9-Mar-2010 1:14 PM

British Airways states JVs are a surrogate for mergers and acquisitions

British Airways CEO, Willie Walsh stated he believes JVs are a surrogate for mergers and acquisitions, which bring revenue synergies, but not as much in terms of cost synergies. (BTNonline.com, 08-Mar-2010).

British Airways: “Our view is that the industry would benefit from general consolidation, but the ongoing restrictions on ownership and control restrict that. [JVs] are one way of pursuing consolidation, but on a light version. I think it's a very interesting development… One thing these joint ventures help to do is demonstrate that you can get revenue synergies. If you look at the Air France-KLM model, the success of that relationship has been built largely around revenue synergies, rather than cost synergies. Historically, people have looked at consolidation and joint businesses and challenged how much cost you could get out. The joint business doesn't really facilitate much in regards to cost synergies. It does facilitate some — co-location at airports is an obvious one — but it takes time to develop the relationship. Where you can coordinate the schedules in particular and look at better passenger flows over the hubs, you can generate additional traffic and generate synergies as a result. I think it's given people a lot more confidence to pursue these,” Willie Walsh, CDEO. Source: BTNonline.com, 08-Mar-2010.