Brussels Airlines in 2020

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lumumba
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Re: Brussels Airlines in 2020

Post by lumumba »

b.lufthansa wrote:
12 May 2020, 19:50
Rik Daems (VLD) let Sabena go bankrupt, histoire ce répète
They will not let Brussels Airlines go bankrupt they take there responsibility.
But they will not give money without counterpart,with SABENA they did nothing not the same story...

If it's not with Lufthansa it will be with somebody else.
Hasta la victoria siempre.

oldblueeyes
Posts: 71
Joined: 13 Apr 2020, 12:44

Re: Brussels Airlines in 2020

Post by oldblueeyes »

Simply. You defined most of the European and neighbouring markets as a single airline market and left it to consolidate.
And here we are ... smaller, weaker airlines are consolidated - like many other industries.
Why is it perfectly acceptable to have 4-5 mobile phone players across Europe and but every small country needs a national airline? No reason for that - the short haul is anyhow free and can consolidate organically.
The long haul is indeed an issue as several markets are reglemented on nation-nation base. But here again the bad news is that this industry works on hub and spoke and everbody is dreaming about catching the connecting pax from other markets - so we'll see here consolidation and loose of importance of certain places as well.
This is the reality, regardless if you like it or not.
And in this reality you can play smart and secure a good place even you are a smaller market, or play full of pride and end up nowhere.

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Conti764
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Joined: 21 Sep 2007, 23:21

Re: Brussels Airlines in 2020

Post by Conti764 »

HLN is now citing two union reps who say LH commited to the A321 for long haul for SN as a way to reduce costs.

lucas
Posts: 175
Joined: 01 Feb 2017, 15:06

Re: Brussels Airlines in 2020

Post by lucas »

Het Nieuwsblad even states that Lufthansa has guaranteed that SN would get A321 for their longhaul routes, to cut costs.

https://www.nieuwsblad.be/cnt/dmf20200512_04955916

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Conti764
Posts: 1745
Joined: 21 Sep 2007, 23:21

Re: Brussels Airlines in 2020

Post by Conti764 »

Matt wrote:
12 May 2020, 12:27
Sai wrote:
12 May 2020, 11:35
Boavida wrote:
12 May 2020, 11:18
VRT reports:
(...)
They also said they want to grow again after this crisis and want a long haul fleet of 12 planes in 2024. The A321LR is mentioned for this.
Long haul with single aisle A321LR? Oh my :o and that's in the best scenario...
Long haul with single aisle A321LR: might work tough. I am not big fan of the idea either you know.

But to North America it might work. TAP is already doing it.
It gave the 752 a second breath.

Jetter
Posts: 474
Joined: 06 Nov 2015, 21:07

Re: Brussels Airlines in 2020

Post by Jetter »

Ansett wrote:
13 May 2020, 01:38
The situation at OS and in Austria is quite similar to SN/Belgium.
https://www.derstandard.at/story/200011 ... urbulenzen
Short summary :
OS is requesting a State aid of 767 m
:roll: If I were Austrian I’d have asked for 787 million, they need to move away from the 767.

oldblueeyes
Posts: 71
Joined: 13 Apr 2020, 12:44

Re: Brussels Airlines in 2020

Post by oldblueeyes »

Indeed, there are some similarities to Austrian and the position of the local government in Vienna.

The questions is rather - are the Belgian and Austrian states not trying to oversqueeze and thus damaging their position? Let's look at the situation without patriotic aspects and (un)likes towards Spohr. At the end of the day, he is reporting to the shareholder and has to sustain their equity interests.

Let's look to the Swiss deal, as a benchmark:
- total rescue package is approx 50 EUR/pax capacity at 2019 figures
- lay off for 20% of staff, due to market shrinking
- money is credit from banks, 85% of it is backed by the state- LH offers Swiss equity as guarantee for the loan
- Swiss state get's a 2% interest rate on the guarantee volume- exit strategy - no dividend until loan is not refinanced on the free market
- the market committment is that after the market recovers ZRH shall grow at the same rate as MUC and FRA

And please remember, Swiss is the cash cow money making subsidiary of the group, at 20% of group passengers carried and earns itself all money needed for investments like ne fleet. Also ZRH is a hub protected from aggressive low cost entries

Now let's take a look to Brussels and Austrian:
- governments were asking initially for blocking minorities of 25%+1 share
- there were voices claiming for growth guarantees, especially on long haul
- voices claiming that lay offs are not compatible with state aid etc.
- apparently negotiations with IAG and Etihad in Austria for alternatives, although Walsh stated clearly that IAG is consolidating first

Meanwhile the group position is significantly weaker:
- actually no profit - thus the need for restructuring regardless of Corona
- lack of own capitalization - money for the last fleet developments came from Germany - and both companies still earn less than the cost of capital
- end of the tail positions - both together count for approx 15% of carried pax and around 10% of the long haul pax

So if we are honest, the demand of the Austrian and Belgian state representatives is way to high compared to the benchmark, for a way to low situation of the brands. Understandable that CS can't and does not want to agree to such conditions as both companies are the end of the tail in the group.

And if one have heared the tones during the shareholder meeting, a well prepared company has always an alternative strategy. There were two announcements given for those able to listen between the lines:

- the future will consist from maximum 10 operating entities (Germanwings is already out in counting)
- Eurowings Europe (by the way registered in Vienna) shall become a new role

So what if negotiations go wrong?
- both Brussels and Austrian are LH group daughter companies and they are all lcoated in the EU - simple nationalisation dreams just because of local pride won't work
- Eurowings Europe could easily get assets such as slots transferred and the short haul rebranded and operated by them - at the end of the day both Brussels and Vienna airports gave LCC players a strong acting field - half of Austrian's A320 are anyhow owned by Lufthansa, the Brussels fleet is leased so one can get rid of it easily and enough capacity available is owned by the group
- now let's look to the long haul, where many claim that there is no way outside local players with AOCs:
- TATL - it is an open sky issue - so basically any brand can do it - call it "Ocean", where LH covers all touristic or "low business class demand" business as a project
- Asia? - the group has revenue JVs - so no problem to let ANA and air China fly in and share net revenue
- West Africa? - well, this is a niche and up to now this is supported by the group by organising the pax flow to Brussels - but this can be easily transferred to ZRH, FRA or MUC - for the transfer pax it won't make a difference, for the BRU pax it is connecting flight on top indeed and for many African governments the other hubs might be more prestigious - last but not least, LH group might be very happy to show this type of growth eg in ZRH, to get it's obligations served?

Now for sure, this is a black/white scenario, but the point is that negotiations have to be realistic and reasonable for both sides. It is not like Lufthansa can't manage an alternative scenario if local governments come with unrealistic expectations given market reality, relative importance of the local companies in the group and their business performance.

Or maybe to make it more simple - why would you as Lufthansa accept minority participation in your non-core companies, knowing in advance that the local partners are unrealistic and unreasonable?

oldblueeyes
Posts: 71
Joined: 13 Apr 2020, 12:44

Re: Brussels Airlines in 2020

Post by oldblueeyes »

Well, the relation with Austria is also full of emotions.

Let's look a little bit back:
- Austrias' self understanding is to be the gate keeper or lead market towards Eastern Europe and this is what they have done also in aviation, with Austrian growing up to 100 small aircraft in the early and mid 2000s
- in the country everything is political, so Austrian acquired a virtually bankrupt Lauda Air in the early 2000s and accumulated 1bn losses till the end of the decade
- the deal at full sale to Lufthansa ( a minority stake was also there from the early 2000s) was that LH will pay almost nothing but keep 500 mio debt, the Austrian state will cut 500 mio out of the accumulated losses and the company should be reorganised in a way that it covers it'S future standalone
- however, the politics sold to the public opinion the idea that they "gave" 500 mio to LH and from self supporting operations as agreed was never any word mentioned

Some of emotional things in the discussion there:
- Austria always compare itself with Switzerland, so they feel badly treated vs Swiss
- there is a fair feeling that some of their feeding pax flows were transferred to MUC, built up as a group main European hub
- strong emotion about long haul fleet - basically what they have it's old Lauda planes extended by 2 leased 772 - worth to notice here the decision pre- full acquisition to continue with Boeing and defleet A343 and thus not to be aligned to the group fleet -> something that caused a lot of issues within the last years - eg unavaialbility of 772 with the right engines or no commonality with aircraft at sizes they would need
- overall the fleet upgauging is not seen positively, as the company was coming from 100 planes(altough the majority was regional ones) and several were working on a wet leases basis for Swiss or Brussels trough the years -> there were soe flying jobs lost in this process

Deejay
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Joined: 06 Feb 2018, 09:20

Re: Brussels Airlines in 2020

Post by Deejay »

nevertheless, i think that a worst case scenario could be:

Mutti and CS shake hands on a 9B€ deal, Mutti gets two seats on the board, CS doesn't need belgian money, and injects just enough LH money in SN to keep it in a coma/zombie state, to protect his backyard from IAG and AF/KLM at BRU for the next few years, and concentrates on a LH/LX/EW restart ....


realistic ?

nordikcam
Posts: 1067
Joined: 24 Aug 2008, 10:22
Location: Uccle

Re: Brussels Airlines in 2020

Post by nordikcam »

Deejay wrote:
13 May 2020, 11:46
nevertheless, i think that a worst case scenario could be:

Mutti and CS shake hands on a 9B€ deal, Mutti gets two seats on the board, CS doesn't need belgian money, and injects just enough LH money in SN to keep it in a coma/zombie state, to protect his backyard from IAG and AF/KLM at BRU for the next few years, and concentrates on a LH/LX/EW restart ....


realistic ?
The worst scenario I agree. And what are the next steps in this saga? A start of the calendar to know if we keep an airline that I think is still a national airline? When does the CS contract end? Could it be dismissed by the shareholders?

Flanker2
Posts: 1690
Joined: 05 Dec 2012, 23:15

Re: Brussels Airlines in 2020

Post by Flanker2 »

oldblueeyes wrote:
13 May 2020, 09:56
Indeed, there are some similarities to Austrian and the position of the local government in Vienna.

The questions is rather - are the Belgian and Austrian states not trying to oversqueeze and thus damaging their position? Let's look at the situation without patriotic aspects and (un)likes towards Spohr. At the end of the day, he is reporting to the shareholder and has to sustain their equity interests.

Let's look to the Swiss deal, as a benchmark:
- total rescue package is approx 50 EUR/pax capacity at 2019 figures
- lay off for 20% of staff, due to market shrinking
- money is credit from banks, 85% of it is backed by the state- LH offers Swiss equity as guarantee for the loan
- Swiss state get's a 2% interest rate on the guarantee volume- exit strategy - no dividend until loan is not refinanced on the free market
- the market committment is that after the market recovers ZRH shall grow at the same rate as MUC and FRA

And please remember, Swiss is the cash cow money making subsidiary of the group, at 20% of group passengers carried and earns itself all money needed for investments like ne fleet. Also ZRH is a hub protected from aggressive low cost entries

Now let's take a look to Brussels and Austrian:
- governments were asking initially for blocking minorities of 25%+1 share
- there were voices claiming for growth guarantees, especially on long haul
- voices claiming that lay offs are not compatible with state aid etc.
- apparently negotiations with IAG and Etihad in Austria for alternatives, although Walsh stated clearly that IAG is consolidating first

Meanwhile the group position is significantly weaker:
- actually no profit - thus the need for restructuring regardless of Corona
- lack of own capitalization - money for the last fleet developments came from Germany - and both companies still earn less than the cost of capital
- end of the tail positions - both together count for approx 15% of carried pax and around 10% of the long haul pax

So if we are honest, the demand of the Austrian and Belgian state representatives is way to high compared to the benchmark, for a way to low situation of the brands. Understandable that CS can't and does not want to agree to such conditions as both companies are the end of the tail in the group.

And if one have heared the tones during the shareholder meeting, a well prepared company has always an alternative strategy. There were two announcements given for those able to listen between the lines:

- the future will consist from maximum 10 operating entities (Germanwings is already out in counting)
- Eurowings Europe (by the way registered in Vienna) shall become a new role

So what if negotiations go wrong?
- both Brussels and Austrian are LH group daughter companies and they are all lcoated in the EU - simple nationalisation dreams just because of local pride won't work
- Eurowings Europe could easily get assets such as slots transferred and the short haul rebranded and operated by them - at the end of the day both Brussels and Vienna airports gave LCC players a strong acting field - half of Austrian's A320 are anyhow owned by Lufthansa, the Brussels fleet is leased so one can get rid of it easily and enough capacity available is owned by the group
- now let's look to the long haul, where many claim that there is no way outside local players with AOCs:
- TATL - it is an open sky issue - so basically any brand can do it - call it "Ocean", where LH covers all touristic or "low business class demand" business as a project
- Asia? - the group has revenue JVs - so no problem to let ANA and air China fly in and share net revenue
- West Africa? - well, this is a niche and up to now this is supported by the group by organising the pax flow to Brussels - but this can be easily transferred to ZRH, FRA or MUC - for the transfer pax it won't make a difference, for the BRU pax it is connecting flight on top indeed and for many African governments the other hubs might be more prestigious - last but not least, LH group might be very happy to show this type of growth eg in ZRH, to get it's obligations served?

Now for sure, this is a black/white scenario, but the point is that negotiations have to be realistic and reasonable for both sides. It is not like Lufthansa can't manage an alternative scenario if local governments come with unrealistic expectations given market reality, relative importance of the local companies in the group and their business performance.

Or maybe to make it more simple - why would you as Lufthansa accept minority participation in your non-core companies, knowing in advance that the local partners are unrealistic and unreasonable?
What a load of BS.

"Why would you as Lufthansa accept minority participation in your non-core companies? "

The answer is because your non-core companies only have days of cash left before they are cash flow insolvent. The reason for that is because you as a holding, did not have reserves for a rainy day, not even appropriate risk-management, because you were busy shoring up your bonusses and paying out dividends to shareholders, instead of strengthening your balance sheet and putting "act of god" clauses in your lease contracts.

So what if negotiations go wrong?
- both Brussels and Austrian are LH group daughter companies and they are all lcoated in the EU - simple nationalisation dreams just because of local pride won't work.


Why not? Because you say so?
Isn't Germany trying to pseudo-nationalise Lufthansa anyway?

- Eurowings Europe could easily get assets such as slots transferred and the short haul rebranded and operated by them - at the end of the day both Brussels and Vienna airports gave LCC players a strong acting field - half of Austrian's A320 are anyhow owned by Lufthansa, the Brussels fleet is leased so one can get rid of it easily and enough capacity available is owned by the group

If money is given without conditions, that can also happen, which is the whole point of asking for guarantees.

- now let's look to the long haul, where many claim that there is no way outside local players with AOCs:
- TATL - it is an open sky issue - so basically any brand can do it - call it "Ocean", where LH covers all touristic or "low business class demand" business as a project


In the meanwhile, the new Belgian national carrier will be serving higher yield demand for TATL from ZRH, FRA, MUC. Also, good luck with a product like EW flying TATL. They tried it out of DUS, how did that work out so far?

- Asia? - the group has revenue JVs - so no problem to let ANA and air China fly in and share net revenue

Air China is not interested in flying into BRU, otherwise they would have done it long ago.
NH benefits from SN feeding. Turn that into EW if you want.

- West Africa? - well, this is a niche and up to now this is supported by the group by organising the pax flow to Brussels - but this can be easily transferred to ZRH, FRA or MUC - for the transfer pax it won't make a difference, for the BRU pax it is connecting flight on top indeed and for many African governments the other hubs might be more prestigious - last but not least, LH group might be very happy to show this type of growth eg in ZRH, to get it's obligations served?

This has been a constant threat of the LH Group since the day they took over and the reason why I said it's a bad idea to sell the company to LH.
In any case, if Belgium set up a new national carrier, the bilaterals will be reallocated.


Meanwhile the group position is significantly weaker:
- actually no profit - thus the need for restructuring regardless of Corona
- lack of own capitalization - money for the last fleet developments came from Germany - and both companies still earn less than the cost of capital
- end of the tail positions - both together count for approx 15% of carried pax and around 10% of the long haul pax


Lufthansa has been restructuring SN and OS for over 10 years now and they have failed. These airlines have failed to turn profits even in a low fuel price, high demand environment. So much for the"Lufthansa expertise". Money for the last fleet developments, ie swapping older aircraft leases for newer aircraft leases come straight from the respective airlines' losses, not from Germany. Germany is not paying their new leases or the paint job.

This project has been a failure. SN has been doing as bad as it was before LH bought it out.
It's time to try something different.

JOVAN
Posts: 484
Joined: 08 Jun 2006, 00:00

Re: Brussels Airlines in 2020

Post by JOVAN »

Just some thoughts:
- crisis will take probably two years or more
- many airlines will disappear, or become lot smaller
- what is role of BRU in this, they are about to lose their biggest customer and we do not hear them
- will FR, easy be the same as before or a lot smaller
- will LX and LH continue to be only Airlines with First Class in Europe? will the Bankers and Corporate flyers continue to fly first, or business ??
- will Airbus Boeing survive? thousands of new planes will become available for good prices
- Airports will also offer bargains, and so will hotels -
- Swissair, AF, LH etc all failed to revive SN because they came here only to plunder the country, like the Vikings, the Spaniards, Romans the Germans (2x) etc

probabilities and certainties.
We better keep strategic industries and infrastructures in our own hands

Finally:
- CS is not eternal

nordikcam
Posts: 1067
Joined: 24 Aug 2008, 10:22
Location: Uccle

Re: Brussels Airlines in 2020

Post by nordikcam »

JOVAN wrote:
13 May 2020, 14:14

Finally:
- CS is not eternal
I asked. Does anyone know when his contract ends? Could shareholders end this contract?

sean1982
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Re: Brussels Airlines in 2020

Post by sean1982 »

JOVAN wrote:
13 May 2020, 14:14
- will LX and LH continue to be only Airlines with First Class in Europe? will the Bankers and Corporate flyers
BA has first class too

ostair
Posts: 333
Joined: 19 Jan 2004, 00:00
Location: ostend

Re: Brussels Airlines in 2020

Post by ostair »

Which destinations will be axed?
Can't find any info on this.

oldblueeyes
Posts: 71
Joined: 13 Apr 2020, 12:44

Re: Brussels Airlines in 2020

Post by oldblueeyes »

Good thoughts. And for some of them there are already market signals.

The overall projections (might be different from country to country) is that the market volumes would be at around 50-60% of 2019 next year and converge towards 80% in 2022 or 2023. So if airlines ask for help, than most of the talks are around solutions enabling half of their staff not to become unemployed until 2022.

Swiss already declared that they will continue with 1st class offerings - well, they are in a market with a lot pf people with private wealth but unkeen to fly private jets.
LH has already most of the planes without a first. In MUC these were the 346 to be retired, the 380s are parked so only the 748 are remaining. Meanwhile there are a lot of thoughts about a business plus, as at least in LH most of the occupied first seats were upgrades against miles.
Meanwhile there is a lot of activity below - for the LH group, the Premium Economy is the best earning product, if we look towards revenue vs area in the plane occupied. Having in mind that the projections are that the leisure market will gain mommentum earlier than business, we might see shiftings here towards more seats in this class.
Also in terms of success Edelweiss is doing very well, mainly by a segmentation in the economy class - with a highly popular Economy Plus, which is basically an economy seat with extra 3 inches of legroom (34'').

Both Airbus and Boeing will survive. Boeing has an extremely strong military backlog and pipeline, although they will face difficult times in civil aviation. Maybe they will make a cut and bring a clean sheet design for the 737 follower sooner than expected. Airbus is more civil oriented, but with a stronger mommentum in existing products.

Let's see what airports will do - we had in the early 2000s an orgy of subsidies, grabbed mainly by LCCs. There might be a reshape here as well, as several regional dreams or converted military airports never achieved critical mass to become operationally viable.

CS is truely not eternal. In best case for him, he will stay for another 5 years, as latest 2006 he will have to retire according to the company's management rules. Until than, there will be at least 2 board positions becoming vacant due to age limit in 2022 and 2023 - so than we would see most likely his successor coming from a newer generation of managers. As the LH group tends rather to export management, it is rather unlikely to hier for the top position somebody from outside.

TLspotting
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Re: Brussels Airlines in 2020

Post by TLspotting »

ostair wrote:
13 May 2020, 14:28
Which destinations will be axed?
Can't find any info on this.
Not a lot disclosed yet, but apparently Sicily and many former TCAB destinations.
Hi. I'm T., spotter and aviation geek. Join me on Facebook & Twitter @TLspotting

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Yuqu12
Posts: 472
Joined: 04 Mar 2016, 09:41

Re: Brussels Airlines in 2020

Post by Yuqu12 »

Most logical destinations to be axed are the TCAB destinations which aren't that profitable and keep the really profitable ones. For other European destinations, I'd imagine the Cityjet-destinations if SN does not start flying to them themselves plus all other destinations which aren't profitable. But as TLspotting said, a list of those destinations has not been published yet.

oldblueeyes
Posts: 71
Joined: 13 Apr 2020, 12:44

Re: Brussels Airlines in 2020

Post by oldblueeyes »

nordikcam wrote:
13 May 2020, 14:19
JOVAN wrote:
13 May 2020, 14:14

Finally:
- CS is not eternal
I asked. Does anyone know when his contract ends? Could shareholders end this contract?
2023. Can be extended max 2026.
Head of supervisory board is Kley - ex CEO Merck and ex LH board member- so both have the LH internal route.
And current shareholders are pretty satisfied with CS, as he is reshaping the company after several issues from the past were continuosly postponed by his predecessors.
So, unlikely to change him as he is heavily advocating the interests of current shareholders against dilution of votes, state interferences etc. And Germany is not asking for his replacement as a price for any deal.

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b.lufthansa
Posts: 163
Joined: 15 Sep 2008, 08:25

Re: Brussels Airlines in 2020

Post by b.lufthansa »

The employees that will stay on board will be offered a new collective labor agreement, less salary, more working and less rest between the duties. Still a lot of talking to be done between management and unions.

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