Lufthansa buys the remaining 55% of Brussels Airlines

[DannyVDB]

Hi all,

This is what CAPA says about it (see http://centreforaviation.com/analysis/l ... ity-277949)

(...) Group CEO Carsten Spohr told Bloomberg that consolidation in Europe is needed and that Lufthansa wants to be a part of it (Bloomberg, 22-Apr-2016), but did not identify specific targets. Moreover, Mr Spohr said the Group was concentrating on making sure that its LCC platform Eurowings worked first.

Interestingly, however, the reports have specified three possible acquisitions, in each case suggesting that they could be used as part of the Eurowings project. The three are SAS, Brussels Airlines and Condor Flugdienst (part of the Thomas Cook Group). In all three cases, there are historical and/or cultural reasons to suggest that some form of closer cooperation, including the possibility of acquisition (or partial acquisition), could feasibly be up for discussion.

Lufthansa's partnership with SAS goes back to the time before they were both involved in setting up the Star Alliance, while Lufthansa is already a minority shareholder in Brussels Airlines and a former shareholder in Condor. Of the three, only Condor could be a realistic candidate to become part of the Eurowings operation. None of these possible Lufthansa acquisitions would significantly change European airline market structure.

[travellover]

What I read here is a deeply rooted, almost paranoid fear and reluctance for change!
Well, we better get used to a changing world.

Not me anyway. These are good news IF confirmed. SN has now grown its roots up and they have learnt the rules. LH wanted them profitable, they reached that aim. The long haul fleet will reach the ten mark in the end of the year (nine now). The future in the group is an added value. The crisis following the attacks is acute and uncertain of course but LH believes in the market, the medium and the long term view. The current crisis illuminates the need for a larger group for SN inside certainly its characteristic will be taken into account with the * synergies growing up more and more.

Very positive reaction and, in my view, correct analysis of the current situation. Let's be bold and voluntarist!

Thx ! Indeed !

[Boeing767copilot]

And this is what ATW says about it:

http://atwonline.com/airlines/lufthansa ... -eurowings

[sn26567]

And this is what ATW says about it:

http://atwonline.com/airlines/lufthansa ... -eurowings

Nothing new, except the last two sentences:

In November 2015, the Lufthansa Group began inviting airlines to join Eurowings as a franchise company to further expand its presence in Europe.

“We are talking with about 20 airlines,” Eurowings chairman Karl Ulrich Garnadt told ATW last week, declining to provide details.

I am surprised by the "20 airlines". I wonder which ones...

[Yuqu12]

I agree indeed that LH isn't stupid. I think there will be Brussels in a name somewhere, because they don't want to see their project fail if they buy over SN. So best option perhaps is rename it to Brussels Wings as part of Eurowings and they have quite a good golden midway: SN integrated in EW and the name is somehow maintained. Otherwise, more people will indeed choose other options instead of EW. Btw: so am I.

[Flanker2]

I don't think that LH is interested in anything but Eurowings.
The whole point for them is to market the flights on their website, under their brand and build a huge airline under the Eurowings umbrella that is all over the place.

I really wonder though, how do you as a pax, justify being loyal to a 100% German "Brussels Airlines" but not a 100% German "Eurowings"? In the end, Brussels Airlines will be as "foreign" as Ryanair, Easyjet, Transavia, Vueling, etc... If Pepsi launches Belga Cola, are you all going to stop drinking Coca Cola?
Once the back-office moves to Dusseldorf, new crews will be hired from the LH pool. Slowly but certainly, the crews will be replaced by German ones.

Sure, LH won't migrate from Brussels Airlines to Eurowings in one day. It might go through an intermediary phase of "converting" the pax to Eurowings.
Sure they could in the beginning market the flights through both the Brussels Airlines and Eurowings channels.
But with time, it will all go under Eurowings because that's clearly what LH is interested in.

For many years some here have been suggesting that LH is not interested in building SN as a standalone brand, but others didn't want to listen. Some fanboys have been selling us for many years that SN was going to have the same status as LX and OS. The fog is lifting and it's becoming clear who are the realists and who are the dreamers.

[Yuqu12]

That is the whole sad thing about it: there will be no real Belgian airline anymore one day at Brussels Airport. Jetair is part of TUI and Thomas Cook is neither Belgian as part of a bigger concern. Normally you don't make the same mistake twice, but SN does as it will be part of Eurowings one day and there won't be a Belgian airline. Some said it is like Sabena but without the banktrupcy. To me personal, both situations are quite close...

[Passenger]

Lufthansa will not take over Brussels Airlines. Lufthansa will take over SN Airholding nv/sa (= owner of Brussels Airlines nv/sa). The take over amount (some say 100 mio, others say 150 mio) will thus not be injected into Brussels Airlines. The only beneficiars are the shareholders of SN Airholding nv/sa = the private companies & regional authorities who had invested in SN Airholding in 2001/2002 (or later)= GDF Suez & GIMB/SRIB & Tractebel & Brussels Airport & Roularta & others: companies with confidence in Davignon & Lippens.

So actually, and contrary to what most people here say, it’s better for Brussels Airlines that Lufthansa pays as little as possible. The more money Lufthansa can keep on its bank account, the stronger Lufthansa remains = the more they can invest in future activities at Brussels Airport.

- -

Now, about the importance of 22/03: apart from the terrible loss of life and serious injuries to hundreds of people, the bomb attacks have caused a serious loss for Brussels Airlines. 2016 will show less profit for Brussels Airlines, thus for SN Airholding nv/sa, thus a decrease of own assets (eigen vermogen) = a decrease of the value of its shares. A lower take over price then verbally agreed two months ago is therefore absolutely normal. Lufthansa doens’t win anything with a lower offer: it’s a fair deal. They pay less, but they get an airline with far less own assets then 2 months ago and with a long recovery ahead.

- - -

Germans are polite and it 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.”

The above statement is diplomatic language for this: At this very moment, a joined team of accountants is calculating the damage. Most bills are in, load factors and revenue are known. Therefore my bet: once the total cost of 22/03 is calculated, the accountants will make a half-yearly account (= 30/06/2016). And a few weeks later, Spohr (LH) and Davignon will agree the new bid. Ahead of the 2017 deadline indeed.

- - -

Now, about the integration of Brussels Airlines into a new low cost (EuroWings or whatever). I don’t believe this, because Lufthansa will then give up SN’s main assetts:

1. the high yield travel to all EU bodies in Brussels (Commission, Parliament, admin, lobby groups). 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 credit card, no waiting for an authorisation. Those involved with business travel know this is routine.

2. Africa between north and south: good yield in Y, excellent yield in C, lots of cargo. Lufthansa is nowhere in Africa, except for Namibia (remember it was Süd-West Afrika) and South Africa (= combined tourism, business, VFR).

3. SN medium haul and long haul destinations for Belgian passengers who will most certainly refuse a transfer in Vienna or Münich. Examples: Tel Aviv, New York.

4. Passengers who refuse to fly Low Cost. Example: staff from international companies that have an embargo for LCC’s.

5. Proven result in beating Ryanair at Brussels Airport. When passengers can choose between Brussels Airlines at 69 € or Ryanair at 59 €, they go for Brussels Airlines. When the choice is between EuroWings, EasyJet or Ryanair, passengers will choose the cheapest.

- - -

Conclusion: both Brussels Airlines staff and SN Airholding’s shareholders rely on Lippens & Davignon for totally different reasons. L’Histoire se répète. De geschiedenis herhaalt zich. Maybe it’s time to remember why Davignon & Lippens started SN Brussels Airlines in 2001, after Sabena’s bankruptcy? 1) to keep Brussels Airport connected for the Belgian industry, and 2) to limit the job losses at Brussels Airport. Although Davignon can only obtain promises from Lufthansa, I’m pretty sure that his good relationship with Lufthansa since 2008 will avoid a repeat of the 2001 Sabena scenario.

[Boavida]

I really wonder though, how do you as a pax, justify being loyal to a 100% German "Brussels Airlines" but not a 100% German "Eurowings"? In the end, Brussels Airlines will be as "foreign" as Ryanair, Easyjet, Transavia, Vueling, etc... If Pepsi launches Belga Cola, are you all going to stop drinking Coca Cola?

I don't fully agree. Look at KLM. In the end, it's not a Dutch company anymore. It is French. Nevertheless, KLM stands for Royal Dutch Airlines and has the Dutch flag on its aircraft. When people see a KLM plane, they link it to the Netherlands.

Same for Brussels Airlines (part of the LH Group). While it's 100% owned by a German company, people will continue to link SN to Belgium - because of its name. It will still be a Belgian company (part of a bigger group).
Same story for Swiss, Austrian, Iberia,... All part of a "foreign" group, but still strong ambassadors for their own country.

So, to answer your question: YES, I prefer a 100% "German" Brussels Airlines over a 100% German Eurowings.

Brand names are incredibly important in today's market(ing). Not to be underestimated.

[Poiu]

Lufthansa will not take over Brussels Airlines. Lufthansa will take over SN Airholding nv/sa (= owner of Brussels Airlines nv/sa). The take over amount (some say 100 mio, others say 150 mio) will thus not be injected into Brussels Airlines. The only beneficiars are the shareholders of SN Airholding nv/sa = the private companies & regional authorities who had invested in SN Airholding in 2001/2002 (or later)= GDF Suez & GIMB/SRIB & Tractebel & Brussels Airport & Roularta & others.....g

Well written post Passenger! It looks and reads as a copy/paste though. Would you be so kind to share the author?

[Passenger]

Lufthansa will not take over Brussels Airlines. Lufthansa will take over SN Airholding nv/sa (= owner of Brussels Airlines nv/sa). The take over amount (some say 100 mio, others say 150 mio) will thus not be injected into Brussels Airlines. The only beneficiars are the shareholders of SN Airholding nv/sa = the private companies & regional authorities who had invested in SN Airholding in 2001/2002 (or later)= GDF Suez & GIMB/SRIB & Tractebel & Brussels Airport & Roularta & others.....

Well written post Passenger! It looks and reads as a copy/paste though. Would you be so kind to share the author?

Sure. The author is a Luchtzak.be member. One of the older members actually, though he had to change his nackname into "Passenger" after the major website crash here, back in 2004. Indeed: I didn't copy/paste someone: not having an anti Brussels Airlines feeling is enough to know what's going on between LH and SN.

I can give you my source for the above names though:
https://cri.nbb.be/bc9/web/catalog?execution=e2s1
Just ask SN Airholding, 1050 Brussels. Then look into one of the annual accounts. The names are at the beginning of each publication. Perhaps you can add some names of investors? Let me give you an easy one to start with: Nicolas Saverys.

[Flanker2]

I really wonder though, how do you as a pax, justify being loyal to a 100% German "Brussels Airlines" but not a 100% German "Eurowings"? In the end, Brussels Airlines will be as "foreign" as Ryanair, Easyjet, Transavia, Vueling, etc... If Pepsi launches Belga Cola, are you all going to stop drinking Coca Cola?

I don't fully agree. Look at KLM. In the end, it's not a Dutch company anymore. It is French. Nevertheless, KLM stands for Royal Dutch Airlines and has the Dutch flag on its aircraft. When people see a KLM plane, they link it to the Netherlands.

Same for Brussels Airlines (part of the LH Group). While it's 100% owned by a German company, people will continue to link SN to Belgium - because of its name. It will still be a Belgian company (part of a bigger group).
Same story for Swiss, Austrian, Iberia,... All part of a "foreign" group, but still strong ambassadors for their own country.

So, to answer your question: YES, I prefer a 100% "German" Brussels Airlines over a 100% German Eurowings.

Brand names are incredibly important in today's market(ing). Not to be underestimated.

I think that you are confused, because KLM is majority owned by Dutch interests and is hence a real Dutch airline.
In fact KLM is in the same situation as SN today. A big foreign shareholder calling the shots, but still majority owned by domestic interests.


Swiss's business model is founded on connections to Asia and near monopoly on the small Swiss market.
There is only Easyjet to challenge them but they are too small compared to LX.
No Ryanair, Transavia, Vueling there. It's not patriotism, just the nature of the market.

OS is also still quite shielded from the LCC competition in VIE, except Niki which is giving them a hard time and is the reason why a big part of OS will have to make room for EW soon. Even Niki is not doing well there since they have started painting their planes in Air Berlin livery, after AB took them over completely.
So VIE is actually the perfect example of things to come in BRU.

[Bralo20]

I think that you are confused, because KLM is majority owned by Dutch interests and is hence a real Dutch airline.
In fact KLM is in the same situation as SN today. A big foreign shareholder calling the shots, but still majority owned by domestic interests.

Actually KLM is 100% owned by Air France KLM S.A. Only the French government has still a stake in the company with 17,6% of the shares. You can find it on the site if you like to read it:

http://www.airfranceklm.com/en/finance/ ... -structure


The Dutch government isn't involved anymore and hasn't been for a long time. However, upon sale (or let's call it a merger) they negotiated that KLM can not be rebranded and must remain a seperate identity. So while the Dutch government doesn't have any say in the airline they do have a say in the airline identity since it was agreed upon sale of KLM in a binding contract.

And this is probably what Davignon & co are trying to do also, selling the airline with a contract that Brussels Airlines must remain a seperate identity.

[Yuqu12]

If they could do so, it would be great. Lower price (also due to lower results after 22/3) for seperate identity isn't a that bad deal. Or if they really want to make it low cost: Brussels Airlines --> Brussels Wings or something and integrate Eurowings in SN? Then they have what they want: low cost in EBBR with the possibility to keep the long haul network and a possibility to launch Eurowings in a propriate manner...

[Flanker2]

Bralo20, you know that I'm not a newbie in this industry. What you show there is the shareholder structure of Air France-KLM, not KLM itself. KLM is a separate company and Air France-KLM is a holding company that owns part of the KLM shares. If you wish, Air France - KLM is to KLM what Lufthansa is to SN Air Holdings.

Since 99% of airliners.net, the English wikipedia page of KLM and other members like Boavida are confused too, let's check the facts on the latest annual report of KLM:

https://annualreports.klm.com/
Page 62-63 Shareholder structure

Air-France KLM holds
-all priority shares
-a proportion of the common shares, together with the priority shares representing 49% of the voting rights in KLM
-The depositary receipts issued by SAK I
-The depositary receipts issued by SAK II

On Dec. 31st 2015,
-SAK I held 33.38% of voting rights based on common and pref. A shares
-SAK II held 11.25% of voting rights based on pref. C shares
-The Dutch State held 5.92% based on pref. A shares

While AF-KLM may hold 94.08% (100% minus Dutch State portion) of the financial interests in KLM through their shares and the DR's, they only hold 49.45% of the voting rights. Hence, it's a Dutch company.

[Passenger]

A comparison between Air France/KLM versus Lufthansa/Brussels Airlines doesn't make sense. KL-AF is a merger. LH/SN is a take over.

Details of the take over don't need to be discussed: that was all done in 2008. The only thing that needs to be finalized, is a date and a figure ($$$).

The reference page has to be:
https://www.brusselsairlines.com/en-be/ ... 0-22385-16

[LJ]

A comparison between Air France/KLM versus Lufthansa/Brussels Airlines doesn't make sense. KL-AF is a merger. LH/SN is a take over.

In the end it doesn't matter if it's a takeover or a merger. What is differen is that KLM and the Dutch government had a better position than SN now has.

And this is probably what Davignon & co are trying to do also, selling the airline with a contract that Brussels Airlines must remain a seperate identity.

LH will do this regardless of Davignon & co as they want to retain the traffic rights for BRU - AFrica flights (one of the most imprtant reasons why KLM Group is still Dutch).

[Flanker2]

LH will do this regardless of Davignon & co as they want to retain the traffic rights for BRU - AFrica flights (one of the most imprtant reasons why KLM Group is still Dutch).

Yes and no.
Because KLM is not 100% owned by AF-KLM, but SN will be be 100% owned.

if LH takes over SN at 100%, SN will become 100% German owned even if its state of incorporation and its main place of business is their BRU HQ.
This can present a problem as bilateral agreements are often based on country of ownership.

Germany already has traffic rights to many of SN's African countries, so it's only a problem where they need more slots or for traffic rights in countries where they don't have German bilaterals established.
To retain those kast traffic rights, part of the longhaul operation will have to remain in control of Belgian shareholders or the traffic rights will have to be established between Germany and the African countries.

Imo the latter will be simpler and easier, also in view of moving those routes to Germany.

This means that the longhauls to Africa will be based on German traffic rights anyway and then the only reason to keep them in Belgium would be the customer base and the established operation.
So even longhaul is on very shaky grounds and could move to CGN or FRA before you realise it.
After all, a huge part of the Africa flights seem to be connecting passengers anyway, so what's the difference whether they transfer in BRU or CGN/FRA?

If anything, I think that FRA will absorb the Africa flights under LH Passage rather than EW/CGN.
It makes more sense.

Finally, who's to say that LH won't dump part of or most of the African operations?
At LH's scale, a few widebody flights per day are not going to make the difference.

[Charlie Roy]

http://www.rte.ie/news/business/2016/05 ... a-results/

"Lufthansa said today it was slowing its growth plans this year due to fierce price pressure in the airline industry".

Sorry if not 100% related to this topic, but it seems somewhat insane to me that Lufthansa are deciding in the current climate to be so conservative in their growth plans. If you ask Michael O'Leary about his plans, he will tell you that with low fuel prices the sky's the limit! And Ryanair specifically have ambitious growth plans for Germany.

Lufthansa cannot afford to to stagnate. Ryanair are expanding as fast as they can get planes, and threaten Lufthansa in their home and short-haul market. Lufthansa should not sit back and allow them eat into their market share. Additionally Turkish, Emirates, Qatar, Etihad etc continue to expand, and will be more than happy to fly Europeans to Asia and beyond if Lufthansa does not have the capacity.

Except for 9/11, air travel has been expanding continuously, and is projected to grow massively in years to come. Lufthansa have deep pockets and the potential to invest and be ahead of the game, but instead they choose to stagnate, even if low fuel prices make turning a profit easier than ever.

[Passenger]

http://www.rte.ie/news/business/2016/05 ... a-results/

"Lufthansa said today it was slowing its growth plans this year due to fierce price pressure in the airline industry".

Sorry if not 100% related to this topic, but it seems somewhat insane to me that Lufthansa are deciding in the current climate to be so conservative in their growth plans. If you ask Michael O'Leary about his plans, he will tell you that with low fuel prices the sky's the limit! And Ryanair specifically have ambitious growth plans for Germany.

Lufthansa cannot afford to to stagnate. Ryanair are expanding as fast as they can get planes, and threaten Lufthansa in their home and short-haul market. Lufthansa should not sit back and allow them eat into their market share. Additionally Turkish, Emirates, Qatar, Etihad etc continue to expand, and will be more than happy to fly Europeans to Asia and beyond if Lufthansa does not have the capacity.

Except for 9/11, air travel has been expanding continuously, and is projected to grow massively in years to come. Lufthansa have deep pockets and the potential to invest and be ahead of the game, but instead they choose to stagnate, even if low fuel prices make turning a profit easier than ever.

This is the quote about that "price pressure" from today's Lufthansa press release - to which the Irish National Broadcaster is referring: "...The intensity of the competition and the resulting pricing pressures will not ease – not least because of the low fuel costs. This is why it is important that we continue to work consistently on our cost positions. We remain fully committed to our goal of reducing our unit costs this year net of fuel and currency impacts...”

https://www.lufthansagroup.com/en/press ... /4028.html