With the news today that BA are in merger talks with Qantas, added to the already announced Iberia merger and AA alliance, it seems that British Airways and their partners in OneWorld are interested in taking the alliance to its logical conclusion (and bypassing all the governmental resistance to such a move). A single airline, from a logistical and operational point of view as opposed to brand, on which passengers can circumnavigate the globe seems to be the aim and the idea of this being a successful structure for airlines has perhaps been shown to a limited degree by the KLM / Air France tie-up in which the two companies merged everything except their brands. Indeed, even without the AA alliance, travellers could be finding their passage around this fair planet of ours slightly more bearable as they transfer more easily through Central/South America on Iberia, thru Asia Pac on Qantas and Europe on BA. The synergies for such an airline, and presumably for the viable competitors who would be forced to respond, could see the none budget sector of the airline industry finally entering a period of sustainable profitability.
From the portfolio point of view, the previously noted thesis of Airline consolidation being somewhat ahead of the overall economic situation, due to previous high oil prices forcing them to get their acts together, thereby leading to a recovery before the overall economy seems to be gaining some traction. I’ll remain long for the moment and see how this plays out with a mental stop around breakeven at 118p.