Brussels Airlines future and financial perspective

[airazurxtror]

In 1995, Godefroid regnante, Sabena, claiming that its cost were too high in comparison with its competitors, tried to delocalize its personnel in Luxemburg (the Minister of Transport and Communication being then ... Elio Di Rupo).
It didn't work.

[Flanker]

Is it a consequnece of the bad financial situation? In any case, Lufthansa is unlikely to buy out Brussels Airline this year, according to ATWonline.

Lufthansa (LH) will most likely not buy the remaining 55% of Brussels Airlines (SN) this year, LH chairman and CEO Christoph Franz revealed.

Speaking to ATW at the lunch of the European Aviation Club in Brussels on Tuesday, Franz said: “Our strategic commitment [to SN] is clear, but we are not in a hurry to exercise our call option. We still have another two years to do so. At this point of time the priority is on our bottom line.” LH Group reported an adjusted operating margin of 3.4% for 2011, which it wants to increase (ATW Daily News, March 16).

In September 2008, LH bought 45% SN’s parent company, SN Airholding for €65 million via a capital increase (ATW Daily News, Sept. 25, 2008). As part of the agreement, LH has an option of acquiring the remaining 55% from 2011. The option can be exercised during three weeks in April.

Franz also confirmed that “if necessary we will offload more loss-making airlines in our portfolio. We started to offload loss-making carriers last year, with the sale of bmi to IAG, we closed Lufthansa Italia and withdrew from Jade Cargo.”

The sale of bmi to International Consolidated Airlines Group (IAG) is under review by the European Commission, which is expected to announce March 30 if it will approve the deal or open a more in-depth Phase 2 investigation. LH and IAG have offered remedies to address anti-trust issues.

Franz declined to comment to ATW on the nature of the concessions and said LH will review the future of bmi in case the EC prohibits the deal. According to the Sunday Times, LH is considering shutting down bmi if the sale to IAG is held up by anti-trust authorities in Brussels.

So much for the "the more losses at SN, the cheaper and more attractive for LH" theory.
I said it numerous times, a balance sheet loss is a balance sheet loss, how the hell could that be attractive to any shareholder.

What I find surprising in this article, is not the fact that LH doesn't exercise its call option in 2012, because that I expected.
But the fact that Franz said “if necessary we will offload more loss-making airlines in our portfolio. We started to offload loss-making carriers last year, with the sale of bmi to IAG, we closed Lufthansa Italia and withdrew from Jade Cargo in the same interview after talking about not exercising the option is rather startling.

No wonder that Davignon went into panic mode...

[Squelsh]

Needs more than that to make the 'honorary' chairman of the Bilderberg group panic, imho. About the Godfroid story, good ol' Maystadt was main block against this idea, now almost 20 years ago..

[Inquirer]

I suggest you start reviewing the post. The exact term I used is:Flight crew payroll cost is higher at FR than at SN. Flight crew payroll cost is the total cost to the employer this includes the gross salary and the employer's contributions. My social law knowledge is shiny clean, your reading skills, a little less than that

I can read perfectly well, yet I do not see what material element was overseen by me.
Being a little bit less overconfident would help you a great deal however, if I may say so.

Per year, the savings would be less than 5 million euro's for flight crew.

If you think a recurrent cost saving of that amount isn't worth lobbying for, than there must be thousands of people constantly wasting their time lobbying our government!

[1V1]

No indeed, yet the interesting thing is they did this faisability study prior to their surprise purchase of 45% of the shares of SN. If the excercise would have shown that operating from FRA would have been a profitable venture for them, you can be sure LH would immediately have added a couple of A330s and started operating to all those VFR destinations in West-Africa themselves, rather than bother buying into a cash-strapped non-allied and at times also stearless airline like SN as they subsequently did.
Assuming LH first wastes €65M on buying into SN and only then runs a faisability study on whether it wouldn't be much cheaper for them to simply operate all those flights to West-Africa themselves is a bit of an insult to LH's management team and even more to your own intellectual capacities, if you allow me to say so...

Hi toli.
I would like to add this to the discussion. Last year, October or November, I was talking to a LH manager in DXB and while we where talking about BMI he suddenly told me LH would not take any extra shares in SN. When he saw I was surprised he added they'd rather get out. Any truth in this story? No idea but he was right about LH not taking any extra shares though.

best regards.

Dear friends,

1.LH strategy: decided upon 2 years ago. Nothing new.

2. The unfortunate truth is that delocalising crew would not make much difference.

3. Cockpit crew are massively sending cv's. I guess that says enough.

Very sad all this.

[Flanker]

Flanker wrote:
Per year, the savings would be less than 5 million euro's for flight crew.


If you think a recurrent cost saving of that amount isn't worth lobbying for, than there must be thousands of people constantly wasting their time lobbying our government!

It would only be worth lobbying for if it were realistically achievable and if it would happen in a tightly closed circuit without involving the media who would make a frenzy out of it as we have seen.

Reality is that all businesses in Belgium work in this unbearable fiscal environment and anyone who is thinking of doing business in Belgium should know the consequences before starting up. SN is no exception and you can't start making any exceptions without seeing major ramifications.

The market is judge. The fiscal and social issues of employment are the least of SN's problems.
It doesn't solve the issues of inefficiency in the organisation, the problems of competition, the high fuel prices, the inefficient Avro's, the inefficient African network and some questionable management decisions.

[Inquirer]

It would only be worth lobbying for if it were realistically achievable

Lobbying is always worthwile, even if it is just to network and buy goodwill for later, which is why it is so popular, even for lost cases.

without involving the media who would make a frenzy out of it as we have seen.

Today's news is forgotten tomorrow and this will be no exception to that.
I bet 99% of people haven't even noticed there were other topics in today's news than the funerals in Lommel.

You can't start making any exceptions without seeing major ramifications.

It has happened in the past and several companies are stil benefiting from special administrative rulings even today: it is much more common than you may think, proof of just how quickly it all gets forgotten once done.

It doesn't solve the issues of inefficiency in the organisation, the problems of competition, the high fuel prices, the inefficient Avro's, the inefficient African network and some questionable management decisions.

From where I sit, they seem to be tackling much of that too: a leaner management structure has been announced, a significant part of the RJs are being replaced by more efficient aircraft and they are going to operate more non-stop to Africa. More should be done for sure still, but then Rome wasn't built in a day either: cut them some slack, constantly bashing them must be getting boring in the end, surely?

[fcw]

Just trying to put two and two together:
Bru-Air expects LH to buy and is desperate for the money, but Franz says NO!
A little bird told me BruAir is asking his, already underpaid, staff for a 10% salary cut.
Governement, who is desperate for money itself, promises to do something before the summer.
If you put all this together, I am afraid another one could be close to biting the dust.

[Flanker]

Just trying to put two and two together:
Bru-Air expects LH to buy and is desperate for the money, but Franz says NO!
A little bird told me BruAir is asking his, already underpaid, staff for a 10% salary cut.
Governement, who is desperate for money itself, promise to do something before the summer.
If you put all this together, I am afraid another one could be close to biting the dust.

I come to the same conclusion through my balance sheet analysis of both SN and SN Air Holding, taking into account that I expect a larger loss in 2012, due to the operating environment such as higher oil prices, lower euro, harsher competition, lower demand, but also from investments and divestments and new ventures.

LH has clearly shown that it's ready to fork out the cash for OS but for SN...

I also predicted well in advance and despite many rumors, the absence of will to exercise from LH,at least for this year. Come on that's plain common sense even for LH. Who wants to buy a business that's making unpredictable losses and is based at 50km from one of Ryanair's biggest bases? Ok they have a niche market with Africa, but for how long? About every other airline is starting routes to Africa and even airines that are supposed to be partners like TK are buying their seat at the table.

Flanker wrote:
without involving the media who would make a frenzy out of it as we have seen.

Today's news is forgotten tomorrow and this will be no exception to that.
I bet 99% of people haven't even noticed there were other topics in today's news than the funerals in Lommel.

Oh believe me, when it concerns people directly, they won't forget.
I met many non-aviation friends randomly yesterday and they all said the same thing, which mens to me that most of Belgium has heard it one way or the other.
"I saw it on the news, SN is on the brink of collapse, isn't it? I think that I'm going to try with Ryanair this year, just to be safe." I know that SN isn't on the brink of collapse, but then again I won't be the one to tell them that, because if or when it happens and they get stuck at an airport, I don't want to be the one who assured them otherwise.

Lobbying is always worthwile, even if it is just to network and buy goodwill for later, which is why it is so popular, even for lost cases.

Which brings us back to this. Lobbying at such an expense? Not the best way, don't you think.
Once the financial difficulties became apparent at OS in the pre-LH period, people stopped booking them in masses, burying their financials into a deeper and deeper hole.

"There is no such thing as bad publicity" is a saying that doesn't apply to media articles about declining airlines.

[Inquirer]

I expect a larger loss in 2012, due to the operating environment such as higher oil prices, lower euro, harsher competition, lower demand, but also from investments and divestments and new ventures.

Let's not fall into the trap of taking ourselves too seriously, shall we?

LH has clearly shown that it's ready to fork out the cash for OS but for SN...
I also predicted well in advance and despite many rumors, the absence of will to exercise from LH.

Predicting either a YES or a NO is like predicting the sex of a newborn: always 50% chance.
In fact, it's even easier here, as it would have been quite rare to see a call option excercised the very first time round: generally speaking those things need to mature, so if you want to know my uninformed bet for next year, it's a NO too, with a very high degree of probablility for a YES at the end.
That's how call options generally go, BTW, especially when there's no urgency on either side: it's all about minimizing the unknown risks.

I met many non-aviation friends randomly yesterday and they all said the same thing, which mens to me that most of Belgium has heard it one way or the other.

I am posting from work right now because I have litterally nothing at hands while at the office. Here even our contact with BCD (our travel agency) had no clue what I was hinting at while booking 3 more business trips with them for next week....

Finally, coming back to our little discussion of yesterday where you disagreed with my ballanced view that the burden of the lack of a level playing field is currently shared by both employers as well as employees at B.Air, may I link to this: http://www.standaard.be/Artikel/Detail. ... d=HI3NPLIL

Somehow, and excuse me if I am wrong, but this airline really can not do much right for you, can it?
There are certainly things I don't like about them too as a very frequent passenger, but when even the most objective facts "à décharge" and for which they don't even need to be given any credit are obviously denied to them, it becomes a bit too obvious one is using everything one can just to give them a good beating. For the quality of this forum and your own credibity, it would be cool if you could recover yourself somehow and become a bit less biassed, because I can tell for a fact that that if your aim is to make your voice be heard by those who matter, the way in which you speak will certainly not make them listen.

[Acid-drop]

Who wants to buy a business that's making unpredictable losses and is based at 50km from one of Ryanair's biggest bases?

What is the problem ? Ryanair ? or Ryanair airport ?
Because it seems they now complain about the subsidies that the walloon region give to each pax in CRL, but they had the options to fly from CRL and get those subsidies too.
They didn't do it because of pride. Pride of what, I'm not sure. Pride of risking bankruptcy probably.
Other Belgian companies decided to use multiple airports in Belgium and it looks like they are more successful, yes even with the horrible tax system in Belgium and yes even with Ryanair super close.
How long more before they learn their lesson ?

[Flanker]

Here even our contact with BCD (our travel agency) had no clue what I was hinting at while booking 3 more business trips with them for next week....

Because if they had a clue, they would be all over it so they could book a Ryanair flight for you

Predicting either a YES or a NO is like predicting the sex of a newborn: always 50% chance.
In fact, it's even easier here, as it would have been quite rare to see a call option excercised the very first time round: generally speaking those things need to mature, so if you want to know my uninformed bet for next year, it's a NO too, with a very high degree of probablility for a YES at the end.
That's how call options generally go, BTW, especially when there's no urgency on either side: it's all about minimizing the unknown risks.

It was the third time that LH could exercise the option. Rumors were floated last year that LH would take it this year but I was the only one around here who was shaking his head and said that I would believe it when I see it. The prediction was based on business analysis, but all signs pointed to a LH buy-out this year.

There is no urgency on either side? That's news to me.
Isn't the airline running out of cash in the next 12 to 24 month?
Jee it is

Finally, coming back to our little discussion of yesterday where you disagreed with my ballanced view that the burden of the lack of a level playing field is currently shared by both employers as well as employees at B.Air, may I link to this: http://www.standaard.be/Artikel/Detail. ... d=HI3NPLIL

That link is useless because there are only a handful of pilots at SN with that much seniority as to receive a 100.000 euro gross salary. At Ryanair too.
So yes, for equal gross salaries, an employer pays less social contributions in Ireland, but the gross salaries aren't the same between Ryanair and SN.

it becomes a bit too obvious one is using everything one can just to give them a good beating. For the quality of this forum and your own credibity, it would be cool if you could recover yourself somehow and become a bit less biassed, because I can tell for a fact that that if your aim is to make your voice be heard by those who matter, the way in which you speak will certainly not make them listen.

I treat everyone equally and give credit where credit is due. I'm not a Ryanair fan either nor do I applaud the short-term vision of the Walloon government who's investing too much in the wrong sector.
It's been 4 years now that I've been warning on the unthinkable strategies and offered countless solutions for this particular company, despite all the criticism from people who prefer to put their head into the sand and pretend to not see what's going on, and look what it is coming to.

Why is it a pax like you should defend this airline this much anyway?
Because you pay 30 euro extra to get a chocolate with their logo on it?
What kind of business is it you do, to afford such high fares while still booking your tickets through agencies like in the stone age?

[cnc]

What is the problem ? Ryanair ? or Ryanair airport ?
Because it seems they now complain about the subsidies that the walloon region give to each pax in CRL, but they had the options to fly from CRL and get those subsidies too.
They didn't do it because of pride. Pride of what, I'm not sure. Pride of risking bankruptcy probably.

Amazing to see such a load of crap from a forum moderator

Other Belgian companies decided to use multiple airports in Belgium and it looks like they are more successful, yes even with the horrible tax system in Belgium and yes even with Ryanair super close.
How long more before they learn their lesson

talking about JAF? how about comparing SN and JAF operations (flights, fleet, staff, ...) before you come up with your brilliant ideas

[Flanker]

What is the problem ? Ryanair ? or Ryanair airport ?
Because it seems they now complain about the subsidies that the walloon region give to each pax in CRL, but they had the options to fly from CRL and get those subsidies too.
They didn't do it because of pride. Pride of what, I'm not sure. Pride of risking bankruptcy probably.
Other Belgian companies decided to use multiple airports in Belgium and it looks like they are more successful, yes even with the horrible tax system in Belgium and yes even with Ryanair super close.
How long more before they learn their lesson ?

To me and the general population, neither. I already booked over 15 tickets from CRL and EIN this year with FR. To SN, Ryanair is a big problem. Well, kind of. I think that SN's biggest threat is their own top management. They're not very clever.
In my opinion, it wouldn't matter if Ryanair becomes the largest airline in Belgium and even takes over from SN at BRU. SN still has 3000 employees, so Davignon and co like to see themelves as heroes, but in reality it has 3000 mostly unhappy, low-paid employees, so SN is kind of helping the government more than it is helping its employees.

SN used to be a well-run airline with straight years of profit and albeit slowly, it consistently developed its niche market. Since the VEX merger and the new management structure, it's been a very bumpy ride and it' starting to turn into an emergency landing.

I just hope that they don't impose additional taxes and fees on Ryanair, because if SN goes tits up anyway and additional charges make Ryanair fares skyrocket, I don't see the point.

[sean1982]

Davignon wants "a level playing field" and reduce social taxes for cabin crew and pilots? Fine by me, but then also remove all of their social securities and level that playing field as well.

[airazurxtror]

Now, according to Davignon, Ryanair is the cause of the SN losses.
Very strange.
I have been told, time and again, on this very forum, that the SN customer has no use for Ryanair.
The SN customers, mostly businessmen, like the securirty of a legacy carrier like Brussels Airlines : flexibility, i.e. possibility of changing flights following the business necessities, need to have more than one or two flights a day, need to be taken care of in case of a flight delay or cancellation, possibility of switching to another carrier of the same alliance, and so on : all things not provided by Ryanair.
An obvious example : a fellow Luchtzaker recently had to go to Bergamo and elected to go by SN to Milano rather than by FR to Bergamo.
And now we should believe that Ryanair is taking custom away from Brussels Airlines ?
This is a phony justification of the heavy losses (for those who believe in fairy tales) - throwing the blame on somebody else - Ryanair, the Government, the taxes - rather than admitting his own faults.

[fcw]

SN used to be a well-run airline with straight years of profit and albeit slowly, it consistently developed its niche market. Since the VEX merger and the new management structure, it's been a very bumpy ride and it' starting to turn into an emergency landing.

I am disappointed young Flanker!
BruAir has posted some positive results in the past, but they have never been profitable.

For 1 (one) euro the "bought" valuable fuel hedging contracts and even more valuable LHR slots from Sabena. These were later sold to dress up the accounts.
During nine years BruAir was exempted from paying pension contributions for their crews. BruAir even deducted the employee part of the pension contributions but didn't transfer them to the pension fund.
VEX was bought to prevent EasyJet of buying it.
BruAir 's lobbying prevented the opening of a LCC terminal at BRU

For 10 years BruAir has been kept artificially alive.
Level playing field??

[Inquirer]

if they had a clue, they would be all over it so they could book a Ryanair flight for you

No thanks.
Being completely unbiassed, I tried them not once, but twice professionally.
First time they managed to cancel my day return trip, rebooking me straight onto the return flight of the flight I was supposed to arrive on, leaving me no other option but to skip the trip completely, after which they obviously kept the money for the ticket: 255 euro in total for your record.
Second time they did a correct job, but weren't really much cheaper than B.air, especially not considering the rental I had to take to go to town.

It was the third time that LH could exercise the option.

Contractually yes, legally no, as there were bilateral problems preventing them so i've heard.
This was the first real chance.
Anyway: I'll repeat: no call until the end, as is normally the case with unstressed call options.

There is no urgency on either side? That's news to me.
Isn't the airline running out of cash in the next 12 to 24 month?
Jee it is

Thus 2 more call option periods, including the final one and a restructuring under way to stem the losses: ample time still, so no need to go into panic mode just yet: you don't seem to have a lot of experience in restructuring management, do you?

Why is it a pax like you should defend this airline this much anyway?
Because you pay 30 euro extra to get a chocolate with their logo on it?

Do I defend them?
I disagree with some of what you are saying, so if that comes down to defending them, it is because you are constantly bashing them: that's all.
Seriously, I look at things in an unbiassed way, not with an 'I've told you so' attitude which you for sure have a hard time suppressing (see above).

What kind of business is it you do, to afford such high fares while still booking your tickets through agencies like in the stone age?

Oh, I merely work at a little Australian firm that employs some 35,000 people and is market leader in its sector. Next time, when you pass the bag of crisps, take a look at the bag... is that enough of a hint?

Now, since you've asked me the question and I've answered it, why don't you answer mine of a couple of weeks ago: who do you work for? It is always nice to know a bit of the background of the people you discuss with but you seem to be dodging the question each time...

Finally, I hate to point this one out as it seems I am bashing you personally, yet please note you're adding needles conjecture in your last question once again, adding a reference to an unnamed and unrelated high fare of which the suggestion is raised it deals with B.air ticket fares.
You'd be a good spokesman for Ryan Air, you know? FWIW, the only fare I've mentioned so far, is that on the cancelled FR return ticket and is was more than 250 euro, which I don't call particularly cheap either yet those seem to be the going rates for day return trips everywhere.

[Acid-drop]

This is a phony justification of the heavy losses (for those who believe in fairy tales) - throwing the blame on somebody else - Ryanair, the Government, the taxes - rather than admitting his own faults.

Exactly. Nothing else to add.

[BrightCedars]

Ryanair is a danger for SN even if they don't cater for the same market.

There is a perception (and I insist on perception) that Ryanair is far cheaper to fly than a full service airline, that is far from being true but does steal some passengers from the back of the plane away from SN which in turn weighs on the overall yield of a flight.

Remember that even a flight full to the rim in C may not break even without some cheap passengers behind the curtain.

In the same way long haul no frills will have a devastating effect on full service carriers not because it will steal first or business class passengers but because it will empty the back of the plane and put most flights in the red by doing so. Fortunately this hasn't been well executed well but I'm sure some day we'll see some Ryanair or Southwest spin off go transatlantic, a mature intercontinental market, and that will hurt badly.

Anyone thinks LH may end up selling SN to IAG?