Wednesday, 4 April 2007

Dumbest corporate decision ever???

Huge amounts of nonsense are being written about Aeroflot on the news that it is to mount a bid for Alitalia. Mostly this is a lame excuse by lazy business news editors, desperate for an Easter break, to stuff some column inches without too much effort [NB: Orthodox and Occidental Easters are at the same time this year, how rare is that?]. For the most part they will write some tired old crap about la dolce vita of the skies being snapped up by Air Kremlin. As I said, crap. But evocative, have-a-laugh-at-a-drinks-party crap.

In truth, though, there are few better examples of a corporate going where angels would fear to tread (but pesky investment bankers would push you anyway) than this deal. This is a very bad deal for Aeroflot; but (natch!) a great deal for the investment bankers.

To put it very briefly: Aeroflot is a sound business model, has rising demand, new jets on order, is (by far!) the safest CIS carrier and, moreover, has great business fundamentals and solid growth prospects. It is (while still a work-in-progress) a great turnaround story.

Alitalia is over-staffed, stuffed full of nasty unions, structurally inefficient (has a much older fleet than you might think) and, while we love Milan, is no-one's serious idea of a hot shot nation for tasty routes; drowning as it is in discount fare airlines.

By what tragic stretch of logic of which human's imagination does anyone think that Western Europe's most economically hopeless national flag carrier - Sabena having thankfully gone bust - would be a synergistic fit with the largest air carrier of Eurasia?

Logic? hah! hah!

Now unless there is something staggeringly sneaky about anti-trust and EU economic concentration rules going on here (you see, Air France has, for eons, been expected to buy Alitalia, but some have queried the...ahem...natural monopoly on Western European routes at issue: Air France already owning KLM and all), then this is crazy.

Actually, some cynics might argue there is a potential sweetheart deal here. Air France, Alitalia and Aeroflot are all members of Skyteam, along with a bunch of other second-rate airlines (declaration of interest: I am a silver card holder on Flying Blue; but then I am on the cusp of BA gold card and Lufthansa Senator too...I really must fly less).

Aeroflot will just never - never - make money on this deal. The Italian unions will screw them and (hello?) no-one wants to fly Alitalia anyway... Western European tourists have oodles of cheap airlines to choose from, to go to Italy from home, and seriously rich and corporate travellers, well... there are few airlines whose business class (take it from one who knows) is less alluring than Alitalia long haul.

So why is Aeroflot engaged in this flight of fancy folly?

Obvious I'm afraid... to keep up with the Joneski's. After two attempts, little old KrasAir, the surprisingly good and go-get airline of the Abramovich brothers (no relation to Chelsea-she's-young-enough-to-be-my-girlfriend-guy) has recently out-manoeuvred Aeroflot.

At its second attempt, AirUnion / KrasAir recently bought Malev; IMHO, Central Europe's cutest airline (declaration: I have a silver card there too).

Owning Malev offers AirUnion (the vehicle KrasAir is using) a unique hub: Krasnoyarsk. Where? You say: oh, Americans!... Krasnoyarsk makes loadsamoney from oil, OK? It's in Siberia. And it has great air-routes to China, Korea and other South East Asian destinations (and Moscow)...

...Malev, on the other hand, has great European routes and even a cute slot or two to North America (and is part of B.A.'s One World alliance). So, AirUnion (KrasAir) offers clever hub-to-hub and competitive fares from China to New York, via Moscow and Budapest (and virtually all places in between).

Moreover, the AirUnion franchise is even more potentially lucrative, if you note that (Boris) Abramovich is also behind Russia's first 'no frills' airline, Sky Express. Indeed, as global aviation goes, he really is one of its most innovative and entrepreneurial players.

Sweet deal for AirUnion (hats off! etc) so you can see why Aeroflot felt it had to do something...

But, boy!, should this not have been it!

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