Expert Finds Flaws In BA-Iberia Merger

Chris Mills says he thinks the cost savings proposed in the deal are conservative

Written by Chris Mills, Merger Integration Specialist

Sky News, 13 November 2009

The BA Iberia merger has been welcomed widely, with routes for survival and cost savings both reassuring and exciting analysts, shareholders and unions.

However, this is far from a perfect marriage, and the spectre of a shotgun looms large in the background.

While initial sentiment has been positive, a further look at the figures suggests either a distinct lack of ambition or a deliberate ruse to downplay expectations and concerns.

For a merger of this scale, the cost savings proposed - around £350m - are conservative to say the least.

The combined company should be looking to double that estimate, but playing the potential cost savings down leaves much more wriggle-room to placate the unions' questions around cabin crew conditions or potential staff cuts.

The timescale for integration and delivering the cost saving is also uninspiring.

It will likely take 12 months for this deal to complete, but the planning should start now with a view to hitting the ground running when the light turns green.

Achieving 25% of savings in year one, rather than year three, as currently forecast, should be the goal.

Maintaining customer service levels and loyalty throughout this change will also be a huge challenge as the companies look set to integrate back office and IT systems.

These operations might seem far removed from a customer’s point of view now.

Get it right and they will be, but get it wrong and it's a potential customer relations nightmare.

Is Willie Walsh aware of this? After the Terminal Five fiasco, there is surely no doubt.