British Airways sale sparks speculation

A planned sale by British Airways (BA) of its stake in Australia’s Qantas has reignited talk of further consolidation in the European airline industry, but analysts played down prospects of an imminent deal.

The British carrier said on Wednesday it expects to net about £425-million from a sale of the 18,25% stake in Qantas.

It said it will use the proceeds to reduce debt and fund possible acquisitions in Europe.

“We now believe it is in our best interests to sell our shares to pay down our debt and continue to strengthen our balance sheet,” BA chief executive Rod Eddington said.

The comment “is likely to be read by some in the market with respect to a potential deal with Iberia in the future”, Merrill Lynch analyst Anthony Bor wrote in a research note.

But he also remarked: “The rationale is to continue to pay down debt, and to that extent, does not represent a departure from the group’s strategy.”

The British airline already has a 9% capital stake in Iberia and the pair have forged a closer commercial alliance recently.

Eddington told reporters his company is “not interested in Alitalia”, the troubled Italian airline, but refused to be drawn when asked whether BA might bid for Iberia.

“It’s a good relationship ... We’ve always made the point we regard them as absolutely key to our European plans,” Eddington said of the Spanish carrier.

BA shares lost 1,38% to 232,75 pence in London, while Iberia gained 1,30% to €2,33 in Madrid.

BNP Paribas analyst Nicholas van den Brul said the announcement by BA’s management does not necessarily pave the way for a merger or acquisition by the British airline in the near future.

“They’ve said for a long time that debt reduction was the main priority, if you read between the lines.
The Qantas stake was obviously something that could be converted into cash at some point,” he said.

“I don’t think that they’re necessarily going to use the money to buy anything else. I think they will wait before they do anything because they already have quite good bilateral agreements in place with both Iberia and Aer Lingus, which are the two candidates suggested in the press.”

Speculation that Europe’s airline industry is poised for further consolidation has been rife ever since Air France created Europe’s biggest airline in revenue terms by buying Dutch rival KLM earlier this year.

BA and its European rivals have seen their wings clipped by a slump in passenger numbers in the wake of the September 11 2001 terrorist hijackings, the severe acute respiratory syndrome outbreak and last year’s Iraq war.

Though air traffic has recovered to pre-September 11 levels, high oil prices and a series of industrial disputes have hindered BA’s recovery.—Sapa-AFP

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