Walsh devising plan to create massive merged airline

WILLIE WALSH, the British Airways chief executive, and top Iberia executives have drawn up a list of 12 candidates to buy or merge with once their own tie-up is finalised in a plan that would create the world’s largest airline and shake up the aviation world.

The 12 targets, pared back from an initial list of 40, include budget airlines and full-service carriers in several countries, among them fast-growing emerging economies such as Brazil, India and China.

Not all 12 would be pursued, and foreign ownership restrictions in many countries would make it hard to buy some of those targeted.

But “others would be possible almost immediately”, said Mr Walsh, who is set to move shortly to head a new company under the BA-Iberia merger called International Airlines Group (IAG).

He will drive the combined group’s strategic direction, assuming the deal is completed by the end of this year as planned, and has already made clear that the new group would look at further consolidation.

But this is the first time he has revealed that detailed discussions have been going on within BA and Iberia in recent months regarding the scope and nature of possible deals.

“We’ve looked at it initially with a view to full merger or acquisition rather than taking a minority investment in another airline,” he said. “The ambition is very clear that IAG will look to consolidate further,” he said in Bombay (Mumbai).

At the same time, he announced a deal with India’s Kingfisher Airlines, an addition to the Oneworld airline alliance in which BA is the leading European member, and BA’s first code-share with an Indian carrier.

While Mr Walsh refused to name airlines on his list and cautioned that no talks had begun with possible partners, Kingfisher will be seen as a likely target.

Another candidate is Chile’s LAN Airlines, although it has just announced that it plans to merge with Brazil’s TAM, making it a more difficult target to acquire.

Leading Oneworld member American Airlines might also be a logical partner, except that the US restricts foreign ownership of airlines, as do many countries.

Mr Walsh acknowledged the difficulties, but said he was confident ownership restrictions would be eased.

There was also scope to get around them, he said, as BA had learnt during failed merger talks with Australia’s Qantas in 2008.

In an interview with The Irish Times in July, Mr Walsh said the likelihood of BA ever tabling a bid for Aer Lingus was low.

“I wouldn’t rule it out, but there are lots of other options and opportunities out there,” he said.