BA on promising course for US deal

Anthony Hilton12 April 2012

BRITISH Airways has made no secret of the fact that it would like to clinch a deal either with American Airlines or KLM to help it build a base for going forward when the current economic slowdown is behind it.

The chances of a deal with KLM are slim because of the sheer complexity of having to renegotiate all those government-to-government route licences following a change of ownership. Many were granted to the Dutch airline only because it is the Dutch airline, so how many would be handed on to a replacement carrier is a very serious question. The American deal is no picnic either, but given the horrendous difficulties of the European merger, it looks the better bet.

Sir Richard Branson of Virgin Atlantic certainly thinks so and has recently revived his lobbying campaign against it because he believes, probably correctly, that it would make life tougher for his business.

The reason why there is far more chance of the American-BA deal happening now, when it was so comprehensively blocked last time, is the very high standing of the British Government in Washington as a result of Tony Blair's wholehearted support for the US campaign in Afghanistan. There is more goodwill towards the UK in the administration and Congress than there has been for years.

In addition, Blair has used his frequent meetings with the US leadership to emphasise how at a time like this it is important to remove any petty disputes that might sully the friendship. The blocking of the American Airlines alliance with BA is exactly the kind of dispute he has in mind. The Prime Minister is clearly doing his bit and the political and economic climate has never been more favourable. We may well know by Christmas if BA has finally got what it wants.

Off the rails

A VISITOR from Mars would never believe Britain's railways were a national asset built up over more than 100 years and far too costly in today's money ever to be built on a similar scale again. That being so, and fragile though the system is, a rational society would treat it carefully. Yet in the past few weeks the fate of the railways has been severely undermined.

Only in this country would it be thought sensible for the most complex investment and logistics business in the land to be handed over to a bunch of accountants with no previous experience of running it and no commitment to the long or even medium-term future of the business. It is not for them to decide where investment is needed and what the maintenance priorities should be. Administration is an economic process designed to salvage whatever can be saved from a company in financial difficulties. But it is utterly unsuited to, and was never designed for, a business like Railtrack. The longer it goes on, the more likely it is that the system will be brought to the brink of collapse.

If that were not insanity enough, the most favoured alternative is a bid by a bunch of financial engineers, the very breed who have broken up British industry over the past 30 years, squeezed all the cash out and sold what was left to the Americans.

Signs of deterioration in the rail network are already showing in a huge surge in train delays with the fault attributed to Railtrack in the weeks since Transport Secretary Stephen Byers pulled the plug on the company. Delays are up by a quarter, apparently. Meanwhile, Byers seems no nearer knowing what he wants to do with the business he was so keen to interfere with. But if he does not start taking some sensible decisions soon, there will be nothing left to rebuild.

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