Business Strategy - BA plans merger with Iberia

We’ve used British Airways as a rich case study in our A2 Business Strategy workshops for a couple of years. It looks like there will be plenty of scope to revisit the business in future workshops following today’s announcement…

The airline industry is a fantastic source of content for business teachers and students at the moment. Falling profit margins, cuts in capacity, increasing losses, business failures, and now mergers!

The proposed merger between BA and its long-term strategic partner Iberia will certainly be followed intensively by the media over the next few months. What else can be expected when the national flag-carrying airlines of the UK and Spain plan to merge?

The competition implications will be scrutinised. Other airlines may rush to follow suit in order to defend themselves against a larger competitor, in the face of very difficult market conditions. An interesting sideshow will be which management team ends up in the key posts?

Lots of coverage already about the proposed merger, the rationale for which BA CEO Willie Walsh describes this morning as follows:

“The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment.”

In our workshops, we use a really good video clip of Willie Walsh being interviewed when he first took the helm at BA. The interview is full of great business strategy terminology, and the word he uses most is “change”.

Three years on, Willie’s words are as relevant as they were then. With the merger of BA & Iberia, and Ryanair forecasing their first loss for 20 years, the airline industry is undoubtedly entering one of the most significant periods of change.