OpenSkies buys L’Avion….. eh?

PARIS (Reuters) – British Airways (BAY.L: Quote, Profile, Research) has agreed to buy small French business airline l’Avion for 68 million euros (52 million pounds) and it will become part of its new OpenSkies unit, they said in a joint statement on Wednesday.

(full article)

Jared from Online Travel Review says:

Openskies gets leases for a couple of 757s (which are difficult to come by these days), slots at Orly (not sure how much they care about that in the long-term, but still good), and eliminates competition on the route (not sure how much difference that actually made). Not too bad for $50 million, though at an average one-way fare of $1200 (I’m being generous) and a 70% load factor (generous), it would take them a year of flying to earn back the $50 million in revenue.  At a, say, 10% gross margin, it’ll take them 10 years to earn the $50 million in cash on that route.

I think Jared is spot on, although for the life of me I can’t figure out why they’d do this. Finding 757’s can’t be that hard, and given the math it just doesn’t seem like good business.

I guess we’ll see pretty soon what they choose to do, but in the meantime I’m confused.

Filed Under: British Airways, Other Airlines
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