BA Calls For Open Market

     Sometimes the stuff that crosses our desk makes us look twice.
     Case in point is a speech last week by British Airways Chairman Martin Broughton at The Wings Club in New York City.
     Martin Broughton prior to his posting at BA after Lord King died in 2002, was CEO of British American Tobacco a company under fire worldwide as tobacco-related deaths from all manner of horrible diseases continue to rise.
     Here as the smoke clears are some Broughton excerpts:
     “The choice the U.S. passenger has today—all too often—is between cheap price with cheap service or more expensive price with cheap service.
     “Traveling outside the USA, the American citizen can either stick with the devil they know, who incidentally offers a bewildering range of code-shares on foreign airlines, or they can have direct access to foreign airlines that they don't know much about because they are barred from operating within the U.S. domestic market.
     “A true open market system wouldn't find the taxpayer funding huge pension liabilities of airlines in Chapter 11.
     “Since the current system has loaded these liabilities onto the taxpayer at least make it worthwhile.
     “Any investor will tell you, the U.S. aviation industry has not represented a great opportunity for shareholders.
     “The European aviation market currently has more attractive investment opportunities—it's growing and most of its airlines are financially sound without State Aid or Chapter 11.”
     Mr.Broughton is effusive enough we suppose,but he fails to mention the sixty or so years after the Second World War when all of European and most other world airlines were subsidized.
     Prior to taking over KLM, Air France for example got billions from the French government in a “one time-last time bailout”.
     Anybody who thinks that even today, if one of the huge European legacy carriers were in trouble, that its European country would not figure a way to bail it out, is not paying attention to history.
     Alitalia in fact without massive propping up (of one kind and another) would have already folded like a cheap suit a couple years ago.
     So what is the Martin Broughton better idea?
     Call it the 'Open Market' model.
     “It's a model that allows companies to operate on a global scale, in competitive markets, offering consumers a consistent product.
     “What would the industry look like if the 'open market' model were applied?
     “Well, American Airlines for example, could fly from Sydney to Singapore or Lagos to Cape Town or whatever routes it chose to fly—and become as ubiquitous as Coca-cola or McDonald’s—available anywhere in the world.
     “It could choose to rebrand its acquisitions, like Citigroup does, or it could retain the existing local brand name just as Procter or Unilever do.
     “It would be a world where the strong get stronger and the weak go out of business either through acquisitions or bankruptcy, but they wouldn't get subsidies to enable them to continue operating unprofitably thus destroying the industry economics.
      “It would be a world where alliances and code-shares, which at best confuse the consumer and at worst deceive the consumer, would be unnecessary.
     “They (alliances) have only sprung up as 'second-best' alternatives in the absence of the acquisition option used in the open market model.”
     Mr. Broughton answers the question of who would survive in this open market scenario.
     “We think we should be one of the long term winners in the open market model.
     “We think a lot of people around the world would be pleased to pay a little bit extra—because it's worth it.”
And we wonder what world this guy lives in?
     “If we (British Airways) get acquired by someone else as part of the consolidation process, then at least our shareholders will be happy.”
     So let’s get this straight.
     BA flies for its shareholders, not its customers, right?
     How about this?
     Give the U.S. carriers one or two decent years (some believe that 2006 will finally see U.S. flags get back to overall profit) and then maybe some sort of enlightened re-regulation or new deal can be struck.
     The most intriquing part of this positioning send up as world airline consolidation approaches, is Mr. Broughton’s scenario suggesting the future includes possibility that any U.S. airline might take over British Airways.
     The Queen would drop her purse at that one.
     In any case our bid as the airline to take over BA is Richard Branson’s Virgin Atlantic
(Geoffrey Arend)