Tempus: Oil pressure

The statement from British Airways last night that it is “exploring opportunities” with American Airlines and Continental is confirmation of just how worried these carriers are by rising oil prices. AA and Continental announced huge first-quarter losses recently and BA is widely expected to reveal its second profit warning of the year next month as oil prices show no sign of dropping significantly in the near future.

Airlines are going bankrupt on almost a daily basis and the big carriers are looking to cut other costs through mergers and takeovers. A merger of BA, AA and Continental would create a massive airline with plenty of scope for cost-cutting while also dominating the transatlantic skies, which is one reason why it will not happen. Sir Richard Branson, president of Virgin Atlantic, has already fought two attempts by BA and AA to get together and he is ready to bring his considerable political and consumer influence against this latest proposal.

Times of London