Limited competition is keeping costs high, says BA's Walsh

Limited competition is keeping costs high, says BA's Walsh

Limited competition might be keeping prices for aircraft, engines and maintenance services artificially high, the boss of British Airways parent International Airlines Group warned.

Chief executive Willie Walsh was speaking at the Iata annual meeting in Miami alongside a representative of Airbus and engine manufacturer General Electric.

“We really have to start pushing back as airlines on our costs where they’re driven by a limited number of suppliers and the choice available to us is very limited,” he told the meeting.

The cost of maintaining aircraft to a high standard was “escalating”, he said.

“In many cases, the cost of doing that bears no relation to the cost or to the service you’re getting,” he added.

Walsh indicated that he had initiated an investigation through Iata of costs for services such as engine maintenance, to see if there was scope for legal action, the Financial Times reported.

He did not specify what kind of action he might support.

“It may be that at the end of the day those of us who think this needs to be investigated will be disappointed and there will be nothing there,” Walsh said. “But I doubt that.”

He won backing from Alexandre de Juniac, chief executive of Air France-KLM.

“We totally support and share his concern,” he said. “We have been among the first to ring the bell on that.”

Walsh made it clear that aircraft ordering decisions had been affected by concerns over competition.

IAG had preferred Airbus’s A380 superjumbo to the latest Boeing 747-800 because Airbus offered a choice of engine suppliers, he said.

Walsh expressed support for efforts by Canada’s Bombardier and Brazil’s Embraer to break into the commercial jet market and boost competition.

He also expressed hope that Rolls-Royce, which currently supplies engines only for wide-body jets, might rejoin the narrow-body market.

Airbus chief executive, Fabrice Brégier, responded by saying that the competition between his company and Boeing was “very tough”. “This is why we are still the only two competitors in town,” he said.

David Joyce, chief executive of GE Aviation, said engine makers faced a challenge. They were pressed when developing new engines to come up with designs that would reduce fuel consumption by as much as 20% but needed to do so in a way that would not push maintenance costs “off the chart”.


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