BA plotting French shake-up

By THIS IS MONEY
Updated:

 

British Airways may launch a fundamental restructuring of its French regional carrier Air Liberté, rather than sell it off as widely expected.

Although contacts with potential buyers, including SAirGroup of Switzerland and Air France have yet to reach a conclusion, the British carrier is understood to be preparing contingency plans for a big cost-cutting drive at the loss-making French operation.

Union representatives at Air Liberté are reported to be expecting imminent details of a fresh round of economy measures, including the replacement of the airline's 11 Fokker 100 regional jets and four older F28s, and the closure of its route from Paris Orly airport to Nantes, which suffers competition from high-speed train services.

A BA spokesman declined to comment on the plans for a sale or restructuring. But he added: 'We recognise that both Deutsche BA (the group's German carrier) and Air Liberté have not in their own right made any money since they have been part of the group.'

Deutsche BA is now under-stood to be close to break-even. However, according to French financial daily newspaper Les Echos, Air Liberté lost Ffr680 million (£68 million) in 1997-98 and Ffr250 million in 1998-99. In the year which ends this month, it is expected to lose a further Ffr300 million, after being hit hard by the strength of the dollar and the rise in aviation fuel prices.

A thorough strategic review of group operations by BA has concluded that the airline's way to improved profitability is essentially to concentrate on providing more frequent direct flights to long haul destinations in smaller aircraft.

Take-off and landing slots used by low-profitability connecting flights at London may be needed to enhance long haul frequency.

Air Liberté's future within the group looks particularly questionable because, according to some experts, the French internal travel market is too small to support three sizeable competing airlines.

At present Air Liberté, which employs some 2500 people, faces tough competition from Air France and AOM, which is 49.5% owned by SAirGroup, the Swiss-based aviation grouping that includes Swissair, Crossair, Sabena, LOT in Poland, TAP Air Portugal and a 20% stake in South African Airways.

Contacts about a possible takeover of Air Liberté by Air France are reported to have taken place. Neither Air France nor SAirGroup, which apparently wants to merge Air Liberté with its AOM subsidiary, will comment. SAir-Group chief executive Philippe Bruggisser said this week: 'Air Liberté is part of British Airways. That is all I am saying.'

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