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(Updates with Walsh’s comments on cabin-crew dispute starting in 21st paragraph.)
June 7 (Bloomberg) -- International Consolidated Airlines Group SA, formed in January from a merger of British Airways and Spain’s Iberia, is concentrating more on extracting savings from the deal than expanding through further takeovers, Chief Executive Officer Willie Walsh said in an interview.
While IAG’s structure is aimed at facilitating further consolidation, the company has “no plans to do anything at this stage,” Walsh said in Singapore, where he was attending the annual meeting of the International Air Transport Association.
“We have a team in place that can take advantage of any opportunities that do present themselves, but our focus is very much on delivering the synergies we have identified, and I’m pleased we made excellent progress on that,” he said, adding that he expects to deliver savings “in full and on time.”
The comments contrast with those made in the run-up to the Iberia deal last September, when Walsh said that IAG was “capable of pursuing further consolidation immediately.” BA said at the time that an internal taskforce had identified about 12 possible merger candidates out of around 40 contenders.
“IAG was set up in such a way that they could add new brands going forward, but that’s not something you can easily do,” said Gert Zonneveld, an airline analyst at Panmure Gordon in London. “It took BA many years to find a partner of its own.”
IAG rose as much as 1.4 percent to 232.8 pence and was trading at 229.8 pence as of 3:17 p.m. in London, paring the stock’s decline since its Jan. 24 listing to 16 percent.
Walsh said in the interview yesterday that the only carrier IAG is actively tracking right now remains British Midland International, a unit of Germany’s Deutsche Lufthansa AG that’s the second-biggest holder of operating slots at London’s Heathrow airport after British Airways.
“I’ve expressed interest in BMI for several years now and that interest hasn’t changed,” Walsh said. “If Lufthansa was interested in disposing of BMI clearly we’d be interested in looking at that because of the slot portfolio.”
IAG is not currently looking at New York-based JetBlue Airways Corp., in which Lufthansa has a stake that may be redundant after its partner United Airlines bought Continental Airlines, giving a hub in nearby Newark, Walsh said.
Europe’s third-biggest carrier is also “not targeting anything” concerning Portugal’s TAP SGPS SA, he said.
While state-owned TAP’s CEO, Fernando Pinto, said March 3 that there are potential buyers interested in acquiring a stake, the government’s defeat in a parliamentary election at the weekend is likely to deflect any planned sale, Walsh said.
“We’ll have to wait and see what the new Portuguese government decides to do,” he said. “At the moment there’s nothing happening there.”
In Asia, plans for deeper cooperation with Japan Airlines Corp. are based around strengthening the Tokyo-based company’s membership of the Oneworld global alliance rather than taking an equity position, Walsh said.
IAG is keen to develop a joint venture with JAL similar to one that it has across the Atlantic with AMR Corp.’s American Airlines, he said. The CEO said March 29 after JAL’s emergence from bankruptcy that IAG would consider investing should a stake become available, adding that the airline industry “needs consolidation” and that IAG was “ambitious” to expand.
JAL last month implemented a venture with American Airlines on 10 trans-Pacific routes including New York-Tokyo and Beijing- Chicago, a tie-up AMR said would generate sales and cost gains of about $150 million a year for the pair.
IAG may also have found that the assets available didn’t measure up to its requirements, Panmure Gordon’s Zonneveld said.
“If these business were performing so brilliantly they wouldn’t be for sale anyway,” the analyst said. “Plus, beyond the network angle, you have to take into consideration potential for labor unrest and discrepancies of fleet and so on.”
AMR President Tom Horton said separately that the company isn’t concerned about being left behind in the U.S. following the United-Continental transaction and the 2008 purchase of Northwest Airlines by Delta Air Lines Inc.
“What’s important is not how big you are but being big in all the right places,” he said. “We have hubs in New York, Chicago, L.A., Dallas-Fort Worth and Miami, and the first four of those are the four largest metro areas in the U.S.”
The Oneworld grouping also has hubs in five of the world’s top six business-travel markets, Horton said, while the trans- Atlantic alliance with British Airways offers 15 return flights a day between New York and London, “far and away greater than any other alliance in the richest market in the world.”
At British Airways, Walsh said he’s hopeful that the carrier’s two-year dispute with its cabin crew is “coming to an end” as workers participate in a month-long vote on a pay deal that enshrines a working structure designed to slash expenses.
“I’m pleased we secured all the cost savings we needed to achieve,” the CEO said. “That’s a very significant step forward for BA. It was our only objective in the dispute.”
Traffic figures have been “incredibly strong” following industrial action that featured five strikes spanning 22 days last year, demonstrating that the carrier has emerged with its reputation and brand undamaged, Walsh said.
--With assistance from Robert Fenner in Singapore. Editors: Chris Jasper, Chad Thomas.
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