Brussels Airlines in 2020

[Av24.be]

Tomorrow is shareholder meeting. Traditionally one day before the board meets and often investments or important decisions are announced - in the past it was typically fleet related. Now it could be last minutes adjustments to tomorrow's agenda and recommendations eg for the Swiss package etc.

https://www.aviation24.be/airlines/luft ... in-autumn/

[oldblueeyes]

Tomorrow is shareholder meeting. Traditionally one day before the board meets and often investments or important decisions are announced - in the past it was typically fleet related. Now it could be last minutes adjustments to tomorrow's agenda and recommendations eg for the Swiss package etc.

https://www.aviation24.be/airlines/luft ... in-autumn/

Yes, this was pre-published last Thu - nothing new.
But there are still other topics on the agenda:
- capital increase - might be higher than the level communicated to shareholders pre-shareholder meeting
- project Ocean
- also "realignment of Eurowings Europe" - as this is targeted for all bases outside Germany, there might be alternative strategies for bases where local governements are coming with unreasonable requests

[sn26567]

An important item in the LH AGM might be the conclusion of an agreement with the German federal government on state aid: which form (loan, participation in the capital, eventual seat for the gov't in the LH Board)? How much? Level of involvement of the gov't in management decisions? Etc.

[Passenger]

Many people here say that Lufthansa has bought Brussels Airlines for almost nothing: 65M for 45% in in 2009, plus 2,6M for 55% in 2016. That’s not a lot of money indeed, compared to the turnover. But if one buys a company, one doesn’t only buy the good: one buys the good, the bad and the ugly. Fact: Lufthansa has bought a lot of debt too. Sure, there have been a few years with a nice nett profit, but that hasn’t resulted in a dividend pay out for Lufthansa. If one makes a profit, one isn’t allowed to pay a dividend as long as there is a cumulated loss. For Brussels Airlines, the cumulated loss was negative since 2010. The counter stood at -92,7M on 31/12/2018. That means that Brussels Airlines must make an additional 92M profit before Lufthansa can pay itself a first Euro dividend as sole owner. (For SN Airholding nv/sa, the counter on 31/12/2018 stood at -64,5M cumulated loss, Beschikbare reserves 0.).

Additional profit for LH, not written down in balance sheet figures: to owne the home carrier at Europe’s capital, a factual monopoly for BRU-FRA/BRU-MUC, some SN transit traffic via FRA/MUC.

In return for the corona loan (290M), the Belgian government demands a lot from Lufthansa (cfr Wilmès reply-letter to Lufthansa): guarantueed growth at Brussels Airport via future investments, no job losses, ecological measures (? less short haul flights?), and a blocking minority at the Board.

I wonder if the pragmatic members of the LH board will accept these demands. And when the Belgian government insists and persists, LH may well decide that they write off their investment in Brussels Airlines.

[lumumba]

Many people here say that Lufthansa has bought Brussels Airlines for almost nothing: 65M for 45% in in 2009, plus 2,6M for 55% in 2016. That’s not a lot of money indeed, compared to the turnover. But if one buys a company, one doesn’t only buy the good: one buys the good, the bad and the ugly. Fact: Lufthansa has bought a lot of debt too. Sure, there have been a few years with a nice nett profit, but that hasn’t resulted in a dividend pay out for Lufthansa. If one makes a profit, one isn’t allowed to pay a dividend as long as there is a cumulated loss. For Brussels Airlines, the cumulated loss was negative since 2010. The counter stood at -92,7M on 31/12/2018. That means that Brussels Airlines must make an additional 92M profit before Lufthansa can pay itself a first Euro dividend as sole owner. (For SN Airholding nv/sa, the counter on 31/12/2018 stood at -64,5M cumulated loss, Beschikbare reserves 0.).

Additional profit for LH, not written down in balance sheet figures: to owne the home carrier at Europe’s capital, a factual monopoly for BRU-FRA/BRU-MUC, some SN transit traffic via FRA/MUC.

In return for the corona loan (290M), the Belgian government demands a lot from Lufthansa (cfr Wilmès reply-letter to Lufthansa): guarantueed growth at Brussels Airport via future investments, no job losses, ecological measures (? less short haul flights?), and a blocking minority at the Board.

I wonder if the pragmatic members of the LH board will accept these demands. And when the Belgian government insists and persists, LH may well decide that they write off their investment in Brussels Airlines.

If they write off there investment and leave Brussels Airlines no problem the state will nationalise the company and look for another partner.

I'm sure it will be easy to find a new partner with a state guaranty of 290 million ( or a participation)and workers ready to sacrifice part of their salary with a big market around Brussels.

[oldblueeyes]

I am just following Sphrs' speech at the shareholder meeting.

The industry will be smaller. The Lufthansa group will be smaller. So if somebody is asking about no jobs losses under circumstances that Brussels was anyhow a candidate to be restructured and now the whole industry is planning with 20% less market in 2 years, than it is logic that cuts will be done in Brussels as well.

Just some notes from the speech:

- LH does not want state management
- LH will be after crisis different and smaller - approx 100 aircraft less
- redundancies can be offset via part times

At the end of the day, the deals with Switzerland and Germany make 90% of the group passangers. So to be fair, Brussels is peanuts. If the political demand is unreasonable, cutting the end of the tail won't hurt that much.

[oldblueeyes]

If they write off there investment and leave Brussels Airlines no problem the state will nationalise the company and look for another partner.

I'm sure it will be easy to find a new partner with a state guaranty of 290 million ( or a participation)and workers ready to sacrifice part of their salary with a big market around Brussels.

And what is the reason to nationalize? LH could also transfer some assets within the group - at the end of the day they are the owner of the company, brand etc.

In Austria Ryanair is already transferring slots etc from Laudamotivon to the mother company.

So before making it insolvent, LH could transfer the nice pieces of the pie. What would remain? Some old short haul aircraft, unattractive slots and routes, most likely direct competition to switch the African routes to another LH hub.

At the end of the day the industry is frther consolidating - dreaming of a new VLM ,Air Belgium or any other peanuts airline won't help BRU strategically.

[b.lufthansa]

If they write off there investment and leave Brussels Airlines no problem the state will nationalise the company and look for another partner.

I'm sure it will be easy to find a new partner with a state guaranty of 290 million ( or a participation)and workers ready to sacrifice part of their salary with a big market around Brussels.

Sure, like the Belgian government did with Sabena. They nationalized the company and looked for another partner

This is the funniest thing I read all day

[Poiu]

So before making it insolvent, LH could transfer the nice pieces of the pie. What would remain? Some old short haul aircraft, unattractive slots and routes, most likely direct competition to switch the African routes to another LH hub.

Africa routes are subject to bilateral agreements, so it would be useless to transfer those slots.
With the consolidation ahead, they only slots which are valuable are the LHR ones. Look at LGW as an example, easyJet paid a small fortune to buy additional slots and now with Norwegian for sure and BA and VS maybe disappearing from LGW slots will be widely available for free.

[nordikcam]

I am just following Sphrs' speech at the shareholder meeting.

The industry will be smaller. The Lufthansa group will be smaller. So if somebody is asking about no jobs losses under circumstances that Brussels was anyhow a candidate to be restructured and now the whole industry is planning with 20% less market in 2 years, than it is logic that cuts will be done in Brussels as well.

Just some notes from the speech:

- LH does not want state management
- LH will be after crisis different and smaller - approx 100 aircraft less
- redundancies can be offset via part times

At the end of the day, the deals with Switzerland and Germany make 90% of the group passangers. So to be fair, Brussels is peanuts. If the political demand is unreasonable, cutting the end of the tail won't hurt that much.

So ... reading to you ... is everything dead? That's it?

[oldblueeyes]

@Nordikcam Not at all dead. Just that there is a need of responsibility from both sides.

All group companies are doing lay offs - Swiss is preparing for something like 1.500 to 2.000 people, according to Swiss media - and this is coming by an already agreed aid scheme, high profitability in the past etc.
It is simple industry reality, due to downsizing of the whole market.

Belgium and Austria where both carriers were regardless of Corona subject of a reshaping program have to realize that downsizing to what made pre Corona sense and adding to that the Corona factor is the maximum that can be achieved. If there would be an unrealistic expectation of employment and guaranteed growth requests than it might be better for Lufthansa to keep at thee bases a nucleus of assets on whatever brand (let's say Eurowings P2P offering) and leave the rest behind them.

@Poiu

Currently the LH group is serving these destinations from Brussels only, directing the passenger flows to BRU.
If there would be a split, there won't be any problem to other brands in the group to close bilateral agreemets to open routes - most hubs are anyhow more prestigious in terms of total traffic, LH owns the 333 Brussels is flying currently anyhow and they know how to re-route pax.
So for the group is would be mainly a matter of switching employment - under circumstances of personnel overcapacity any goverment wwhere they sign an agreement and any home airportwould be keep to take these pax flows as they would come on top to the current strategy.

[Poiu]

If they write off there investment and leave Brussels Airlines no problem the state will nationalise the company and look for another partner.

I'm sure it will be easy to find a new partner with a state guaranty of 290 million ( or a participation)and workers ready to sacrifice part of their salary with a big market around Brussels.

Starting a new, State subsidised company, would be a much better and much cheaper option.
NewSN wouldn’t have to carry the heavy debt from the past and could easily recruit staff on lower T&Cs as there will be massive unemployment post Covid19.
EWBrussels or for short haul and Sabena2.0 for Africa will cost less money than trying to fill a bottomless pit.
My personal preference would be Vueling and Level-Brussels, as once LHR and LGW are saturated again BRU could be an excellent hub for flights towards Africa and Asia.

[oldblueeyes]

LGW saturated? Are you aware that BA is reducing massively the Gatwick activity and closing the long haul from there?
Can you finally realize that all players from the industry are in the same boat?

https://www.theguardian.com/business/20 ... 130-pilots

There is no greener grass somewhere else, as bitter as the reality is.

[Passenger]

... Just that there is a need of responsibility from both sides.

All group companies are doing lay offs - Swiss is preparing for something like 1.500 to 2.000 people, according to Swiss media - and this is coming by an already agreed aid scheme, high profitability in the past etc. It is simple industry reality, due to downsizing of the whole market.

Belgium and Austria where both carriers were regardless of Corona subject of a reshaping program have to realize that downsizing to what made pre Corona sense and adding to that the Corona factor is the maximum that can be achieved. If there would be an unrealistic expectation of employment and guaranteed growth requests than it might be better for Lufthansa to keep at these bases a nucleus of assets on whatever brand (let's say Eurowings P2P offering) and leave the rest behind them.

Exactly - and that is why I don't understand the bluff poker from the Belgian government towards Lufthansa: Belgium demands growth, Belgium refuses job cuts. It's even more incomprehensible because Alexander De Croo (co-author of the letter) is businesswise the most intelligent guy in the federal government: De Croo jr. has studied Economics (VUB & Solvay Business School) and he has a MBA from Illinois University, USA.

[Jetter]

Many people here say that Lufthansa has bought Brussels Airlines for almost nothing: 65M for 45% in in 2009, plus 2,6M for 55% in 2016. That’s not a lot of money indeed, compared to the turnover. But if one buys a company, one doesn’t only buy the good: one buys the good, the bad and the ugly. Fact: Lufthansa has bought a lot of debt too. Sure, there have been a few years with a nice nett profit, but that hasn’t resulted in a dividend pay out for Lufthansa. If one makes a profit, one isn’t allowed to pay a dividend as long as there is a cumulated loss. For Brussels Airlines, the cumulated loss was negative since 2010. The counter stood at -92,7M on 31/12/2018. That means that Brussels Airlines must make an additional 92M profit before Lufthansa can pay itself a first Euro dividend as sole owner. (For SN Airholding nv/sa, the counter on 31/12/2018 stood at -64,5M cumulated loss, Beschikbare reserves 0.).

Additional profit for LH, not written down in balance sheet figures: to owne the home carrier at Europe’s capital, a factual monopoly for BRU-FRA/BRU-MUC, some SN transit traffic via FRA/MUC.

In return for the corona loan (290M), the Belgian government demands a lot from Lufthansa (cfr Wilmès reply-letter to Lufthansa): guarantueed growth at Brussels Airport via future investments, no job losses, ecological measures (? less short haul flights?), and a blocking minority at the Board.

I wonder if the pragmatic members of the LH board will accept these demands. And when the Belgian government insists and persists, LH may well decide that they write off their investment in Brussels Airlines.

If they write off there investment and leave Brussels Airlines no problem the state will nationalise the company and look for another partner.

I'm sure it will be easy to find a new partner with a state guaranty of 290 million ( or a participation)and workers ready to sacrifice part of their salary with a big market around Brussels.

If the government sticks to its demands of no job losses and guaranteed investments and growth it will be impossible to find a new partner: no amount of loans/guarantees is good enough if there isn’t a reasonable likelihood of profitability.

Workers ready to sacrifice part of their salary? Is that your speculation or an actual offer? Pilots even went on strike recently while they very well knew SN was in bad shape. Unions didn’t care about the demise of Sabrina either and were even striking the moment they went bankrupt.

[PttU]

Sabrina

[Inquirer]

What is remarkable is the ease at which some think that if Belgium wants to replace Brussels Airlines with something new, the old one will just clear the skies for it...

Brussels Airlines is fully owned by Lufthansa and as long as they think it has value to keep on to, they will keep it: I doubt Lufthansa will simply turn over routes, staff and planes to any new company, like Sabena did so many years ago, especially if they are not affiliated to it!

Sabena was state-owned and so the government at the time decided to close it down in order for the newco to have sufficient economic space in BRU to succeed. Brussels Airlines is not state owned however and Lufthansa might very well decide to hold on to the most valuable things of this airlines itself, something not unimaginable if you go by the emphasis they've put on keeping their group of European Airlines together as of lately.

What would be left for any new company at BRU if indeed Lufthansa holds on to a downsized Brussels Airlines serving Africa as well as the most popular European business routes, fed by a network of partners?
I'm not sure you can build a successful network competitor in BRU on the parts voluntarily shed by Brussels Airlines and Lufthansa, let alone whether it's such a smart strategy for our government to start an internal competition to their most important networking company at BRU, when they'd have to concentrate on competing internationally with AMS, CDG, London etc in fact.

If this is the government strategy indeed, it's another one of those typical Belgian solutions in which the main driver seems to be provincialism and tribalism, rather than national economic interests.

[Poiu]

LGW saturated? Are you aware that BA is reducing massively the Gatwick activity and closing the long haul from there?
Can you finally realize that all players from the industry are in the same boat?

Once Gatwick is saturated AGAIN were my words! By the way, Virgin just announced, they will close their Gatwick base.
I do realise the whole industry is in the same boat, but many on here don’t seem to realise SN was not viable before Covid and it certainly won’t be afterwards, especially if you don’t accept at least a 20-30% job cut and EW-style working condition for those who keep their jobs.
Reboot was announced in September 2019 in the six months to the start of Covid nothing happened whilst SN was bleeding over a million a week... Restructuring SN could be more difficult than starting from scratch with Eurowings or Vueling for short haul and Sabena 2.0 or, why not, Air Belgium for Africa.

[Poiu]

What is remarkable is the ease at which some think that if Belgium wants to replace Brussels Airlines with something new, the old one will just clear the skies for it...

Brussels Airlines is fully owned by Lufthansa and as long as they think it has value to keep on to, they will keep it: I doubt Lufthansa will simply turn over routes, staff and planes to any new company, like Sabena did so many years ago, especially if they are not affiliated to it!

If this is the government strategy indeed, it's another one of those typical Belgian solutions in which the main driver seems to be provincialism and tribalism, rather than national economic interests.

LH wants free money, as simple as that, but you can’t have your cake and eat it too.
If LH wants money he will have to give something, maybe the State could ask for a guarantee in the form of the slots and some assets. I do agree though that it’s not realistic to ask for no job cuts and unconditional growth, which has proven wrong long before Covid.
LH IS interested by starting from scratch, they tried via EW in the past, but didn’t get the unions and Mr G and D on board so the project failed. What was left was a company in distress unable to Reboot.
I fully agree with you Belgium needs a solid aviation group in Brussels, but trying to fix something which has been broken for its whole existence despite a never seen expansion of global aviation, won’t work unfortunately.
Trying to save SN, whatever it costs and without any guarantee would be one of those typical Belgian solutions, the national economic interest is creating something new which is viable, not trying to save a company which has been on life support for years and now caught Covid on top of that.

[oldblueeyes]

LH wants free money, as simple as that, but you can’t have your cake and eat it too.

That's again a claim without substance.

You can see it in the structures of all deals LH is making:
- they want a subsidy part in the way any company forced to let people stay home during the past months can legally claim in the respective country
- the want a state guaranteed credit where they are ready to pay a markt premium on the interest rate - for example in Switzerland the Swiss state guarantees 85% of the load and receives for it an extra interest rate on top to what the airline is paying to the banks
- as counterpart they guarantee with assets oft he local entity
- in Germany they are talking that the governemnt should buy a 25,1% minority to protect them to be taken over by Chinese or whomever group during the time the valuation is low

So there is no "free money", just "free" portions that any company gets according to the local decisions and a guarantee for a loan.

What they want is:
- a help via guarantees from the respective states so that they are not getting stuck in interest rates and can't invest further
- the freedom to decide commercially the future of the franchises

We can compare on what is reasonable by showing the Swiss case:
- several 773 and 333 will be parked for longer
- 1.500 - 2.000 staff cut out of 10.300
- the promise to grow afterwards proportionally equally with FRA and MUC

If this is the "price" for your best in class company of the group, what is reasonable / acceptable for SN - regardless of what the local emotions, politicians and fired ex managers are believing to be a revenge mommentum?