Lufthansa and Brussels Airlines: another view

Lufthansa Group
With more then 300.000 views and more then 1.600 posts, our forum topic “Brussels Airlines future and financial perspective” is one of the most viewed and most discussed here. When Lufthansa announced a press conference for 27th April 2016 about Brussels Airlines, all recent posts regarding this take over were transferred into a separate topic “Lufthansa’s press conference 27th april 2016”. One of our active forum members posted an opinion there that differs from many posters who think that Lufthansa will pull out – or that Lufthansa will buy Brussels Airlines to integrate the airline into a new low cost EuroWings project. We therefore preferred to publish this long post from Luchtzak-member “Passenger” on this page too.

Brussels Airlines versus SN Airholding

Lufthansa will not take over Brussels Airlines nv/sa. Lufthansa will take over SN Airholding nv/sa (= owner of Brussels Airlines nv/sa). Lufthansa already owns 45% of SN Airholding sa/nv, and they have an option to buy (or not to buy) the remaining 55% shares. Expiry date of this call option is 15 May 2017 (source: Luk De Wilde, or 15 May 2018 (source: L’Echo).

Lufthansa’s take over money will thus not be injected into Brussels Airlines, the airline. Actually, Brussels Airlines is just “the subject” here. The only beneficiars of this take over are the shareholders of SN Airholding nv/sa. They have invested in 2001/2002 (some a bit later), and they will now get their money back. Those investors include private companies & regional authorities – really big names in Belgian business like (a-z) Brussels Airport, CMB, GDF Suez, GIMB/SRIB (Brussels Regional Investment Company), Roularta, Solvay, Tractebel, UCB, Umicore and others. All united through two mutual friends: Etienne Davignon & Maurice Lippens.

So actually, and contrary to what most people on this forum say, it’s better for Brussels Airlines that Lufthansa pays as little as possible for SN Airholding nv/sa. The more money Lufthansa can keep on its bank account, the stronger Lufthansa remains after the take over = the more they can invest in Brussels Airlines / at Brussels Airport / for EuroWings.

Zaventem, 22/03/2016

Now, sadly enough, I have to refer to the bomb attacks at Brussels Airport on 22nd Match 2016. Apart from the terrible loss of life and serious injuries to hundreds of people, 22/03 has caused a serious financial loss for Brussels Airlines. 2016 will certainly show far less profit (if any) for Brussels Airlines, thus less profit (if any) for SN Airholding nv/sa, thus a decrease of their own assets (eigen vermogen / capitaux propres). And thus a decrease of the value of SN Airholding. A lower take over price than verbally agreed some two months ago is therefore absolutely normal.

We have to remain correct towards Lufthansa: they don’t win anything with their lower offer: they pay less, but they get an airline in exchange with far less own assets then 2 months ago, and an airline with a long recovery ahead.

Press release Lufthansa – 27/04/2016

Germans are polite, and unless like with Ryanair versus Aer Lingus, this is a friendly take over. Hence Lufthansa’s official press release: “Our colleagues at Brussels Airlines are currently devoting all their energies and resources to restoring reliable flight operations for their customers at their home airport following these terrible attacks. That is a major challenge under the current security provisions, and must now be the priority. And in view of this, we have agreed with Brussels Airlines to give ourselves a further three months to conclude our negotiations on the acquisition terms and devise the migration concept required.” Source:

The above statement is diplomatic language for: “at this very moment, a joined team of Belgian and German accountants is calculating what 22/03 means for Brussels Airlines’ balance sheet. We’re checking the bills, looking at load factors, calculating revenue and yields, and analize booking trends.”

Therefore my bet: with all those figures, the LH/SN accountants will make a half-yearly account: probably dated 30/06/2016 (thus matching with the Belgian quarterly VAT administration). Carsten Spohr and Etienne Davignon can then start a new discussion about the value of the remaining SN Airholding shares, based upon their 2008 agreement.

Though many people said that there was no decision on 27th april, there was one. It’s in the above press release: “…Under their existing agreement, Lufthansa was required to take this decision, through which it could acquire the remaining 55% of SN Airholding, by the beginning of June. This deadline has now been extended to the end of August. The call option could be exercised not before September 2016.”

Lufthansa indeed confirms that they agreed with SN Airholding to extend the date for their 2016 call option (remember it was till 15th May 2016). Without such prolongation, the last opportunity is 01/04/2017-15/05/2017 (unless L’Echo is correct, and it’s till 2018). Why have Lufthansa and Brussels Airlines extended the date for 2016? There can only be one reason: Lufthansa wants to acquire Brussels Airlines as soon as possible. But 15th May 2016 is too close for the accountants, hence the three months extra.


Now, about the predicted integration of Brussels Airlines into a new low cost (EuroWings, BrusselsWings, whatever). I don’t believe this, simply because Lufthansa will then loose Brussels Airlines’ core business. And that is the reason why they have invested already: because Brussels Airlines is a hybrid airline. Of course some activities will be transferred to a another member of the big family. But Lufthansa will not dissolve Brussels Airlines for some very good reasons:

1. the high yield clientele for business travel to all EU offices in Brussels (Commission, Parliament, admin, lobby groups) and to the Nato (= almost next to Brussels Airport). Remember the post from DannyVDB here: flexibility is important. If a meeting will end two hours later then planned, a business traveller (Y or C) wants to amend his flight with one simple call. No surcharges, no waiting for an authorisation, no extra fee for which credit card details must be given. And when they finally arrive at the airport and are able to catch an earlier flight, they want that flight. Without a surcharge of course. Those involved with business travel know these changes are routine.

2. Africa between Northern Africa and Southern Africa: good yield in Y, excellent yield in C, lots of cargo. Lufthansa has no presence in Africa, except for Namibia (previously a German colony Süd-West Afrika) and except for South Africa (combined yields for tourism, business, VFR and cargo). Brussels Airlines still benefits from Sabena’s heritage in Africa. The crew and ground staff speaks French and English, they know how to sell in Africa, they have an excellent reputation there, they know them.

3. SN medium haul and long haul destinations for Belgian passengers who will, most certainly, refuse a transfer in Vienna, Münich or Zürich. Examples: Tel Aviv, New York, Washington. If Belgians cannot fly this nonstop, they will choose the cheapest possibility with a stopover. Could be Lufthansa or Eurowings, but it will certainly be at a low yield. Thus: Lufthansa needs to keep those nonstop flights to/from Brussels.

4. Passengers who only use legacy carriers because they don’t trust Low Cost Carriers. Example: staff from multinationals with an embargo for LCC’s. There are indeed a lot of people who think that airlines who don’t want to spend money on peanuts & coffee will also save on safety (I disagree, but I understand some people think like that).

5. Brussels Airlines proven result that a legacy carrier can beat Ryanair, when offering rates that are competitive enough. When Belgian passengers can choose between Brussels Airlines at 69 € and Ryanair at 59 €, most will choose Brussels Airlines. Agree, at 69 € there isn’t much profit. But overhead costs are covered, thus allowing to gain a better profit on passengers who pay more. And one more passenger for Brussels Airlines is one less for Ryanair. Brussels Airlines is reliable, punctual and passengers don’t fear surcharge surprises. On top of that, the Belgian public really appreciated the way that Brussels Airlines handled 22/03 = their biggest crisis ever. EuroWings? When the choice for Venice or Rome or Budapest will be between EuroWings, EasyJet, Jetairfly and Ryanair, Belgian passengers will choose the cheapest one. Could be that EuroWings will be the cheapest, but at what yield then?


Both the employees of Brussels Airlines and the shareholders from SN Airholding rely on Davignon & Lippens now, be it for totally different reasons. L’Histoire se répète – de geschiedenis herhaalt zich. I’ve witnessed the birth of SN Brussels Airlines from very closeby, and the main objectives from its founders haven’t changed: the Belgian industry needs that Brussels Airport is kept online with Europe, and he Belgian industry cannot afford a massive job loss like the Sabena bankruptcy.

Although Davignon can only obtain promises from Lufthansa about jobs, I’m pretty sure that his good relationship with Lufthansa, since 2008, will avoid a Sabena scenario. So very strangely: although the shareholders would like to have as much return on investment as possible, it’s also in their interest that the deal with Lufthansa will realize. A take over by Lufthansa will allow their staff to travel around Europe (and the world) at decent fares, and will allow them to travel out of Brussels Airport.

Above companies have realized their two major aims from 2001/2002. It looks however that Davignon and Lippens will have to give up their third aim from 2001/2002 = to keep a Belgian airline as the leading carrier at Brussels Airport. So be it: one cannot turn the clock back, and 22/03 has happened. But what matters for the Belgian trade & industry is not that there is a flag carrier. Only Belgium’s king will regret this. What really matters, is that fares to/from Brussels will not increase and that the number of destinations won’t be reduced. Luckily, with today’s fierce competition, there is no such risk.

And finally: just like after Sabena’s bankruptcy, Belgium puts its hope on two senior citizens: Davignon (age 84) and Lippens (age 73). Makes the whole discussion about retirement at 65 or 67 a bit silly…

Feel free to discuss the above in this topic:

See also

(I’m involved in the aviation & travel trade for more then 30 years, but I don’t work for an airline or airport – hence I choose a nickname that makes that clear)