The hidden reason why BA would like Heathrow expansion even more than you think

Further to the post yesterday about the UK airport choice, one of the biggest supporters of Heathrow is British Airways (well, its parent company the boringly named International Airlines Group).

BA's HQ is at the Waterside building, pictured above. It is a epic paean to corporate excess. A huge sprawling building, never really filled with staff and built at a cost of £200 million in 1998. It has a long hall, shops, etc. A very nice place to work and absolutely no re-sale value whatsoever. BA has tried to put it in its Pension scheme over the years amongst other things. But a building with no real re-sale value (what other business would want a 100,000 suare foot between the M25 and the Runway at Heathrow?) it has become an albatross trapping BA in an office to big to leave and costly to maintain.

But lo, a new runway would mean the demolishing of this building and of course, a compulsory purchase order for Waterside. No doubt, being a CP, the price would be something astronomical, after all if it cost £200 million in 1998 with the rise in commercial property values surely now it would be £500m or more. Of course, BA has not far from here and also scheduled fro demolition its staff hub for the aircrews and engineers - all of this would have to go too. All at CP prices.

Thus as part of a new runway programme BA will be subsidised directly by the taxpayer to move and re-build a big chunk of its estate. Either saving them a fortune or resulting in a free upgrade of the estate that would be a huge benefit.

This over and above the massive benefit of a hub being built at their home airport anyway. No wonder Willie Walsh is so keen on Heathrow expansion.

BA losses in a spin

I really don't get the City reaction to the BA results today. Sometime analysts are just like journalists, they want a story and make the facts fit it.

In short, BA posted its worst ever losses today on the back of all the troubles last year, a £531million pound loss. A very rough calculation is putting this at over £10,000 loss per flight taking off!

The City is focusing on the fact that the company led it to believe it would lose £600 million. Therefore this number is a beat for them and the shares are marked up!

However, all these figures are pre the next set of strikes which could cost £150 million and the cost of the Ash cloud - which of course could well be a recurring theme.

Not only this but BA's pension deficit is still a disaster zone, with the deficit being worth triple the company's value and the planned merger with Iberia will stick BA with another loss making airline - it may not even be a UK domiciled company for much longer.

BA is said to have £1.7 billion of cash on the balance sheet. Therefore the company can stand these conditions a while longer. What the analysts are missing is that BA is not replacing its fleet. Look at how old its planes are here: compare it to say Virgin or Easyjet.  These aircraft that need replacing cost $70 - $200 million each. OK BA gets 50% discount, but it is still over £2 billion of replacement costs needed very shortly.

I have always said BA have good management, despite the sniping in the press, Willie Walsh, Keith Williams both do a terrific job, but it is a Sisyphean task.. But the Unions and weather are conspiring to ruin the brand once and for all. Perhaps with the merger they will try a re-brand?

All this and the share at at 190p - in current parlance - get real.

British Airways staff select their Jonestown

Yes, the Telegraph reports today that the BA unions are getting more revolutionary not less. They have seemingly been encouraging staff to sabotage the company and want a showdown. They have picked Kempton Park racecourse for a meeting to decide on a new stirke, having been thwarted by the Company at Christmas.

I am always amazed by lemming behaviour and how it can continue. I will continue to watch the story unfold. I doubt BA or its staff can really keep this level of antagonism up without serious problems for the company this year.

Michael & Willie in clown competition; BA-Ryanair

I will give Ryanair some credit, they believe that they have the market cornered on being cheap. This latest stunt is just incredibly funny; the idea that there can be a ledge to sit on in a plane and no seat.

I cannot for the life of me believe the CAA would ever regulate such a thing on an aeroplane.

No doubt Mr O'Leary knows this too, but he can't help himself in promoting Ryanair as the cheapest of cheap brands.

Good luck to him, I vowed never to fly with them long ago after a truly miserable experience (which did not even involve being able to get on a plane).

Next up though, British Airways look set for another summer of strikes. Willie Walsh, a decent man with a near impossible job, has decided to play hard-ball with the staff. The trouble is they are highly unionised at BA and it seems they think he is lying when he says BA might go under. Well, maybe the staff will get to find out soon enough.

Which of these jovial Irishmen would you rather work for Willie or Michael?