Will Lufthansa sell BMI?

[xdm941]

Given the recent news that BA once again is interested in the possible purchase of BMI .... who thinks Lufthansa will sell??

" (Reuters) - IAG, the parent of British Airways and Iberia, is interested in buying UK carrier bmi if Lufthansa (LHAG.DE (http://www.pprune.org/finance/stocks/overview?symbol=LHAG.DE)) decides to sell, Chief Executive Wille Walsh said on Monday.
IAG has renewed its interest in the UK carrier because of its slots at Heathrow, which faces constraints on capacity.
"I have said we are interested; it is really a decision for Lufthansa," Walsh said on the sidelines of an IATA airlines conference in Singapore.
Walsh said the newly formed IAG airlines holding company, which has expressed interest in expanding to include other airlines, was not currently looking at any other targets.
Walsh also said IAG was keen to pursue a joint-venture with alliance partner JAL (JALFQ.PK (http://www.pprune.org/finance/stocks/overview?symbol=JALFQ.PK)) and praised the Japanese carrier's record in recovereing from the March earthquake.
Lufthansa (LHAG.DE (http://www.pprune.org/finance/stocks/overview?symbol=LHAG.DE)) recently received anti-trust approval for a similar revenue-sharing joint venture with All Nippon Airways (9202.T (http://www.pprune.org/finance/stocks/overview?symbol=9202.T)).

[JSCL]

Doubt they will. The UK probably won't allow the sale to ensure there's no Market dominance and to keep a competitive route Market.

[xdm941]

I think LH will certainly look closely at it. BMI is still making massive losses (150m euros in 2010). Given the recent announcement that LH Italia would close I think shows the hard line view of the new CEO when it comes to loss making subsidies. We'll see...

[Max Angle]

Lets hope so, we are going nowhere (except down) with the Germans, they don't seem to have a clue to be honest.

[davidjohnson6]

What is there to stop LH dropping a few of BMI's worst-performing routes, selling some LHR slots, and moving spare aircraft to German, Austrian, Belgian or Swiss hubs ?
If LHR-GLA can be chopped, is anything really safe ?

[Phileas Fogg]

As JSCL makes point of much of it is about monopolies in UK these days, the Morrison's buying out of Safeway's supermarkets springs to mind!

Howevever the UK Government have been exposed as being less than honourable in their favouring of the world's (supposed) favourite airline in the past, the name 'Sir Freddie Laker' springs to mind whereas telephone lines between 10 Downing Street and 1600 Pennsylvania Avenue became occupied in favour of the world's (supposed) favourite airline!

[stormin norman]

Does BA need the aircraft and the staff that go with the slots ?

[Skipness One Echo]

Doubt they will. The UK probably won't allow the sale to ensure there's no Market dominance and to keep a competitive route Market.

Domestically BA has more of a competition with easyJet out of STN and LGW for the London market than BMI, which seems to use these routes as feeders from STAR, even though in the case of GLA it didn't seem to save the route.

The ex BMED routes were operated for BA anyway and there are no city pairs to Western Europe that BMI compete on that lack competition from someone at LHR I think. It WOULD be an excellent commercial deal for BA I think, Branson would squeal again but he has failed to keep up with the world around him.
( he hasn't joined a cartel, *cough* I mean an Alliance !!)

Cutting some of the duplication would I am sure see growth in both short and long haul options at LHR for BA, a win win. Also nothing in this prevents London having an excellent STAR focus in the new T2.

[bean]

The BMED routes were not operated for BA. BMED paid a franchise fee to BA to operate the route to BA standards and take advantage of BA marketing

[G-AWZK]

Why would Lufthansa want to give BA a win-win?

It is unlikely that Lufthansa would want to sell the slots to anyone outside of Star Alliance.

In the unlikely event of BA buying bmi there would be >3,000 staff on the street in very short order.

[xwindflirt]

If BA were to buy BMI under the tupe rules they wouldnt be allowed to buy an ongoing concern and then lay everyone off, unless they kept it as a completely separate company. BA is also in a recruitment phase. The crews fit BA and are already trained on their fleet type. It would not be very cost effective to make staff redundant then to recruit or at least look at these same staff members for a position at BA. It could also be argued that it was not a true redundancy and therefore subject to unfair dismissal. I am not saying they wouldn't win but it seems like an unnesasary waste of resource and money.

[INKJET]

I think BA would buy if bmi were for sale, yes there would be anti trust issues that would mean releasing of slots and so on, bit in my view it's very unlikely anyway.

From LH point of view it has no pressing need to sell and whilst disposing of bmi would boost LH group profits only by removing the losses racked up by the bmi group,losses which are trending down after taking into account various one off events. The bmi group exposure to mid east and African markets is hurting at present but these routes offer tremendous upside opportunities when things settle down, London to Tripoli could be a gold mine in a years time.

The general view seems to be that bmi regional is marginally profitable baby marginally loss making with the bulk of group losses still coming out of bmi mainline,but its worth remembering that much of bmi heavy maintenance is done by LH tech now, baby 737 c check program alone will be over 10m Euro to LH

Like the baby Monarch rumour and the regional SN rumour I think this will come to nothing

[BEagle]

Well, if ba did acquire British Midland, with any luck the Lufthansa flights 'operated by British Midland' (e.g. some of the LHR-CGN and BHX-FRA flights) would become Lufthansa-operated again....

If they became ba-operated, it'd mean me trying to find other suitable business flights as I simply will not fly with ba.

[G-AWZK]

Given that bmi account for 27.75% of operating losses for the whole Lufthansa group (and 37.58% of EBITDA losses), I wouldn't be too surprised if Lufthansa would be happy to offload the bmi group on to a suitable buyer.

I wouldn't expect BA to be a suitable buyer in DLH shareholder's eyes though.

Inkjet, losses increased by 40% against the previous year, even the EBITDA losses increased by nearly 30%. Even taking one off expenses out of the equation, losses are not trending in a positive direction.

[on time all the time]

Hello.
It seems that there are 2 distincts subjects here. The airline and the slots.
It seems that the airline value has decreased a lot lately however the value of the slots at LHR remain.
So the purchase of BMI by Lufthansa may not be that bad in the sense they have sold 5% share of the slots which are gold dust to her alliance partners (BMI down from 15% to 10% of the slots)
So will Lufthansa want to sell BMI or simply close it slowly by carry on selling the slots?

[Skipness One Echo]

The BMED routes were not operated for BA. BMED paid a franchise fee to BA to operate the route to BA standards and take advantage of BA marketing
In Airbuses built and kitted out to the BA spec in full BA colours and branding with a BA product, handled by BA with BA lounge access and Executive Club points. You are correct, I was utterly wrong to suggest that these flights were in any way operated for BA and I have no idea what gave me that idea. Oh and they had BA flight numbers and were available for codeshare in the standard BA way. Silly me !

As part of the franchise agreement they lost a degree of independence in choosing routes and paid a fairly hefty franchise fee for the privilege, henc.e to all intents and purposes they were functioning as an extension of British Airways. Then the whole thing went out of fashion when Willie Walsh came on board of course.

[Phileas Fogg]

Could BMed be booked via the BA website and did BMed use 'Birdseed' callsigns per chance?

[Skipness One Echo]

Could BMed be booked via the BA website and did BMed use 'Birdseed' callsigns per chance?

From the time of the BA franchise being signed all bookings were done through BA. The callsign stayed as "BeeMed" as the aircraft remained on the AOC of the owner, British Mediterranean Airways. Once they were bought out by BMI the AOC was no longer needed and the aircraft moved across to BMI and used "Midland" as the callsign.

[LD12986]

BD's losses are not sustainable. Comparing Q1 of 2010 and 2011:

Q1 2010 Revenue: €196m
Q1 2010 Operating Loss: €45m

Q1 2011 Revenue: €178m
Q1 2011 Operating Loss: €63m

Revenue is falling and operating losses are widening. LH may not want to give BA a competitive advantage in expanding at LHR but can it justify these losses by not doing so?

The only plausible alternative buyers to IAG are Virgin or AFKLM. Virgin has made a lot of noise but has evidently done nothing to get LH interested in some form of deal. AFKLM may want the slots but IAG has a far better chance of making any deal work.

[INKJET]

I think you are looking at Q1 figures? If so on that bases you would sell Austrian and Germanwings

Yes bmi lost 60m of LH 221m of Q1 loss but it's a bit meaning less when set against LH 1bn+ full year result which included 140m loss by bmi.

Bmi continue to have LH full support selling the slots would be self defeating,the bmi group are still paying SMB lease deals that are way over Market rates and the will take a few more years to work through the replacement cycle.

When one looks at what is being done behind the scenes there is no sense that there are moves a foot to dispose of or close down bmi or it's offspring, in fact quite the reverse

Mods time to move this to the bmi thread I think?

[G-AWZK]

When one looks at what is being done behind the scenes there is no sense that there are moves a foot to dispose of or close down bmi or it's offspring, in fact quite the reverse

The financial situation at bmi is quite different from either Austrain or Germanwings, and not in a positive way.

What happens behind the scenes is exactly that, behind the scenes. Some of which we may be privy to, some not. Time will tell who is correct, don't you think?

What is very safe to say, however, is that with out DLH constantly throwing money at Donington Hall, bmi would have disappeared a couple of years ago.

[JSCL]

Also remember you can still get made redundant from tupe. I've been on tupe before when the company I worked for lost a contract to a competitor. Transfer over and the new company has to pay redundancy - that's win win for Lufthansa because they won't have to pay e redundancy fees.

Very complicated but sneaky - I've known people to tupe, get redundancy and end up going back to the original employer full time a few weeks later with a new job offer there.

[nospeedrestriction9]

INKJET, what are bmi paying SMB leases for? Slots, aircraft, property?

[EI-BUD]

I would agree with a previous poster, Why would LH sell to BA and give them a stronger HUB at LHR. Surely strategically LH would not wish to see BA expand or increase connectivity at London Heathrow. I would expect if the assets are to be stripped the slots would be sold to other Star Alliance Partners and also some additional slots for LH and it's own carriers Austrian and Swiss.

Lufthansa did try to sell Bmi not too long ago and invited interested parties to the table. They didnt feel that the prices that were on offer were strong enough, so whats changed in the mean time? BA in stronger position to buy?? Now with the Iberia merger now in place.

Bmi dont have the range of connectivity through London that BA do, nowhere close and as a result there are far more exposed to competition on short haul point to point routes than BA. So if they are more in the game of the loco's they need costs that allow that.

So if LH do sell the slots what becomes of the leases of the aircraft and all that, I am sure that there are exit costs that will need to be measured up carefully.

EI-BUD

[G-AWZK]

Lufthansa did try to sell Bmi not too long ago and invited interested parties to the table. They didnt feel that the prices that were on offer were strong enough, so whats changed in the mean time?

2 years of performance. Turnaround has been much much slower than DLH expected and some unfortunate route choices have not helped - none of which have been in bmi's control. bmi is still haemoraging cash and financial top ups from DLH have been needed on a regular basis.

I understand that VS and BA made offers a couple of years ago in the range of £60-65m. At that time it was deemed unacceptable as DLH had just been forced to part with £320m.

[JSCL]

There is no way DLH will be able to recover their expense shovelled in to BMI, which is a real shame.

I personally see BMI as a declining dark ages airline.

[clareview]

Shame about bmi's problems - remember the days when it was pushing into BA's domestic and near european monoply with great effect with elderly DC9's against the modern BA 757 and 737.