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British Airways chief executive Willie Walsh today said the case for a tie-up between the UK flag carrier and American Airlines (AA) is "stronger than ever", as the industry braced for $9 billion (£5.67 billion) of losses this year.
Walsh and his AA counterpart Gerard Arpey said they are confident of winning approval from US and European authorities to allow them to co-operate on transatlantic flights by 2010. The BA boss also warned that his airline is "in a fight for our very survival".
It came as the International Air Transport Association (IATA), which represents 230 airlines worldwide, said its members will lose $9 billion in 2009 - nearly double the $4.7 billion forecast in March - and the recovery will be slow as the economic crisis saps demand.
IATA chief executive Giovanni Bisignani said: "There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced."
Revenues are expected to decline by $80 billion or an unprecedented 15% on a year ago to $448 billion this year.
Passenger numbers for 2009 will be down 8% to 2.06 billion, IATA said, while cargo will be down 17%. BA last month stunned the City with losses of £401 million as business and first-class passenger numbers plummeted.
A tie-up with AA will see the airlines sell each others' tickets and work together on pricing and schedules. Critics such as Virgin Atlantic boss Sir Richard Branson claim BA and AA are already too dominant, but Walsh is increasingly confident the alliance will be approved because of the difficulties facing the industry.
"This is about levelling the competitive playing field and we are confident our case has significant merit," Walsh said at the IATA conference in Kuala Lumpur.
"We expect to get approval in the current calendar year, which will allow us then to proceed with the joint business by 2010."
BA now faces another summer of strike chaos after its ground staff rejected proposals to take pay cuts or redundancy.
In a letter to his 40,000 staff, Walsh said: "The next four weeks are vital for the future of our business. We are very clear that we are now in a fight for our very survival and time is running out. This is our greatest-ever challenge."
Reader views (7)
Expect BA customer service to deteriorate to AA's level if these airlines join forces. AA customer service is a farce.
- Alan Preen, McLean, Texas, USA.
A tie-up is 'crucial' perhaps to two badly run airlines such as BA and AA - I don't think it is crucial in any way to the consumer that we remove competition from transatlantic flights.
I wish Willie Walsh well (he's a fellow Irish man after all) but his staff have made quite a few basic errors that have led to poor perfomance this year. I only fly in economy, but if I compare the dreadful customer experience I get when I fly with BA and AA against the very good service from Virgin/Singapore/BMI and other carriers I have used worldwide, this tells me more about why BA and AA are struggling. It starts and ends with how they treat their customers.
- Dc, Belfast
I have flown many countries airlines and in recent memory AA stands out as the worst I have flown and although I have never flown BA many who have give it a thumbs down
- E.Reed, Bournemouth,UK
To A Winsley,
What a load of tosh.. Parts of the US Inc. are floundering, but what does that say? LHR will still be full next year of executives from Microsoft, or Intel, or J&J or McDonalds.. Even Wall Streets finest will return given time
The North Atlantic is BA´s biggest profit winner, and co-ordinating with AA helps make that a better business. Just like Lufthansa does in Star with UAL... Or Air France does with the new Delta. A level playing field, nothing more.
Iberia seems to be BA´s only option in Europe, but from a timing point of view now is probably not very favourble to BA. Iberia handily has cash and a better balance sheet it´s true. It has capacity to spare at Madrid, and could add an extra flight or two to Bogota etc.. But Madrid is a void when it comes to Asia. Iberia don´t fly anywhere East of Suez, and Madrid has maybe 3 flights a week sometimes via other European cities linking to Asia.
BA has, for my money, got to heal itself. It´s pension defecit and labour groups have to share with the shareholders in the pain. Otherwise keep BA "LHR Airlines", improve alliances particularly with AA, and wait for better days
- David, Battersea
Any tie up with American industry at the moment is a bad decision. The American industries are priving to be a tissue thin, and managed on the bases of our parlimentary expenses. After a century the motor industry is tottering, other industrial conglomerates are following suite. Any tie up with the States is a bad move. Its only benefit is for the board. It should look towards Europe to form a powerfull air body.
- A Winsley, London England
Is Virgin Atlantic´s real problem that 49% of the Company was sold to Singapore Airlines a few years back, and now they lack options when coming to choose their own dance parter in the alliance mating game!
Also in analysing city pairs, I think competition authrories are being unrealistic expecting say Boston / Heathrow to have a certain level of competition. Is the correct way of looking at this not to also include routes that for example link Boston and Heathrow via Paris or Amsterdam.
This clearly an industry that is broken. I wish Virgin Atlantic the best, but they have to adapt too!
- David, Battersea
Just because BA has massive financial problems, it doesn't mean that the BA/AA proposed merger is right for consumers. It isn't and travellers would end up paying higher ticket prices to a dominant monopoly. I don't think consumers want a choice of BA only on a route, as would happen. The regulators are luckily well aware of BA's stranglehold on Heathrow.
Paul Charles, Director of Communications, Virgin Atlantic
- Paul Charles, London, UK
