20 December 2015

What are IAG´s next steps?

The CEO, Willie Walsh, of IAG (International Airlines Group) the owner of British Airways(BA), Iberia(IB), Aer Lingus (EI) and Vueling(VY) recently admitted in public that,   "he wanted to add more airlines to IAG but no deals were currently “imminent”."(Buying Business Travel 23-11-15) He was speaking at the Airport Operators’ Association (AOA)during the UK Aviation Conference 2015 held in London.
Vueling A320
Aer Lingus A321


In the first year of this blog an article was published titled, Maybe BA has found a new way(24 September 2010) which looked at the progress British Airways was making trying to get out of the financially difficult situation in which it found itself. Since then a lot has happened and even not happened.

BA has completed the merger with Iberia to form IAG (International Airlines Group) which has taken over the non-owned shares in Vueling, and convinced the Irish Government, Ryanair and Etihad to sell their holdings in Aer Lingus to the group.Thus IAG is formed with 4 brands and in good health. This is something which cannot be said for its competitors, Air France/KLM or the Lufthansa group.

Alitalia is now, mostly, in the hands of Etihad but the "The Etihad Equity Alliance" seems to be now concentrating on Asian airlines. Virgin Atlantic has dropped its Little Red domestic UK service and is now firmly in the hands of Delta and subject to it. Malev(Hungary), Mexicana and Kingfisher (India) have dropped out of the oneworld alliance and disappeared into the history books. Even the alliance partner (under Etihad´s wing), Air Berlin, is finding it very difficult to get into profit. Part of the reason might well be Berlin Brandenburg airport failing to open because of grave technical problems which means that it is postponed till, most probably, 2018. This would make the airport 8 years late in opening.

Other movements in that time have occurred in oneworld with the entrance of new airlines. The most notable is the entry of one of the three Gulf airlines which span the globe, Qatar Airways, including its purchase of a 10% shareholding in IAG.

Bringing this information up to date and looking at European airlines mean an article was published later titled,

European Airline Consolidation - what does it mean? what does it involve?(06 February 2014).  In the near two years since then things have not stood still - except for the increase in number of runways in the London airports of Gatwick or Heathrow. There is no change and the decision has been put off again till the summer 2016, at least!!!

The LCCs are still growing. they are being joined by other holiday airlines (like Monarch) while Lufthansa is closing Germanwings(too expensive) to the benefit of Eurowings(better value for its short, medium and even long haul flights from airports other than Frankfurt and Munich). Norwegian is increasing its long-haul flights (and has even set up a UK subsidiary to add to its Irish one to facilitate this). It is also increasing its European bases outside Scandanavia. Air France/KLM (Skyteam) wanted to increase the profile and presence of its LCC Transavia. The setting up of a new subsidiary met with strong opposition from unions in France, so they have been ignored and the Dutch subsidiary, Transavia, will be the vehicle for growth in Europe. TAP has been sold to groups of investors but stays in Star Alliance. 


But what about other possibilities for IAG.

  1- Europe

Flybe did not last long in Finland and sold its 60% of the joint venture, Flybe Nordic, back to Finnair for €1. This airline is now called known as Nordic Regional Airlines. The 60% is most likely to be sold on to other investors with Finnar retaining 40%.
Finnair A350-900 (c) Carlos Enamorado

As recently as 12 November 2015 rumours were rife about IAG set on consolidating in the European market - which were denied despite Finnair being seen a the most likely candidate to enter IAG for a long time.   

"Finnair comments market rumours: no ownership negotiations are ongoing".

This is quite possibly the situation as IAG is still digesting Aer Lingus whose purchase was only finalised in September 2015. On the other hand it seems that IAG and Finnair are getting closer together after signing an agreement on cargo on 27 July which was put into effect on 10 September last. This means that the two companies could well be in the first stages - "talks about talks" - rather than anything concrete which they would have to reveal to the respective stock markets.  The likelyhood of this deal being done is high. Finnair would form part of a bigger, stronger group while keeping its operational independence and brand - that is something which convinced the Irish government, with Aer Lingus, and could convince the Finnish.

Meridiana A319

This blogger looked at Meridiana and saw it as a possible candidate. However, since then Vueling has stepped up its presence in Italy and is making Italy an important base for operations so the decision might have already been made to ignore the airline. Meridiana still has operating agreements with BA and Iberia but will they be enough to spark interest in it? Most of its focus is on serving Sardinia and Sicily but it has recently increased destinations from both Madrid and London. Also, it has some long-haul (holiday) flights to the Maldives, Africa, North America and the Caribbean. Thus, there is still a possibilty of interest in it though this blogger views that as remote.

There are various small airlines operating in Europe but the logical step to take would to look at operators in more medium or larger countries. Germania is an independent airline in Germany. However, after the experience of dba (originally Deutsche BA) and the travails of Air Berlin, Germany might well be seen as too difficult a market. Bulgaria Air comes to mind but the market might not be big enough nor rich enough to be of interest. Aegean in Greece is another possibility but it is one thing to operate to Greece and quite another to operate within Greece, especially after the financial hardships this country has to, and will have to suffer.

The one country of medium size that still provokes interest is Poland and its near 40 million
LOT B787- 8
population. The national airline, LOT, is owned by the government who is still trying to sell it off. The country is well positioned between Central and Eastern Europe
to fill in the gaps between Spain, the UK and Finland. It also has a large diaspora in Europe and North America. LOT flies long distance as well as into other hubs, but it would have to be tempted away from the Star Alliance into oneworld. It still seems to be a very appealing airline for IAG

One must not forget the feeder airlines to IAG members. Iberia Express is a 100% subsidiary company while Iberia Regional (Air Nostrum) has no shareholding by Iberia (IAG). Aer Lingus Regional (Stobart Air) also has no shareholding by Aer Lingus (IAG).  The major airlines might think it prudent to have a greater say in each Regional airline through a minority shareholding. However, it should be emphasised that  each bases its business model on complete and utter subservience to the major so any shareholding should not be necessary to maintain fidelity to the major. Having said that Flybe is a regional airline 15% owned by BA (IAG) which goes its own way. It forges alliances of one sort and another with whom it pleases, including the direct opposition. It is in no way subservient to BA. In addition to these airlines there is the British Airways franchisee (Sun Air of Scandanavia) flying out of Billund in Denmark. This airline is privately owned. It is well placed to fill in the gaps that  IAG has between the British isles and Finland (and even Poland). It could serve the capital cities of Scandanavia and the major cities of northern Germany (Hamburg and Berlin principally) to connect to London and Dublin in the west, Madrid, Barcelona and Rome in the south, and Helsinki and Warsaw in the east. However, Sun-Air is a slow moving, very prudent operator in the market. It could well be an interesting airline with which to expand IAG´s presence in Northern and Central Europe. 


   2- South America/Latin America:

Iberia is the largest operator from Europe to the subcontinent while oneworld also has a large partner, LATAM, which flies domestically in Chile, Peru, Ecuador, Argentina, Columbia, Paraguay and Brazil as well as internationally. At the moment the airline is still using its two brands LAN and TAM but they are being substituted at the moment and will eventually be replaced in the next few months. That leaves six countries in South America of which, Venezuela, Bolivia and Uruguay are the Latinos where it has no domestic subsidiary. It has no domestic operations within Central America and Mexico.

Normally one associates all the American(both north and south) countries as being fiercely nationalistic so never even contemplating the sell-off of national iconic firms to foreigners. The USA limits foreign direct participation at 25%. Though this percentage was supposed to have been increased to something like the European 49% after the signing of the "Open Skies" agreement when first signed 30-4-2007. This meant that BA´s investment in, firstly, United and, later, US Air never exceeded 25% without any effective control. On the other hand, Singapore Airlines sold its 49% shareholding in Virgin Atlantic to Delta, which effectively now controls that UK airline. The (UK)Virgin group was never allowed to buy more than 25% of Virgin America and had(has) no control at all since it is prohibited from having even one member on the board. 

        Such non-reciprocal agreements are frequent all over the world. Thus what can IAG achieve in South America? There are two big groups LATAM ( in oneworld) and Avianca(Star Alliance)(which covers 8 countries in Central and South America), COPA(Star Alliance) is the third (represented in Colombia and Panama). It seems logical , therefore, that if IAG does anything in Latin America it will start with LATAM as the following article will help one to understand.

 An interestisting article appeared in the Madrid newspaper, EL Pais Negocios, on Sunday 6 December last looking into the problems at LATAM ( the airline to appear after merging the Chilean LAN with the Brazilian TAM) and how it was facing the financial crisis of South America and its prospects. The following is the final part of the article.

"At the moment, the company is valued on the Stock Exchange at US$3000 million as against the US$12,000 million at which the company was valued on announcing the merger.This together with the potential of the Latin American market makes it a very appealing morsel for any external investor. The company increased its capital in 2013 by US$780 million. However, repeating the operation, according to financial analyst Robert.W.Mann, would dilute control too much. This suggests looking for a strategic partner. (my emphasis).

Last November the shares in LATAM rose on the Chilean Stock Exchange when the CEO of IAG, Willie Walsh; expressed a wish to have a closer relationship with the airline which together with IAG forms part of the alliance oneworld.Straightaway the company denied any conversations, but the very same Willie Walsh had made it very clear that if anything was going to happen, it will not be now. He did affirm, "When the time is right and they are ready to sit down with us then we will have constructive talks." "  (translated)

There it is in that last sentence. IAG looks like being prepared to take a stake in LATAM if the terms are right, but this blogger is still not convinced that the Chileans and Brazilians will give up majority control in their iconic airline.

LATAM denied any interest by IAG to invest in the airline with press releases on 10 November and 10 December  to that end.

   3- North America

The oneworld partner of IAG in the subcontinent  is American Airlines(AA). This airline is considered the biggest in the world so it is most unlikely that IAG would make any sort of move for that airline. As already stated the maximum permitted shareholding by any foreign airline in those of the USA is limited to 25%. Thus it is unlikely anything would happen here, at least in the mid-term (10 years?). There is another US airline which collaborates with IAG based in Seattle - Alaska Airlines together with its sister Horizon. They have working partnerships with five oneworld members, as well as nine other airlines. thus it does not seem to be a candidate for IAG.

Westjet B737- 6CT (c) dlowwa

 In Canada, since the flag carrier, Air Canada, is in the Star Alliance, competitors have looked around and found a worthy partner in WestJet, founded only in 1996. Between codesharing arrangements (5) and interlining (6) there are eleven oneworld partners, including IAG, which partner WestJet. However, its other partners number 31. Oneworld might try to attract WestJet into the alliance but any relationship is not likely to go beyond that, especially the statutes of the company call for 75% Canadian ownership.

Mexicana went bust so leaving oneworld without any representative in the Mexico of 120 million. Both BA and Iberia fly to Mexico City while BA also flies to Cancun. Both airlines tend to direct a lot of traffic through AA hubs in Miami and Dallas as well. Other oneworld carriers fly into the country and so LATAM and AA have found a partner in interjet, founded in December 2005, together with Iberia. The airline has built up a respectable domestic route network of 38 destinations plus 9 more to other neighbouring countries. Interjet could thus be

Interjet A320-214 (c) Luis Miguel Martinez

cultivated to join oneworld. It might prove attractive to IAG, if the terms were right, but regulations might limit any shareholding. BA has followed Iberia into codesharing with interjet with an agreement from 4 March 2015.The Mexican airline calls itself "low cost and high efficiency". However, that should not be a restraining factor since BA is now talking to low cost Ryanair about co-operation, while its franchise partner in South Africa - Comair - also flies under the low cost Kulula.com brand and is strengthening ties with BA. This could well prove the door opener for interjet.

   4-The Caribbean:(including Central America):

Most airlines, especially in North America and Canada, tend to think about flying to this region, mostly for touristic reasons. Nobody proposes flying from it to other destinations. It must be the richest region for tourism the year round. From Mexico´s Gulf and Yucatan coasts which would be from Veracruz, to Campeche, Merida, Cancun, down to Panama, Aruba, Venezuela, Trinidad and Guyana the potential is tremendous.

Limiting ourselves to the airlines mentioned on this continent we find LATAM flies to Cancun, Punta Cana (Dominican Rep.), Havana(Cuba) and Oranjestad(Aruba)AA, on the other hand, flies to 34 Caribbean destinations plus 10 Central American ones, so clearly dominates this traffic. 

If we look at the Mexican interjet, it flies to Guatamala City and San José in Costa Rica, while connects to Havana and Varadero in Cuba. Cancun is the only "Caribbean" resort connected to Miami.  Westjet offers 27 Caribbean destinations plus 4 Mexican ones in the Caribbean, though it is not clear which are direct and which are reached through connections.

From the other side of the Atlantic Iberia flies to the Dominican Republic, Puerto Rico,Panama, Costa Rica and San Salvador while returns to Havana. BA flies to many different islands which are British possessions in the Caribbean, such the Providenciales and the Cayman Islands, and others which are now independent states, such as Trinidad and the Bahamas. Between direct flights and connecting ones BA offers 26 destinations to the Caribbean islands and Central America plus Cancun and Bermuda(which come down to 16 direct flights). All these are attractive, some exotic, some pure leisure, some poor and some super rich - this is certainly not a market to be ignored. 

It is not something to be ignored but the British, French and Dutch still maintain possessions in the Caribbean. Their relationships with the European Union and, therefore, each other are difficult to unravel in the question of airline traffic rights. However, an European company, as is IAG, should be able to sort that problem out so that maybe a subsidiary airline were set up to fly from these resorts to, especially, the USA and Canada, with the support of one or all of the British, French and/or French governments. On the other hand, an existing vehicle might prove more attractive. 

The French offer the airline Air Caraïbes, based in Guadeloupe, which flies within the Caribbean islands plus French Guiana as well as across the Atlantic to Paris. Its owners, the Groupe Dubreuil, decided to buy the French airline Corsair from the tour operators TUI. You can see from the link that Corsair not only flies to the (French) Caribbean, but also to Montreal, Abidjan, Dakar, Madagascar, Reunion, Mauritius, and Mayotte. This makes its network, which is all long -haul, similar to the long haul network of Meridiana from Italy. This flies to the Americas, Africa and the Maldives. The interesting additional point to mention is that some several months ago Iberia signed a working agreement with Corsair. This blogger does not know if it is still in force. However, it all makes for interesting speculation.

The Dutch have Insel Air to connect their Caribbean possessions, with others, and up to 23 destinations across North and South America. It is based in Curaçao.The British Overseas Territories in the region are: Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Monserrat,  and the Turks and Caicos Islands All are attractive for tourists and some have very-well developed services.

Cayman Airways B737-300


 The only medium range airline based in a British Overseas Territory in the Caribbean is  Cayman Airways. It flies to 5 destinations in the USA, 2 in Cuba, 2 in Jamaica, and one in Honduras as well as inter - Cayman island domestic services.              



LIAT is a regional airline owned by 11 Caribbean governments, together with banks and other funds, and is based in Antigua, principally, but the commercial department is based in Barbados while there is another hub on Trinidad. It flies to 21 island destinations in the area. The government shareholders are Trinidad & Tobago, Antigua & Barbuda, Barbados, Dominica, Grenada, Guyana, Jamaica, St Kitts & Nevis, Monserrat, St.Lucia, St.Vincent & the Grenadines. Of these only Monserrat is an Overseas British Territory.           

The model used by LIAT might not be to the liking of IAG, if it looked at the airlline, as it is basically an island hopping airline, similar to Loganair in Scotland (with which BA used to have codesharing operations now taken over by Flybe). It could be a feeder airline but already does that role for (British) Virgin Atlantic and (US) JetBlue. It should be noted that the airline does not receive good press for punctuality and struggles to make a profit if any.

Other airlines in the region are Bahamasair which flies to 4 destinations in Florida,  Havana(Cuba) and the Turks & Caicos Islands.

Caribbean Airlines B737-800

The most ambitious is, the appropriately named, Caribbean Airlines. It was founded in Trinidad by the government there to replace British West Indies Airlines(BWIA) after this closed in 2006. This mid/long-haul airline flies (or has flown) to 7 islands in the region, plus Caracas, Guyana and Suriname,  from its bases in Trinidad and Jamaica, and  to Florida(3), Toronto, New York and London(this last route is to be closed down 10-01-16 for equipment reasons).           

Caribbean sees itself as an airline for the whole region, "The recruitment from other CARICOM nations showed the airline’s commitment to being the airline for the whole of the Caribbean. " This led it to incorporate Air Jamaica into its operations in May 2011, thus giving the Jamaican government a 16% shareholding in Caribbean. The wish to run an efficient, profitable entity "to fly the flag" for both countries and promote the region as a whole made the two governments reach agreement. This could well be a working model for IAG.  With its operating independence and own brand within the benefits of a larger outfit like IAG might just make Caribbean an interesting merger partner.   

Just to add a closing statement in this section, Norwegian (which subsidiary will run it?) has recently announced its intention to introduce services from the USA to the French islands of Guadeloupe and Martinique. This takes advantage of the "Open Skies" agreement signed by the USA and the European Community. The two Caribbean islands are part of Metropolitan France.

"Norwegian Air Will Serve French Caribbean From U.S. And Eyes Boston-Europe" (Forbes /Logistics and Transportation) and

"Just the ticket: Norwegian airline to offer flights from BWI to French Caribbean".(Baltimore Sun).



When we think about IAG and Africa thoughts immediately go to South Africa. As has previously been mentioned IAG has a franchise partner in the republic flying under BA livery called Comair, which also operates a second low cost brand called Kulula.com . Both airlines feed into BA´s services from Johannesburg and Cape Town. No doubt they will do the same for Iberia when that company restarts its flights into Johannesburg in August 2016. That would strengthen the co-operation between Comair/Kulula.com and IAG. In fact, to illustrate that, Comair and the St. Helena government have just signed an extendible three year agreement for the provision of air services between Johannesburg and the mid-Atlantic island from February 2016.     

Apart from that arrangement in the South African region both BA and Iberia offer few services to Africa from their home bases. BA serves 18 destinations while Iberia serves 10.  Their respective websites indicate something different. BA´s offers 16 countries (in some of which it flies to more than one destination) plus some (probably 7) of those 18 destinations are flown from a connection in Johannesburg with its franchise partner Comair. Iberia´s offers 34 destinations. 15 of those destinations are to North Africa, 4 are to the Republic of South Africa itself, which leaves 15 destinations to all of sub-saharan Africa.                             

In their respective countries and from their hubs, Egyptair(Cairo), Ethiopian Airlines (Addis Ababa)(both Star Alliance) and Kenya Airways(Nairobi)(Skyteam) are fast developing their networks so as to provide pan-African coverage.More destinations and more flights mean more incoming passengers. On the contrary oneworld has no partner in Africa with which to build a relationship, apart from the aforementioned Comair.

There is a long tradition of Spain and Morocco being involved together in one way or another.Now
Royal Air Maroc - B737-8B6
 the terms are certainly amenable. The national airline of Morocco Royal Air Maroc (100% government owned) has drawn closer to Qatar Airways and is trying to form a joint venture on their routes to the Persian Gulf. It is looking for a strategic partner in one of the Gulf airlines. It is also trying to form a joint venture with Iberia. Thus it is being drawn in closer to and considering joining oneworld. From its hub in Casablanca it would be able to serve Europe, North and West Africa.


In West Africa after experiencing a boom in traffic to serve the booming economies the Ebola outbreak suddenly put a stop to that. This forced many airlines to suspend operations in the region. the areas affected were principally Guinea down to Côte d´Ivoire. The airports of Conakry, Freetown and Monrovia experienced the greatest downturn in traffic.It seems that things are returning to normal as the outbreak has been contained with airlines creeping back into the region. 

One airport that has taken advantage of this is Accra(Ghana). The demise of Ghana International Airways in 2010 means the country has been without a national flag carrier since then. it was the second attempt to established an international carrier after Ghana Airways (1958-2005). The remaining airlines are Africa World Airlines, Antrak AirStarbow and Eagle Atlantic Airlines, but are minnows. Long term possibilities exist.

The Central African country, Rwanda, might be an attractive possibility where to base an airline to service Africa. RwandAir flies to most capitals of central and east africa, as well as Lagos(Nigeria), Accra(Ghana), Johannesburg(Rep.Sth.Africa) and Dubai. It presents itself as an outward looking airline, which is not that surprising when the country is only about 220kms. across at its widest point. Since its airline´s destinations are all to foreign countries comparison to other small countries come to mind, especially Singapore. This could mean that RwandAir could aim to become like Singapore Airlines, providing service to all Africa(and elsewhere) from a hub in central Africa.      

It might not sound appropriate to mention the following, but anyone who has worked in Africa will appreciate the considerations. The fact that Rwanda has joined the Commonwealth ( Nov.2009) makes it an added attraction. It has signed the charter which commits the country to
the principles of the Commonwealth. The core principles are "..consensus and common action,mutual respect, inclusiveness, transparency, accountability, legitimacy, and responsiveness."This makes the country and its institutions subject to "Good Governance". This idea has moved Cameroon(1995) and Mozambique(1995) to also join the Commonwealth. It shows a desire to better themselves and makes for a good business environment, making it much better than others such as Dem.Rep.of the Congo, Nigeria, and even neighbouring Burundi. 

Thus Rwanda gives the impression of being a go-ahead country in which to do business, and its RwandAir airline gives the impression of being the appropriate vehicle. The basic question is if this airline can develop on its own , or needs partners. It could sign agreements with a mutitude of foreign airlines or it could join an alliance. This is where oneworld should step in since it has no partners in Africa. Even IAG should be able to make a case for the airline to work more and more closely with it with the aim of joining oneworld. It could then provide the opportunity of IAG being its strategic partner so as to eventually join the group, just as Aer Lingus did. Maintaining its own identity, brand, home base and control of operations would give it the opportunity of being an independent airline within a larger group.

One has to be careful about other countries, not least stepping on Air France´s toes. This airline follows its own government´s neo-colonial involvement in its former colonies. It is, therefore, logical for IAG to take its time to look at opportunities that develop in other west and central African countries with potential partners. The fast growth of African low cost carriers (LCCs) like Mango (South African Airways), Fastjet (the founder of Easyjet is involved), Flyafrica.com and Jambojet (Kenya Airways) plus others are all trying to make their mark on the continent. This means that IAG and oneworld have to make strategic decisions sooner than later, otherwise they will be shut out of Africa.


consensus and common action, mutual respect, inclusiveness, transparency, accountability, legitimacy, and responsiveness, - See more at: http://thecommonwealth.org/our-charter#sthash.Lnu9vwok.dpuf
consensus and common action, mutual respect, inclusiveness, transparency, accountability, legitimacy, and responsiveness, - See more at: http://thecommonwealth.org/our-charter#sthash.Lnu9vwok.dpuf

    6- Asia-Pacific:

oneworld has, as members, Royal Jordanian, and Qatar Airways (Middle East), Qantas (Australasia), JAL- Japan Airlines and Cathay Pacific and its regional subsidiary Dragonair (Far East). These have been joined by Sri Lankan Airlines(South Asia) and Malaysia Airlines (SE Asia). BA flies to the whole region while Finnair offers an excellent choice of destinations in South, South East Asia and the Far East.

The oneworld relationships in this region have changed. The Indian airline, Kingfisher, has stopped functioning so access to South Asia (the Indian sub-continent) is provided by other airlines. BA and Finnair fly direct from Europe. From neighbouring countries the offer is much greater. From the east - Kuala Lumpur - Malaysia Airlines offers 9 (international) destinations. From the south - Colombo - SriLankan Ailines offers 8 destinations , while from the west - Doha -  Qatar Airways offers 24. An Indian partner is considered interesting for the alliance but at the moment it seems that the subcontinent is well covered. 

South East Asia is the homeland of Malaysia Airlines which offers 10 routes to other countries in the region. Obviously there are other airlines which are associated to oneworld through their parent airlines. Some such airlines are MasWings and Firefly from Malaysia, and the JetStar group which are subsidiaries or associates of Qantas. The members of the JetStar group cover Australia, New Zealand, Singapore, Vietnam and Japan.

However, there is one airline outside oneworld co-operating more and more with its members.
Bangkok Airways A320
This is
Bangkok Airways which has a strong regional network of routes both domestically in Thailand and to the immediate neighbouring countries. It describes itself as a "boutique airline", which is just what oneworld wants. IAG could well be interested in incorporating the airline into its stable but that would be dependent on the Thai government rules on foreign investment.    

The Australian airline and founder member of oneworld, Qantas, used to have a joint venture(JV) with BA on flights to London - the "Kangaroo Route". This went through Singapore, Bangkok and Hong Kong as intermediate stops. Since the airline was losing money it reduced the offer to eventually close the JV. The alternative, on which it decided to co-operate, was with Emirates though Dubai. The agreement with Emirates offered many many more destinations from the one stop in Dubai. This is particularly important for connections to Europe because before by flying into London, BA´s connections, in most cases, had to double back to other destinations in Europe. This increased flying time. The relationship with Emirates has worked well for Qantas by bringing it back into profit, though it does maintain the one through route to London. BA maintains it route to Sydney though probably more for traditional reasons than anything else. There is still co-operation between the airlines  but much less than before. This could be increased by use of the Qantas´subsidiary and associate airlines JetStar.

 Japan Airlines (JAL) has signed a JV with BA and Finnair on flights between the Far East and Europe which seems to be working very well. On the other hand Cathay Pacific, which has always maintained a distance from its partners in oneworld now seems to be putting greater distance between itself and BA. BA has always found it difficult to work with Cathay Pacific and its subsidiary Dragonair, as it wants to channel the feeder traffic through its own airlines. Thus BA has not been able to offer the number of one stop destinations in China (mostly) which it would have liked to. That is how Cathay Pacific is able to offer 5 flights per day into London Heathrow and it is introducing a new service into Gatwick. The ins and outs of the relationship are explained by the aviation analyst CAPA. This also points out that Cathay Pacific has increased its European destinations to 10 with more in the pipeline, with Madrid to be opened in June 2016. 

With flights directly into China,  BA flies to Hong Kong, Beijing, Shanghai and Chengdu, while Finnair flies to Hong Kong, Beijing, Shanghai, Chengdu, Guangzhou, and Chongqing.To try to satisfy the desire to enter into mainland China in quantity, BA is looking at the possibility of coaxing China Eastern Airlines and China Southern Airlines away from the Skyteam Alliance in which they already are and into oneworld. This would be a coup for oneworld and a heavy blow for Skyteam, possibly with unpredictable consequences. Before the alliances picked up non-aligned airlines but this would mean stealing two heavyweights from a competing alliance.

China Eastern is based in Shanghai and is considered one of the "big three" airlines in China. This is, probably, why BA has decided to increase its fights to 2 daily to Shanghai. This might be appealing to IAG members but the Chinese airline has strenghtened its ties with Skyteam partner Delta which has purchased a 3.55% share of China Eastern.

China Southern is another of the "big three" but is based in Guangzhou(formerly Canton). Beijing,Urumqi and ChongQing are other hubs, Beijing being of most interest to BA. The Guangzhou -London route is now known as "The Canton Route". 

Both these Chinese airlines are interesting without doubt, but they are in Skyteam and any co-operation might be limited by that factor. IAG might be interested in investing in these airlines, or even others. However, I doubt that. I think their size is offputting though their traffic would be welcome. On the other hand such rumours might just mean IAG is manouvering so as to get better deals with Cathay Pacific and Dragonfly.  It should not be forgotten that other oneworld members offer flights into China which, as additional one stop destinations, would be: Malaysia to Xiamen and Guangzhou, Sri Lankan to Kunming and Guangzhou, Qatar Airways to Chongqing, Hangzhou and Guangzhou, and JAL to Guandzhou and Taiwan(2). Using the oneworld network the possibilities are great but greater if Finnair is incorporated into IAG.



IAG is making progress after, at last, getting out of the financial doldrums. The immediate way forward is with further airline consolidation in Europe in order to strengthen its home continent with its bases. That way the consolidation of and the co-operation between the different partners would give them the opportunity to provide, alternative routings, more frequencies and greater feeder traffic for each member of the group as well as the alliance.

After that IAG has to look at possibilities to see if any investment is hindered in the markets in which it is interested. In this blogger´s view the best opportunties exist in Rwanda (or some very similar case) and the Caribbean where the North /South traffic is large and lucrative.

Also IAG has to investigate (something way beyond this blogger´s means) what the possibilities are in the different markets to see if only minority shareholdings are permitted. This can vary greatly from country to country. Then the decision will be made whether to become a strong airline holding company , or whether it becomes an investment vehicle in airlines. These two strategies are different. The first seeks to promote traffic between and through the participating airlines thus leading to profitability. The second is just orientated towards profit. This would mean investment in any activity in airlines or related to them - such as airport handling services, catering, engine and aircraft maintenance, or even in airports themselves among others. Then IAG would become a different animal and not just a group of airlines.

The last point is to speculate to see which photo or photos will be added to the stable of IAG members, in the near/mid term (by 2020) to the four  illustrated here of Vueling, Aer Lingus, Iberia and British Airways.                                                                                                                                                                                                 

Iberia A350-900

British Airways A380

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