Brussels Airlines in 2020

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sn26567
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Re: Brussels Airlines in 2020

Post by sn26567 »

Lufthansa Group sets a deadline (tomorrow Friday) on reaching a deal with the Belgian government about its subsidiary Brussels Airlines, as "time is running out” for Belgium carrier.
André
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Flanker2
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Re: Brussels Airlines in 2020

Post by Flanker2 »

LH has already set many deadlines and they have vanished into the rear view mirror without an issue.
By the end of the 2nd week of May, by the end of May, by the end of June, and now by July 11th.

LH has to realise that they are dealing with government, and government doesn't take deadlines from private sector companies.
The Belgian government's offer is already exceedingly generous, and LH now has the option to help SN by themselves, it's not a desperate situation anymore.

We shall see.

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Re: Brussels Airlines in 2020

Post by MHG »

Makes me wonder if the government is willing (and able) to set up a new carrier if LH is serious this time.

I suspect LH does underestimate the Belgian government ...
... and the government in Brussels is likely not in the same situation as in Vienna and Zürich.

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

So what was the situation in Zurich? Do you expect the Swiss to have less ressources, or as their experience with Lufthansa to good and successfull?

Passenger
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Re: Brussels Airlines in 2020

Post by Passenger »

Last Tuesday, CEO Dieter Vranckx was in the Belgian Parliament, at a hearing in the Commission Mobility, together with Arnaud Feist (BRU) and Freek De Witte (DHL). Vranckx explained why there is an urgency: ...Lufthansa has made an agreement with the Swiss government and the Austrian government, so the solution in Belgium must be similar... If we have to go for another solution, like a Chapter 11 (in Belgium: Insolventie van ondernemingen / Insolvabilité des entreprises), we need to do this with a certain amount of cash left... Our cash prognosis in March was "end of May", but meanwhile we were able to improve our cash position, but it still is limited...

Flanker2
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Re: Brussels Airlines in 2020

Post by Flanker2 »

So, when's the next deadline? :lol:

Why can't Lufthansa just pump some of those 10 Billions they got and forget about Belgian state aid?

Why are these 290 millions so important?

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

It is as always a trade off for having a sharp business decision vs finding a way on transitioning the crisis.

What would in an insolvency happend? For example Lufthansa could get rid of all leased planes rather quickly -Brussels does not own it's fleet. Would this be a good move? For sure, as one has anyhow a lot of owned planes with zero book value, harmoized engines etc.

Might this be an option to adjust sharply the profile and scope of the airline? Also yes.

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Re: Brussels Airlines in 2020

Post by MHG »

oldblueeyes wrote: 10 Jul 2020, 13:22 So what was the situation in Zurich? Do you expect the Swiss to have less ressources, or as their experience with Lufthansa to good and successfull?
My mistake.
Had my comment edited a few times and thought I had the "Zürich" deleted from the final context ...

The government in Vienna certainly has sufficient funds as well (albeit not as deep pockets as the government in Bern) but AUA is in a whole different financial state and has a much worse perspective for recovery than Swiss.

SN has a few (African) cherries in its route portfolio that LH wants to keep but the rest is mainly just "ballast" for them and the Belgian government certainly won´t assign African traffic rights to LH if SN goes belly up.

So, the question is how valuable are these cherries for LH and how far are they willing to bend over ...

Something we do not know as well is : Which alternatives (in particular a possible plan B or plan C) does the Belgian government already have if LH decides the demanded conditions are too high a price in order to keep SN ?

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Conti764
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Re: Brussels Airlines in 2020

Post by Conti764 »

MHG wrote: 11 Jul 2020, 05:38
oldblueeyes wrote: 10 Jul 2020, 13:22 So what was the situation in Zurich? Do you expect the Swiss to have less ressources, or as their experience with Lufthansa to good and successfull?
My mistake.
Had my comment edited a few times and thought I had the "Zürich" deleted from the final context ...

The government in Vienna certainly has sufficient funds as well (albeit not as deep pockets as the government in Bern) but AUA is in a whole different financial state and has a much worse perspective for recovery than Swiss.

SN has a few (African) cherries in its route portfolio that LH wants to keep but the rest is mainly just "ballast" for them and the Belgian government certainly won´t assign African traffic rights to LH if SN goes belly up.

So, the question is how valuable are these cherries for LH and how far are they willing to bend over ...

Something we do not know as well is : Which alternatives (in particular a possible plan B or plan C) does the Belgian government already have if LH decides the demanded conditions are too high a price in order to keep SN ?
Although I am in favour of a negociated deal with LH, I do hope - given the presence of Bernard Gustin as advisor - the Belgian government indeed is working on plan B as well.

But if LH wants a deal like the deals it has with the Austrian (and Swiss) governments, I wouldn't know whats holding the government to agree on it. If they will get the same guarantees the Austrians got, it gives SN plenty of time to get profitable.

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

Well, let's see the difference between the brands and the markets.

Both Swiss and Austrian became the commitment to be re-scaled up in the same speed as the other 2 hubs in Germany until 2023. Nothing more, nothing less. The first questionmark with Brussels is how far it is from being integrated and operate as a hub airline.

Both Austrian and Brussels have to implement their restructuring programs agreed Pre-Corona in order to improve their performance.

Due to Corona Austrian is looking its 7 A319 and moves to a E195 and A320 shorthaul fleet. The first 3 767 are scrapped.

Brussels is loosing anyhow the 4 A333 operated for eurowings and the steering of the joint long haul which moved to the mainline. The 2 A332 go back to lessors. As all the short haul fleet is leased here is a question mark on what would be better for the group, whilst having several aircraft on the ground for longer.

AvGeek
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Re: Brussels Airlines in 2020

Post by AvGeek »

Here's an interesting analysis on how Brussels Airlines should be restructured: https://epsilonaviation.wordpress.com/2 ... structure/

The author says it should become an all-A320-family operator and use the A321XLR for long haul destinations in Africa (all destinations are well within the aircraft range).
What do you think?

Image

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Conti764
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Re: Brussels Airlines in 2020

Post by Conti764 »

AvGeek wrote: 11 Jul 2020, 13:40 Here's an interesting analysis on how Brussels Airlines should be restructured: https://epsilonaviation.wordpress.com/2 ... structure/

The author says it should become an all-A320-family operator and use the A321XLR for long haul destinations in Africa (all destinations are well within the aircraft range).
What do you think?

Image
I disagree with the author.

I wonder why he cuts the Africa network to only 8 flights, merely based on the number of flights SN does today towards all destinations... SN is axing CKY and OUA but retains the rest, which says something about profitability.

And his solution for cargo, shifting them to LH Cargo? He'd take away an extremely profitable part of SN's Africa operation to have the company rely on pax only. It would put them at a major disadvantage towards AF and other airlines offering one stop solutions to Africa from Europe.

And if there is enough demand to Africa on certain days to certain destinations? Bring in widebodies from LH. Why would LH keep around some A330's only to serve SN in times when needed? Just leave them at SN, have the airline operate them to Africa with much profitable cargo and keep the airline around.

He also suggests SN should only keep one frequency to JFK in winter, but add another one to EWR in summer. He forgets SN is part of the A++ joint venture so everything happens in accordance to the other members. SN only flies to JFK to have connectivity to Africa since a vast majority of the African diaspora in the NYC area uses JFK. Leave the EWR flying to UA who has more diverse equipment to do so, based on demand.

So, all in all, have SN fly A321XLR's is a good idea to raise profitability on certain routes and to venture into new destinations, but switching it to A320 only and cut half of the African operations is a disaster. Does the author work for Air France? :roll:

oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

The fundamental question is rather - where should the money for the brand new 321XLR come from? And who would pay for the early retirement of the 333? At the end of the day, there are 10-12 years leasing contracts running and Brussels does not earn the money to finance a change.
Beside that the 321XLR will come in few years when demand should be normalised again.

rwandan-flyer
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Re: Brussels Airlines in 2020

Post by rwandan-flyer »

AvGeek wrote: 11 Jul 2020, 13:40 Here's an interesting analysis on how Brussels Airlines should be restructured: https://epsilonaviation.wordpress.com/2 ... structure/

The author says it should become an all-A320-family operator and use the A321XLR for long haul destinations in Africa (all destinations are well within the aircraft range).
What do you think?

Image
Quite interesting

Legacy European airlines are not longer rule (alone) the African sky. Now there are Emirates, Qatar Airways, Turkish Airlines, and Ethiopian Airlines.

Before Covid19 crisis, Air France CEO planned to make huge modifications, for the Air France African network. Too many routes are served, with huge aircraft, with very low frequency, with tag service and sometimes long day stop. https://skift.com/2019/07/02/new-air-fr ... ir-france/

I can't find an article, where some one say that Air France was loosing money in Africa.

AF was intereseted to add the A321XLR / LR / Neo (2018 in French: https://www.air-journal.fr/2018-06-27-a ... 00805.html and then in 2019 with Ben Smith: https://www.ainonline.com/aviation-news ... ance-staff)

AF serves Djibouti only one week, manly with an A330-200 and sometimes B777-200ER, while Qatar Airways and Turkish Airlines serve JIB, daily, using A320 / A321.Ethiopian Airlines operated till 3 flights a day, before the covid19. Ethiopian operated a daly service to Paris, Turkish Airlines up to 7 flights a day to CDG, Qatar Airways 3 flights a day to CDG

Same thing for Ndjamena and Bangui service. Big aircraft, very low frequency, with tag service

Air France will first make some changements, for their short haul network, but we don't know how will be the future African network. A330s are becoming old (ATDB shows that some A330s will probably left the fleet in 2021, see below) and the airline has retired the A340s.

Ii i m right, before covid19 crisis, only Dakar, Bamako, Lagos, Libreville, Douala, Yaoundé, Antananarivo, Mauritius, Johannesburg and Abidjan were serverd daily by AF.


British Airways has ended several routes to Africa, in 2010s, sometimes on huge markets (and former colonies): Zambia, Zimbabwe, Tanzania, Uganda. Competition was huge in Uganda and Tanzania, with Ethiopian Airlines, Qatar Airways, Kenya Airways Ethiad (which has dropped EBB and DAR services) Turkish Airlines and Emirates. BA was loosing money on these routes. AFter Ebola crisis, BA dind't resume flights to Sierra Leone and Liberia.

Royal Air Maroc will probably end some flights to Africa. Ndjamena and Luanda could be the first destinations to be dropped: https://www.panorapost.com/post.php?id=27490 (FR)

I guess like for others markets, many airlines in Africa will also make some changements. I won't be suprised, if they are not some modifications, but i also won't be surprised, if they are some modifications(for Brussels Airlines, Air France, KLM, TAP,...)

Image

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Re: Brussels Airlines in 2020

Post by Passenger »

Passenger wrote: 10 Jul 2020, 13:38 Last Tuesday (7th July), CEO Dieter Vranckx was in the Belgian Parliament, at a hearing in the Commission Mobility, together with Arnaud Feist (BRU) and Freek De Witte (DHL)...
http://www.dekamer.be/media/index.html? ... ffset=6989
I had some time to take some notes from the above meeting. It was in three parts: first there were three PP presentations from Arnaud Feist, Dieter Vranckx and Freek De Witte. Then came questions from the MP’s (which you won’t find here as some questions were just statements). And then Feist, Vranckx and De Witte replied to those questions.

Dieter Vranckx started by explaining how corona has hit Brussels Airlines:

2019 was a bad year for us, with the Thomas Cook bankruptcy. We lost 1M passengers. Jan 2020 was above our expectations. In Febr 2020, the corona crisis started in Italy. As a result, we had to ground most flights because that would cause less damage then flying with a low LF. Example: one flight to Rome had a 80% LF the evening before. On the day itself: 30%.

Relevance of Brussels Airlines for Brussels Airport:
- If SN operates a route, that leads to 4 times more Belgian jobs then if a foreign airline would operate the same route.
- Before the crisis, we had 4.000 own jobs and Thousands of indirect jobs, leading to another indirect jobs. Example: our catering leads to jobs at LSG Sky Chefs, but they also generate jobs – example their food suppliers.
- Our 40% market share results in 150M value for BRU.
- Our membership of Star Alliance means that we connect BRU. Example: Chicago-Madrid by United. Without our add-ons, sold as one ticket, there would be not enough pax for a United Chicago-Brussels. Our research shows this applies for half of BRU long haul flights.

Advantages for BRU and Belgium that we are part of the LH group?
1M extra pax by Austrian, Swiss and LH. Investment in BRU by Lufthansa Technik and LSG. LH allowed us to renew our fleet (Avro’s out). We have a very strong position for AFI, contrary to China and USA were there is a lot of competition. We also sell the product ‘Belgium’, we support large events here, we promote Belgian catering, we invest in Belgian-icons-aircraft.

LH has made an agreement with the other countries (in DE, AT, CH). To avoid a disaster like in 2001, and to avoid a large grounding like THCB, we do need an agreement urgently. Our salary cost has been amended thanks to an agreement with the trade unions.

Off topic here, but from the same meeting:

Arnaud Feist then explained why Brussels Airport did not start an own handling company when Swissport went bankrupt: we had a few meetings about that, but we concluded that we simply can’t do it. We don’t have the knowledge. We run an airport.

Feist then told that Brussels Airport has asked Thalys to connect Brussels Airport, but Thalys told them they were not interested. Probable reason, Feist said: the French government is in charge at Thalys, and they prefer that people use AF/KL airports.

Corona damage: Brussels Airport expects for 2020 a nett loss of 200M. Feist: unfortunately, that minimizes our possibilities to support our business partners.


Then Dieter Vranckx’ replied to the questions:

On 15th June, we’ve started at 10%. Today (7th July) we’re at 25-30%, summer holidays will be 40-50%, just like Sept-Dec. No growth in Jan-Febr 2021, but 80% by April 2021. And full recovery in 2023 only. That is today’s hypothese, but it’s risky to predict. And it’s thanks to our reorganization program.

On very short term, we need that “technical unemployment” is continued.

On a wider spectrum, we need level legislation. One example: for Cameroon, we had 3 changes in 2 weeks. Airspace opens, then closes. And every time, it’s flights that are cancelled and pax who have to be rerouted. You had the press reports what this means.

On long term, we need a policy planning for 15-20 years: capacity of airways, capacity of runways, and first of all a solid solution for the police capacity at BRU border control. Waiting times are not acceptable, and we often had to take difficult decisions when pax don’t show up on time at the gate.

Collective Dismissals: our social plan aims to avoid hard/plain dismissals. We are now working this out. Our estimate of the 1.000 is 350 dismissals, and 650 with a solution.

The question “what do we do for less CO²”:
1. we invest in new aircraft with new engines;
2. we insist on a single sky: an integrated ATC can lead to a 10% fuel reduction. Example: our aircraft are put in hold very often. Unfortunately, this single sky file is being studied by the European Commission for already 10 years.
3. bio fuel. Today it’s 10 times more expensive, thus not possible. LH Group is working with producers to improve quantity supply.

Then Vranckx replied to the questions on the ongoing state aid negociations:

- First of all: it is not between Brussels Airlines and Belgium, but between Lufthansa and Belgium. But Brussels Airlines is present there too.
- Two weeks ago, negociations were more intense then now. But then there was the news that LH has made a deal withv the German government. With that OK now, negociations continue.
- LH also has made a deal with Switzerland for Swiss and Austria for Austrian. When the 4th deal (LH-BE) would be of a different kind, that would lead to tensions for the other deals. We hope for flexibility from both sides, enabling to settle it this week (the week ending 12th July).
- Do we have cash till end of May? That was our prognosis when we became grounded, in March. But meanwhile we have renegociated some contracts, we have holded some other costs, and we are flying again. But our cash resources are not unlimited. If we should to go to a judicial reorganization like Chapter 11, there must be some cash available.
- It is not a matter of months, just a week. Or weeks.

LH believes in SN. They have promised ut to invest because they have trust in our reorganization and our social agreement. The shareholder will fund our restructuration by a capital increase if necessary. So LH invests in our future. During the previous six years, LH has financed 360M for our fleet renewal (A319/A320). And meanwhile, our long fleet is done to A333.

Our plan to continue as home carrier? We open more new routes then we close: Mumbai, Montreal, Toronto (corona has put that on hold). There is no indication that LH wants to move our long haul to another hub. Vranckx: I want to deny a press report about that. We even wish more connectivity hub to hub because BRU to FRA ZRH VIE are financially excellent for us. We even want to develop them more. Rumours that LH wants to limit that traffic are untrue, Vranckx said.

Regarding fatigue and the comparison with Ryanair: EASA sets the EU minimum standard. We apply them and and improve them with internal rules. History however is that we started with the Sabena rules, then the Virgin amendments, then the 2012 restructure amendments. We now mainly look at the pairings.

Our long term perspective is to become structurally profitable. That will allow us to invest ourselves in aircraft, in IT, in people, in sustainable development.

Flanker2
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Re: Brussels Airlines in 2020

Post by Flanker2 »

In the end, LH will have to take the deal that is on the table or give up their hopes of state aid and decide by themselves whether they want to recapitalize it or let it go insolvent.
Those are the only 3 options for LH.

I think that LH will recapitalize it in small bits to the bare minimum to keep it afloat and keep dark clouds hanging over SN to try to get free money.

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sn26567
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Re: Brussels Airlines in 2020

Post by sn26567 »

Thanks, Passenger, for this excellent summary.
André
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oldblueeyes
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Re: Brussels Airlines in 2020

Post by oldblueeyes »

Flanker2 wrote: 12 Jul 2020, 18:38 In the end, LH will have to take the deal that is on the table or give up their hopes of state aid and decide by themselves whether they want to recapitalize it or let it go insolvent.
Those are the only 3 options for LH.

I think that LH will recapitalize it in small bits to the bare minimum to keep it afloat and keep dark clouds hanging over SN to try to get free money.
They won't take any deal that is structururally different than what they have negotiatied in other countries. Not for the smallest/end of the tail entity.

With the German deal signed and approved by the shareholders, there is no pressure on the company - this is a fundamentally different situation than it was several weeks ago, as the LH management was rather under pressure to demontrate to the shareholder that it can master the crisis.

And what if we turn the question around - if all other govenrments were able to close deals with Lufthansa and they are somewhow having a similar logic, why is the Belgian not able to do it now, as the benchmarks are already set and thus the intellectual contribution is not anymore needed?Excess of pride and incapacity?

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sn26567
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Re: Brussels Airlines in 2020

Post by sn26567 »

Brussels Airlines will operate some of the long-haul flights of Lufthansa's Ocean concept, starting with Frankfurt-Windhoek in September.

https://www.aviation24.be/airlines/luft ... k-namibia/
André
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b.lufthansa
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Re: Brussels Airlines in 2020

Post by b.lufthansa »

Still no news on the financial rescue of Brussels Airlines ?

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