Summary
1. BA stock price at 133 pence and potentially can go lower could call off the talks. 2. AA/BA antitrust immunity request could likewise kill the deal.
Analysis
BA stock is undervalued, which on its own could kill the IB merger talks...even thought no one believes the company's current price reflects its true value. Obviously this is the case with many companies and industries today given the world economic situation. To illustrate this craziness, in the US airline industry for example, American's current market cap is about the same as JetBlue's. Does anyone believe that these 2 premier carriers with worldwide networks are valued properly? Can a 63 airplane airline like JetBlue really be worth the same as an airline, like American that has more than 10x the number of airplanes and offers a global network with the largest frequent flyer program in the travel industry (which include cars, hotels etc.)?
The second opportunity is the antitrust immunity that both BA and AA are seeking. While this should be a "no-brainer", I remain concerned that it will not get done since logic does not seem to have a place in this industry. The fact that Northwest, KLM, Delta and Air France already enjoy the very antitrust immunity that both AA and BA are seeking, would suggest that either AA/BA immunity should be easy and quick (it is not)...or at the very least, take away the immunity from others that already have it. Either way it would make it a level playing field, which it is not today. Moreover, with the opening of slots at Heathrow in the last year...anyone who has wanted to start service has been able to do so. Thus if the Ba/AA deal does not get done there is even less reason to do an Iberia merger as they are already in the OneWorld Alliance so a merger would be less compelling.
Therefore, since I do not see a quick solution to either of these situation, I do not see the BA/Iberia merger happening in the near term, but could occur over time.
