When will Lufthansa take over 100% of Brussels Airlines?

[sn26567]

According to an article published this morning (27 May 2010) in French financial newspaper La Tribune, Lufthansa would not buy a majority share in the capital of Brussels Airlines in 2011.

Our members know that the German carrier owns 45% of the capital of the Belgian flag carrier and has an option to purchase the remaining 55%, but Lufthansa 'will probably not exercise the option next year' according to internal sources at the general management of Brussels Airlines quoted by the newspaper.

La Tribune mentions that Lufthansa can only exercise this option between 1 Avril and 30 June during a period of four years from 2011 to 2014.

There is a large probablity that Lufthansa will exercise the option, because of the strategic value of Brussels Airlines with its Brussels hub and its strength in Africa, but the French economic daily newspaper underlines that Lufthansa has already its hands full with the restructuring of bmi and Austrian Airlines.

[HighInTheSky]

Strange that a few weeks ago (with the ceremony of Boeing and Lufthansa) there was another source who told that LH WOULD exercise the call-option...

Time will tell I guess...

[RoMax]

Strange that a few weeks ago (with the ceremony of Boeing and Lufthansa) there was another source who told that LH WOULD exercise the call-option...

Time will tell I guess...

That source was a LH spokesman, a pretty reliable source I would say...

But indeed time will tell

[euroflyer]

the French economic daily newspaper underlines that Lufthansa has already its hands full with the restructuring of bmi and Austrian Airlines

not a convincing argument if you ask me ... LH probably wants SN to be succesful and fully integrated in *Alliance and the LH group regardless of the question if they own 45%, 60% or 100%. The integration has already started anyway. So there is not that much less work for them if they wait longer with exercising the option. The only reason might be that they have to include a 100% daughter company in another way in their balance sheet than with the 45% ownership at the moment. Here they might want to find the best moment (year), as changes to the balance sheet always receive attention at the stock marktes and will see reflection in share prices etcetera. The most important might be the question if all traffic rights questions will have to be solved by 2011. Because that is a "must", before SN can become a fully German owned airline ...

[NCB]

Austrian is in big troubles. The airline is losing money at 1 million euro per day.
BMI lost 78 million euro in 2009.

These two airlines are already representing a very big risk for LH.
Despite their small size if they take the wrong turn, they can bring losses of 1 billion euro per year to the LH group. LH can not afford to lose them because they also represent a strategic long term investment.

We don't know what LH shareholders are really thinking to do about SN.
SN is strategic for Africa but the return for investment may not be what LH has in mind.
SN is a top notch airline in the sense that it is very stable with minimal fluctuation between profit and losses, but certainly not an airline that could make the difference like Swiss International.
After all, if SN really had such a huge potential, its shareholders (includes big banks!!) would have found a way to attract capital to grow the airline instead of desperately selling 45% at a price that even the employees could have afforded to pay together. (See United Airlines history if interested in employee ownership)

Like I said, for LH shareholders it is alot more lucrative to operate to Africa from its established FRA and ZRH hubs unless there is a drastic change in strategy within SN that makes it a little less steady but very lucrative.

Not now but further down the line there may be risks to take if SN does not want to end up like BMI. Alot will depend also on what Korongo has to offer.

Wait and see.

[Air Key West]

I am writing this on the basis of what I remember (so feel free to correct me).
LX practically never made a profit before it was bought up and turned around by LH that made it into a very successful airline.
LH probalby thinks it can do the same with OS, but OS is nevetheless a different story or airline. But I'm optimistic. If LH was not 99 % sure they could turn around OS, too, they would not have bought the airline. It's a question of time.
BD is a different story, since, if my memory serves me well, LH was legally (juridiquement/juridisch) forced to buy BD.
For once, I am going to ignore employee concerns and talk as a cold manager : would it not be preferable to close down BD ? What does the airline bring to the LH Group ? At first sight nothing except the precious slots at LHR. So, close down BD, rent out the slots, transfer some BD aircraft to SN, sell the other planes and concentrate on an airline (SN) which has been doing OK financially (although we have not seen the figures for 2009). SN in my eyes is offering an added value to the LH Group, which BD does not do.

[RoMax]

For an airline like LH it's the best to take over an airline when it's in bad financial shape, because the value of the company is much lower than when it makes profit. But they need to know if they can turn the airline into profit when they take it over. LH said they will not succeed to make BD and OS profitable in 2010, but they knew that already at the time they took over these two companys. SN is another story, at the time they took over the 45% SN was a loss making company and we've seen the 2009 numbers (see other topic) and the loss in 2009 was even bigger (as expected), but both SN and LH believe that SN will make profit again in 2010 and normaly more and more profit the following years. So the value of SN will rise each year LH waits. So it's to LH to decide what's the most important for them, to first make OS and BD profitable (or less loss making) or to buy SN as cheap as possible.

[NCB]

I think that Swiss (LX) was not really turned around by LH.
Swiss was turning around before LH acquired it thanks in part to internal restructuring programs.
See these figures: page 8 http://investor-relations.lufthansa.com ... -01-03.pdf

Interesting numbers to know are that LX has a shorthaul fleet with 1.9 times the seating capacity of SN's shorthaul fleet and a longhaul fleet seat capacity 5.5 times larger than SN's.
The LX static (non-flying) fleet is composed of 58% shorthaul seats and 42% longhaul seats
The SN static fleet is made of 80% shorthaul seats and 20% longhaul seats.

These numbers state the obvious. SN needs to reduce the shorthaul fleet and increase the longhaul fleet to achieve the same balance as LX.
If reducing the shorthaul fleet is not an option (which would be odd because it worked fine before the Virgin Express 737's were added), then the longhaul fleet must be increased to 12 A333's to achieve the same balance as LX in terms of shorthaul/longhaul capacity.

If we may state this, SN made a mistake by adding the former VEX capacity, because that considerably increased the shorthaul capacity, forcing it even to withdraw its owned BAe's that cost nothing in leases.


Now about BMI (BD).
BD has a very strategic value for LH. Since 2 years Virgin Atlantic (VS) and Lufthansa are negotiating about BD. If I got it right, Lufthansa wants to buy R. Branson's share in VS, Branson wants to buy BD but Branson tells LH to buy Singapore Airlines' (SQ) 49% share, but LH want the SQ shares + Branson's shares.
I believe that something is in the makes, just look at Branson's body language (especially eye movement and tone) when asked about it during this interview:

http://www.youtube.com/watch?v=o0eyn9Nd ... r_embedded

Rumours are that Branson may pull out of VS and let LH take it so that LH can combine the longhaul capacity of VS with the excellent feeding of BD to form a very competitive airline against AA-IB-BA at LHR.
http://www.reuters.com/article/idUSTRE64O2EE20100525

The timing could not be better because AA and BA will be forced to drop slots at LHR for antitrust reasons.

[Air Key West]

I cannot remember having heard or read anywhere that LH wanted to buy Branson's shares in VS (and 49 % fo SQ shares ?). On the contrary, I seem to remember that LH could consider selling all or part ob BD to Branson.
From the Branson interview on youtube (thanks for the link, NCB), it is obvious that Branson does not want to tie up with any other airline, which has always been Branson's policy. As he said, he'll only do it if he is forced to, if the BA-AA tie-up gets final anti-trust immunity, which I'm tempted to believe will happen.
So, Branson will practically be forced to tie-up with another airline, and my guess (for what it's worth) is that he will buy all or a major part of BD from LH, and Branson might also be forced to consider entering an alliance, but he'll do it reluctantly and as a last resort.
In short (my guess and, I admit, speculation) : AA-BA will get anti-trust immunity and Branson will buy BD from LH. Unlike NCB, I don't think BD has a strategic value for LH. BD's only asset are the LHR slots. They are worth quiet a lot of money, but all that "money" could go to covering the losses.
OK, one could say that SN's only asset is its African network, but this network could become an addition to LH's network. I think it would be wiser for LH to let AA-BA and VS-BD fight the transatlantic battle between themselves and concentrate on developing links with Africa where there is a potential to expand, whereas the transatlantic market is probalby close to saturation.

[Air Key West]

As to LX being turned around or not by LH, it can be a question of interpretation or nuances. Thanks again for the link, NCB, but I honestly don't feel like going through all those figures, graphs and texts, but other members on this forum will, I'm sure, find them very interesting.
Perhaps another link might also be useful : http://investor-relations.lufthansa.com ... 09-6-e.pdf

[NCB]

I view the BD story differently.
Branson wants BD but LH will never sell it to them out of fear of losing a hand into the LHR market after AA, BA and IB go together to form the largest airline in the world.
BA and AF-KL want it too but LH will not sell it to them either.

I think that Branson is looking at a way out with as much money as possible, in order to focus on expanding Virgin America (VX) together with the American shareholders and to have further cash on hand for his Virgin Galactic venture.

Virgin Atlantic is not very profitable on its own and it does not have significant assets like LHR slots.
BD is not profitable on its own, it has significant LHR slots.
Combine both into a Star Alliance carrier, add a few slots from the AA-BA merger and from airlines like SN, LH, OS, LX (their passengers will prefer to use London Gatwick) and you have a very strong airline that will make it very tough on BA at LHR.
SN would be even better off flying to LCY than nightmare LHR.

[kiwiandrew]

LX (their passengers will prefer to use London Gatwick) and you have a very strong airline that will make it very tough on BA at LHR.
SN would be even better off flying to LCY than nightmare LHR.

I am curious why you think LX pax would prefer to use LGW ?

With regard to SN , surely most of their pax on BRU-LHR are connecting on to other *A flights , aren't they ? (I would have thought that most point to point traffic uses Eurostar ) If you were to move the flights to LCY how would all those pax connect to flights departing from LHR ?

[NCB]

Some passengers could connect to Star Alliance flights in LHR but it is of no importance to SN because those same pax can also go through FRA where there is less hassle.
To importance of SN is the Africa feed. The switch to LHR brought no additional feed, it was just a move from a crowded airport to an overloaded airport.

With LCY you can generate some point to point traffic (remember VLM used to operate it) because it is still faster with the aircraft as there are passport control and check-in times for the Eurostar, Eurostar is not cheap and you can compete against Cityjet in Antwerp.

[Vinnie-Winnie]

Some passengers could connect to Star Alliance flights in LHR but it is of no importance to SN because those same pax can also go through FRA where there is less hassle.
To importance of SN is the Africa feed. The switch to LHR brought no additional feed, it was just a move from a crowded airport to an overloaded airport.

How do you know that it brought no additional feed?

With LCY you can generate some point to point traffic (remember VLM used to operate it) because it is still faster with the aircraft as there are passport control and check-in times for the Eurostar, Eurostar is not cheap and you can compete against Cityjet in Antwerp.

VLM left BRU-LCY because it couldn't compete, and no 95% of the time it is not faster to fly. Only under very specific circumstances will flying be auicker. And no Eurostar fares are not that atrocious...

[LJ]

Some passengers could connect to Star Alliance flights in LHR but it is of no importance to SN because those same pax can also go through FRA where there is less hassle.To importance of SN is the Africa feed. The switch to LHR brought no additional feed, it was just a move from a crowded airport to an overloaded airport.
With LCY you can generate some point to point traffic (remember VLM used to operate it) because it is still faster with the aircraft as there are passport control and check-in times for the Eurostar, Eurostar is not cheap and you can compete against Cityjet in Antwerp.

LCY is a business destination and I doubt that the majority of pax travelling to/from Africa to Lonodon via BRU are business pax. For non-business pax, LHR is more convenient (they don't have to travel to the center of London first. Moreover LHR has much better opening hours (LCY is closed Saturday evening and Sunday morning if I'm not mistaken).

Furthermore, apart from the fact that LHR offers destinations which FRA doesn't offer (Auckland for example), it's quicker to fly to the US via LHR than via FRA.

[NCB]

VLM left BRU-LCY because it couldn't compete, and no 95% of the time it is not faster to fly. Only under very specific circumstances will flying be auicker. And no Eurostar fares are not that atrocious...

VLM's problem is that it only did point to point BRU-LCY. Of course you can not compete in those conditions.
But SN can feed United,Continental, US Airways, Jet Airways, all its codeshare partners (RAM, Egyptair, ANA when they come, etc...) and Africa on top of the point to point and also do minor transits for passengers on intra-European destinations to LCY that are not disserved directly.

The Eurostar takes 2 hours and 5 minutes Brussels to London and you need to check-in 30 minutes before departure time. There is no safe car park near the station.
BRU-LCY is 45 minutes with the airplane and you can check-in online. You need to be there 30 minutes before your flight, you still save 1 hour 20 minutes or if doing the same day return, 2 hours and 40 minutes.

170 euro return at the cheapest fares (outside promotions) to cross the channel is not expensive?
You must be very rich. The morning rush hour departures are at 162 euro one-way. Cheap?

The discussion is veering away but the point was that SN could better operate LCY and let the VS/BD combo operate LHR-BRU and add destinations. SN is doing a good thing for the alliance by operating LHR but they are only feeding Africa and the Star partners at LHR. 8 flights a day. Minimum 600 seats.
Like religions, Star Alliance is there to serve SN, not the other way around.

LCY is a business destination and I doubt that the majority of pax travelling to/from Africa to Lonodon via BRU are business pax. For non-business pax, LHR is more convenient (they don't have to travel to the center of London first. Moreover LHR has much better opening hours (LCY is closed Saturday evening and Sunday morning if I'm not mistaken).

London, the largest financial center of Europe, the second in the world, is not a business pax connection city to Africa? LHR is more convenient for non-business pax?
You have never been to LHR have you? I have and it's a mess so huge that everyday there is people fainting at the airport. Even energic people like Susan Boyle!!

[sab319]

The Eurostar takes 2 hours and 5 minutes Brussels to London and you need to check-in 30 minutes before departure time. There is no safe car park near the station.

170 Euro return at the cheapest fares (outside promotions) to cross the channel is not expensive?
You must be very rich. The morning rush hour departures are at 162 Euro one-way. Cheap?

The fastest travel time of Eurostar is 1 hour and 51 minutes between Brussels and London, and you get the added benefit that you can't be put on hold when landing at London or influences caused by weather conditions (trains keep on driving during ash clouds you know)

The Q-park at the Brussels South Railway station appears just as safe as the Front Parks at Brussels Airport to me, besides the train to/from Brussels from any Belgian station is already included in your Eurostar ticket. Most likely taking the train to Brussels from your nearest railway station is faster than travelling by car to Brussels (especially during rush hour)

And I can get a return ticket at a fare of only €70 (youth fare) or €88 (adult fare) while taking a morning rush hour departure... (I haven't seen a VLM plane ticket at that price yet)

Brussel naar Londen: 1 Jeugd Reisroute 1 van 1

Heenreis - dinsdag 3 augustus 2010
08:05 - Brussel Zuid 08:56 - London St Pancras
01h51m (Duur)
Standard Klasse Non flexible 35.00€

Terugreis - dinsdag 3 augustus 2010
18:35 - London St Pancras 21:33 - Brussel Zuid
01h58m (Duur)
Standard Klasse Non flexible 35.00€

Totale prijs voor alle passagiers
70.00€

Brussel naar Londen: 1 Volwassene Reisroute 1 van 1

Heenreis - dinsdag 3 augustus 2010
08:05 - Brussel Zuid 08:56 - London St Pancras
01h51m (Duur)
Standard Klasse Non flexible 44.00€

Terugreis - dinsdag 3 augustus 2010
18:35 - London St Pancras 21:33 - Brussel Zuid
01h58m (Duur)
Standard Klasse Non flexible 44.00€

Totale prijs voor alle passagiers
88.00€

source: www.eurostar.com