Most business valuation experts accept the fact that business partnerships (for IP or shared revenue opportunities) add to the value of a pool of assets. A very interesting interview with IAG chief Willie Walsh, published by Flightglobal.com (9 November 2019) offers a cautionary perspective. IAG’s primary carriers—British Airways and Iberia—are allied with Oneworld, and its latest acquisition, Air Europa, will be rescinding its SkyTeam membership.

Walsh told an investor group earlier this month that alliances have a ‘role to play,’ but their structure is proving ‘fragile’ with several carriers, including Air Europa and LATAM (following Delta’s acquisition of a 20% share).

He’s suspicious of alliances and minority shareholdings for the major carriers such as IAG because, while there may be revenue synergies, ‘anyone who tells you that there’s a cost benefit, or any cost synergy, they’re misleading you.’ (That being said, Walsh still agrees, ‘[i]f we see that we can generate strategic value by taking any minority stake in another airline, then we would have to consider it.’)

‘But taking a minority stake without having some form of control, or some influence over what the airline will do, has no value whatsoever. Again, Walsh refers to Delta, which has a 49% ownership share in Virgin Atlantic and a 49% voting share in Aeromexico. Despite these minority numbers, Walsh believes Delta’s stake is ‘non-controlling … on paper only.’

Alliances and acquisitions only add value with elements of control: In summary, Walsh cautions investors (and valuers): ‘We only see [minority stakes] making sense where you get an element of control.… If you can’t get control or influence …[y]ou think you have control, they take your money, they spend it, and then they tell you to get lost.’