are likely to lose $1.1 billion this year, compared with an earlier forecast for a $600 million loss, IATA said this week at its annual meeting in Beijing.
Spain requested a 100 billion euro ($125 billion) bailout for its banks in the past week, becoming the fourth European nation to seek support since the debt crisis began.
777 Orders
IAG may also exercise some options to order more long-haul Boeing Co. (BA) 777-300ERs, Walsh said. He didn’t say how many planes the carrier may add. BA operates six, according to its website.
“It’s been a great success in our fleet, so we are very encouraged by that,” Walsh said.
Walsh also said he wasn’t concerned by partner Qantas Airways Ltd. (QAN) being in discussions with Dubai-based Emirates Airline about wider cooperation. BA and Qantas have worked together on Australia-Europe flights since 1995.
Qantas tying up with Emirates would make “commercial sense” and would be the strategy that Walsh would pursue if he ran the Australian carrier, he said. He also said that IAG wouldn’t buy into Qantas and that he didn’t think the Sydney- based airline will seek an equity investment.
On AMR Corp. (AAMRQ), the parent of BA’s trans-Atlantic partner American Airlines, Walsh said that CEO Tom Horton was right to focus on reorganizing the carrier and exiting bankruptcy rather than looking at potential mergers. US Airways Group Inc. has won support from American unions for a combination.
“First you need to try and fix the problem,” Walsh said. “Then you say is there a better option?”
To contact Bloomberg News staff for this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net
