BMI losses= £650 million over 4 years?

[Pull what]

£650 million losses over 4 years must make BMI the the UKs most unsuccessful airline ever!

Bid target BMI on course for £145m losses - Telegraph (http://www.telegraph.co.uk/finance/newsbysector/transport/8886203/Bid-target-BMI-on-course-for-145m-losses.html)

[40&80]

As Cameron says...WE are all in this together.
Well they write Lord Glendonbrook trousered millions....good for him...but it looks bad for the employees....unless they are picked up by BA or whatever BA calls itself this week.
We certainly were/are all in this together.:ok:

[Capetonian]

A great shame, but I see the loads on some of their flights. 10%, 15%, 25% ........ and that's both outward and return so it's not even justified by saying one leg is full.

[Mr A Tis]

Has anyone seen any comments from Mr Turner or Mr Bishop? I would be interested to hear their views on the subject.

[Pull what]

I should think Bishop hasnt stopped laughing yet! Full marks for pulling off sellimg his share to Lufthansa when it was worth top dollar and making them pay up whan it was worth nothing

[racedo]

Ouch to that level of losses.

[TCX69]

£650 million losses over 4 years must make bmi the the UKs most unsuccessful airline ever!

I would hardly say bmi was unsuccessful! To of being around for so long they obviously did something right. Yes unlucky in regards to fuel prices (like everyone else), Middle Eastern destinations, bad decision making at times & yes they've lost hell of a lot of money. I wouldn't exactly say they were unsuccessful though.

NOW Airlines & UK International Airlines springs to mind!

[TSR2]

I wouldn't exactly say they were unsuccessful though.

With a £650 million loss over 4 years, I wouldn't exactly class that as successful either.

[G-AWZK]

Add to that the £340 million purchase price and Lufthansa has pissed around a billion quid against a wall.

Frightening, really.

[LD12986]

I suspect they'll have to write off the £248m loan when they sell it as well.

[stormin norman]

With such bad figures and recent bad press it looks like the brand itsself is mortally wounded.

What IAG will take out (apart from the slots) is difficult to see but any priority for any buyer must surely be avoiding any outstanding financial liabilites.

Its beginning to look very messy.

[JSCL]

I still fail to see why BMI can't return to it's home territory of the midlands. I personally think that if they had the guts and put aside a nice marketing pot - Birmingham airport could become a good hub-spoke airport. People travel to Amsterdam for the sake of flying to the USA or the opposite direction. If they're going through a flights website or agent, BMI would be listed naturally and BMI could price themselves more effective than say going EDI>>AMS>>JFK - than BMI could possibly handle on EDI>>BHX>>JFK.

That's my personal view on what should be done with BMI. Big market in Birmingham anyway, albeit not as big as the London market, and there's big potential to develop there. If you're bookable through the systems, it has a fighting chance of working.

[Skipness One Echo]

I still fail to see why BMI can't return to it's home territory of the midlands.
I can, it's because you get the next bit wrong when you say
Birmingham airport could become a good hub-spoke airport.

You're suggesting that BMI take considerable losses at least for 2-3 years in a smaller marginal market too close to London. When you say BMI could price themselves more effective than say going EDI>>AMS>>JFK - than BMI could possibly handle on EDI>>BHX>>JFK. they couldn't. Flying direct means charging a premium, not less, besides which they neither have the fleet or economies of scale to compete effectively with KLM asnd LH. That might mean that where once BD flew 707s succesfully over the summer to JFK and YYZ, they stopped when winter came. This would not be an option today and during the winter they'd be flying fresh air across the pond unless there was a generous code share with a STAR partner in the US. Given CO/UA would be keen to fill their own BHX flight, there's little reason for them to help.

[Capetonian]

BMI's problem as I see it has been that it never clearly identified itself or its market. Whatever the marketing whizzkids say, whatever labels they stick on, it's British Midland in peoples' minds and I suspect that is why they've never been very successful at LHR, despite being a brilliant airline. It was on another thread regarding 'Heathwick' that I suggested that Birmingham would make an outstanding hub alternative to a saturated Heathrow, and a couple of other views people seemed to support that.

It would require cooperation from Star Alliance/codeshare partners to support this strategy but medium to long term it could work. However it's too late now.

[pee]

So who actually pays the piper? Lufthansa as the owner, presumably? If so, why would they want to continue such a sponsorship?

[ian_h1]

Slightly tongue in cheek ;) and without wishing to go wildly OT but surely Capetonian if its BRITISH Midland this would make Manchester the home of your suggested Hub and Spoke arrangement as Birmingham is the English Midlands :)

Still whatever now transpires good luck and thank-you to all the dedicated caring humane employees bmi employ - I was on the receiving end of your kindness once (ahem twice) when I messed up.

I never forget you did more than I could have dreamed have remained loyal as a result and encouraged as many people as I could to use you. The personal touch is not something we see much of anymore.

[N707ZS]

Should they have stuck to the internal market that they used to run in the 80s and 90s. Leeds, DTVA, Liverpool to Heathrow?

[commit aviation]

...probably not. The train service has improved markedly (in frequency at least!) & a 4 times a day service would struggle to survive against the half hourly service East Coast now runs from Leeds. LPL / MME may not have as good a rail network but with increased pressure on yields from the rail companies I fear bmi (or any other carrier come to that) would have met the same fate.
If you stand still in todays world, you move backwards. You have to innovate / develop (add business speak expression of choice). Whilst I believe bmi tried to do this, life (in terms of the European economy & middle eastern political instability) conspired against them.
Bottom line: sh*t sometimes happens & sadly for bmi / LH & the great team that work there it certainly appears to have done so - several times over.

[racedo]

Sadly BMI is another example of the market moving on and the providers not really knowing what to do.

[6chimes]

If you're using these figures to judge bmi, then you are totally naive.

If you're suggesting bmi has been a failure at LHR, you're an idiot.

6

[davidjohnson6]

6chimes - I agree there is more to business than just profit. I also agree that bmi have been very unfortunate with the Arab spring on many of their routes. I also agree that prior to the LH takeover, there was a significant amount of asset stripping going on.

However, profit is the kind of measure that is relatively objective and easy to measure - even if temporary accountancy tricks can be played compared to cashflow.

I'm not sure how else one could objectively and consistently judge bmi's performance each year, without making reference somewhere to profit. Could you perhaps suggest how else one would judge bmi over the last 4 years ?

[G-AWZK]

If you're using these figures to judge bmi, then you are totally naive.

If you're suggesting bmi has been a failure at LHR, you're an idiothow exactly would you define success?

[LD12986]

If you're using these figures to judge bmi, then you are totally naive.

If you're suggesting bmi has been a failure at LHR, you're an idiot.

6


Well, the only other measure is cashflow and it tells the same story. Without LH recapitalizing BD through debt for equity swaps, slot purchases and intra group loans BD would have become insolvent years ago.

[Spitfire boy]

The harsh commercial reality is bmi as a separate brand/entity probably won't exist after the end of the summer 2012 season. The A319s may move to LGW and the pilots to BA.

[mccdatabase]

I believe Willie Walsh has stated something along the lines of " The bmi of the future will look a lot different to the bmi of today"

The inference being there is some sort of future planned for the bmi brand, perhaps as a lower cost operation than BA.

[TwinAisle]

perhaps as a lower cost operation than BA.

Add to that the £340 million purchase price and Lufthansa has pissed around a billion quid against a wall

And which definition of 'lower cost operation' would you suggest that bmi fits into?

TA

[LD12986]

I believe Willie Walsh has stated something along the lines of " The bmi of the future will look a lot different to the bmi of today"

The inference being there is some sort of future planned for the bmi brand, perhaps as a lower cost operation than BA.


To be honest, I think Willie Walsh is just unwilling to come out and say that the bmi brand will disappear.

I just don't see it fitting with the IAG strategy to maintain/launch a lesser known brand than BA or Iberia.

Also, I think the days when BA would seize the opportunity to use acquiring bmi to launch a lower cost in house operation are over. Mixed Fleet cabin crew operation is up and running and the ground operation has been overhauled in recent years.

[Skipness One Echo]

how exactly would you define success?

Still trading and sold for a kings ransom to a duped Germanic suitor?
KERCHING I believe is the technical term.
As to building a still lower cost around BMI, BA have just fought a very bloody fight with the one union that wouldn't engage and won. They "appear", I say appear to be, in a concilatory rebuilding phase. To have a trojan horse of BMI being seen to further undermine already eroded ts & cs at this time would be pouring oil on troubled waters. It would undermine the brand refresh, rebuild and recovery strategy.

If BA get BMI, BMI needs to "go away" as soon as possible with as many good people taken on under BA as the business needs, which *may* be rather a lot as it happens if BMI short haul slots end up being used on BA long haul.

[Facelookbovvered]

Well they could pull all BA London flights into LHR (other than city) and shove bmi down to LGW and either keep it or flog to Stelios, that would offset the purchase costs for IAG and end up with the LHR slots in BA which is what this is really about anyway?

Any bmi staff wanting to stay in LHR could apply to BA, but not transfer, thus avoiding any seniority issues, or take their chances with LGW

[acbus1]

BA bought bmi for the LHR slots, to expand LHR long haul.

Go figure the rest. It's not difficult.

[G-AWZK]

Go figure the rest. It's not difficult.
LGW 777s to go to LHR for long haul services
BMI 319/320s to be based out of LGW, replacing the 737-400s (EuroGatwick Mk2)
Some BMI 320s to Iberia Express

Regional sold and baby sold/closed.

[Surreyman]

IAG will certainly need to take drastic action to stem the losses.

It has been stated that they are buying the company, so amongst other things, they presumably will inherit a large wide bdy hangar at LHR, a training centre in Stockley Park with a 44 yr lease, and numerous contracts/agreements with suppliers/airports/governments.
BMI and Lufthansa have spent the last 12 months 'finding synergy' by combining their Handling/Cargo/Line maintenance etc at LHR + Star Alliance agreements/forward bookings.
That little lot is going to take some time to unravel, also given the limitations on terminal space/stands etc, BMI is going to be around in some form or another for at least 12 months.

[Count von Altibar]

You plugged into Willie's laptop? Nobody knows the plan except those at the very top and even that will probably change in the coming months.

[racedo]

Nobody knows the plan

You mean you think there is a plan ?

[davidjohnson6]

You mean you think there is a plan ?
racedo - you're often good at analysing, but could you lay off the cheap gag please ?
I very much doubt a large well run company would be preparing to take on thousands of staff, spend hundreds of millions of pounds, take on a once in a generation chance to expand service, but not have a plan. The board of IAG would be fundamentally failing in their duties if they hadn't see a comprehensive (albeit confidential) business plan before giving backing to the takeover of bmi.

[acbus1]

Agreed, davidjohnson6. The attitude on this thread is understandable, though, given that most of the posters are accustomed to the standard bmi 'management' technique: several changes of plan, followed by a last minute panic (or three), followed by a continuous process of crisis (mis)management.

I expected better directional control from Lufthansa, though. From external observation (OK, admittedly not the most reliable method) they appeared to have a rather passive, 'wait-and-see' approach. T'was more likely an intentional 'wait and sell' plan.

[le grand fromage]

Acbus, hardly a "wait and sell" plan....they've been busy integrating the mainline business into LH for the last 18 months, and waiting to sell at a time the biggest annual loss is about to be made, a new res and inventory system is about to be implemented at great cost and are in the midst of upgrading on board product is hardly smart. They genuinely thought they could turn it around with their usual strategy of reduce capacity, extract cost synergies and throw the weight of the LH sales machine behind it before expanding once profits start to flow(as per Swiss, and in due course OS). What has happened is that time has run out to turn it around, indeed they probably realise it can never make a sensible return on the capital invested and have to get out at almost any cost rather than burn more cash for years to come. The truth is that there is a structural strategic problem with the mainline business which has existed for many years and was disguised until 2008 by the JV with LH and SAS which passed 90% of the losses back to them. It's too small to compete with BA as a network carrier and the old domestic and short haul Euro market has been decimated by lo-cost and train. Personally I don't think that anyone could have made money with bmi over recent years and it is only BA who can make a reasonable case for why it makes sense to them now. It might have been better if the JV had never existed and the consolidation that was needed had happened earlier when the business was still in reasonable shape.

[acbus1]

If Lufty weren't playing a 'wait and sell' game and genuinely intended to turn bmi around, then the only explanation is staggering incompetence. As you correctly identify, their actions since acquiring bmi have been targeted at irrelevancies.

In which case, I wonder which mine in Siberia WPS and those on the Lufty board responsible for monitoring his performance are being sent to.

[Facelookbovvered]

ACBus 1

If i recall DLH offered bmi for sale when they first took control, there were no takers, at least at a price deemed acceptable at that time.

They set about trying to breath life into bmi including a major fleet revamp at a cost reported of £30m

We all know that the Arab spring did bmi no favours and some marketing has been very poor.It is this that did for bmi, its cost base is manageable for a full service carrier, the product is excellent, it lacks passengers and that is down to a confusing brand image and a miss match of routes flying to just about anywhere where there is trouble in the world.

Alas it is to late to turn it around now and it will fall to IAG to sort out, which will probably mean the brand will go, together with a good few jobs, a sad end for a once great airline. One can debate until the cows come about whether it could have been turned around, but from what i have read and heard it seems WPS did all he could given the cards he held.

[G-AWZK]

We all know that the Arab spring did bmi no favours and some marketing has been very poor.It is this that did for bmi, its cost base is manageable for a full service carrier,I disagree. The business had a number of fundamental flaws. Waste was of epidemic proportions, but since every area operated almost independently of each other it was impossible to make any decisions about how or where to make cuts and efficiencies.
There had been no investment in IT or back office systems for over 10 years, there was a lack of flexibility among the middle and senior management which contributed to an inability to identify and focus on some basic fundamental issues. the cost base was out of control and WPS should have made it his first priority to bring it under control.
There were too many people firefighting and management would constantly change direction without explaining their "plan" to those had to implement it. An exhausting and frustrating way of working.

[Aksai Oiler]

Have to agree with G-AWZK. The Arab Spring ? Surely this only affected BMI's routes to Libya (which it had not actually started - I don't believe) and Cairo. If this was a major factor in BMI's demise then, I'm sorry - a load of BS

Besides, I was travelling to Tunis this summer, several times, another one of the "Arab Spring" destinations, with BA, flight was full in both directions, in a clapped out 737.

I actually welcome BA's move to buy BMI. The only thing that worries me is the integration. I can see with the Iberia or sorts "merger", integration must be a swear word, because many months on, they have a very long way to go, particularly in terms of service quality.

[EI-BUD]

I tuned into the bmi's threads on here to see was there any mention of the Virgin Money take over of Northern Rock from the goverment. Richard Bransons name all over it and the price being paid is £747million.

Was a symbolic figure, 747!!!

I am not sure how that it will materialise but I wouldnt be surprised 'if' this deal with the government has wider ranging consequences i.e. Virgin not out of the race for bmi.. Although there is a good case for BA/IAG taking over bmi, given that total slot holding at LHR for BA wont be as much as LH at FRA or KL at AMS, doesnt mean that the competition authority wont rule on the take over not being in the interest of the consumer.

What does anybody else think?

EI-BUD

[Capetonian]

I travelled to Teheran on BMI in late February just after Libya kicked off. The inflight magazine contained a lot of publicity about their new service to Libya and a couple of full page advertisements for property in this 'stable and prosperous Mediterranean paradise.' Given that aircraft and crews would have been deployed and scheduled for the operations, contracts procured, and so on, they would have taken a fair hit on that.

They upgraded their distribution system about 6 years ago, at considerable expense, so it is not correct to say there was no investment in IT, when they switched to Amadeus.

As I've said earlier, their main failure was lack of identity both for themselves and their potential customers. I intend to keep using them to the bitter end, and have quite a few forward bookings.

[22/04]

I have said before I don't think Virgin atlantic or Vigin Group have the desire to take on the enormous mess that is Bmi. They will be very happy to pck up a few slots out of it though.

[JSCL]

22/04 - take a brand identity crisis like BMI and slap Virgin on it with the Virgin umph. Strip back flights like MAN>>LHR and BHX>>LHR. Train to London, fly Virgin, but they could still fly it I suppose. I think a Virgin service would sell itself a lot better (unfortunately) than a BMI service. Branson won't put himself at risk. He's made the USA work, he's made Australia work. Now is his change to make the UK/EU work.

[Nubboy]

BHX>>LHR?????????

Just about sums it really:ugh::ugh::ugh:

[mccdatabase]

The BHX-LHR route finished many years ago, well before LH took control !!

[JSCL]

Nubboy ... on a train. I wouldn't be surprised if Virgin tried to adopt a part-train-part-fly should they go down that route and tried to ditch flying to the regions.

[Capetonian]

Air/rail integration works well at several major hubs including FRA, ZRH, AMS. The airport station needs to be properly integrated into long distance, international, and regional services on the national networks. In that respect, the Heathrow Express is risible as it is an overpriced standalone which offers little to anyone unless they want to travel to/from the western perimeter of London.

[LD12986]

I tuned into the bmi's threads on here to see was there any mention of the Virgin Money take over of Northern Rock from the goverment. Richard Bransons name all over it and the price being paid is £747million.

Was a symbolic figure, 747!!!

I am not sure how that it will materialise but I wouldnt be surprised 'if' this deal with the government has wider ranging consequences i.e. Virgin not out of the race for bmi.. Although there is a good case for BA/IAG taking over bmi, given that total slot holding at LHR for BA wont be as much as LH at FRA or KL at AMS, doesnt mean that the competition authority wont rule on the take over not being in the interest of the consumer.

What does anybody else think?

EI-BUD


Of the £747m paid to acquire Northern Rock plc from The Government, Virgin Group only contributed about £50m, the rest came from other investors and from Northern Rock's own funds.

I think that says enough about Virgin's ability to bankroll large acquisitions.

[G-AWZK]

They upgraded their distribution system about 6 years ago, at considerable expense, so it is not correct to say there was no investment in IT, when they switched to Amadeus.They had no choice but to upgrade their GDS, and then they went for the most expensive system around. However it did not address many of the key fundamental issues that needed to be deal with.

The easiest way to describe bmi, is penny wise and pound foolish. Desktop systems hadn't been renewed for years, for a company that had 3000+ employees there were more than 10,000 access databases - none of which were connected to each other. Data was lost, misplaced and even the same department people were working unkowingly against each other. There was poor planning and management at almost every level of the company, not because managers lacked the skills, but they lacked the information to develop strategies and tactics to help the company grow and develop. There was no centralised management information system and by the time a solution was found it was way too late.

Having the head office 200 miles north of the company's centre of gravity was just barking and a perfect example of why the company ultimately couldn't be turned around

[Pull what]

I still fail to see why BMI can't return to it's home territory of the midlands.

BMI completly missed the boat at BHX and let Exeter based Fly Be gain the market while they were to busy concentrating on LHR. LHR is the only thing that has kept them afloat and now its turned around and bitten them really hard, they suffer from poor yo yo management-look at the Docklands operations how many million did that loose?

[crewmeal]

They upgraded their distribution system about 6 years ago, at considerable expense, so it is not correct to say there was no investment in IT, when they switched to Amadeus.

They also transferred their call centre to India which I believe didn't help matters. Several times when booking tickets using this method it took longer because many of the personal didn't understand basic English.

Additionally the website would quite often fail when you tried to book from a foreign country using that method.

I speak from experience using BD's AMM service at least 4 times a year.

[Peter47]

Two possibilities if IAG acquire bmi.

- Integrate operations, seniority lists, etc.

- Run bmi as a BA codeshare with aircraft in BA livery. This would probably be domestic routes.

Existing BA domestic fleet & slots would be switched to short haul, boosting frequencies with smaller aircraft, possibly restarting Cologne etc. Switch slots to long haul (and upsize / reduce frequency) as required over a period of years.

Industrial relations & political factors may determine which but even given the latter expect BD's cost base to rise to close to that of BA after pay negotiations.

Either way most bmi staff would switch to IAG either working for BA mainline or for a subsidiary.

However, whilst the requirement to divest a small number of slots to VS etc would not be a problem, anything that would drastically reduce the size of the operation would cause problems as BA/IAG would probably only wish to take on the number of staff pro rata to the number of slots acquired. Of course VS could also take on staff. This then raises questions about merging seniority lists, etc.

Lots to think about...

[Surreyman]

Sunday Times reports; -
"Pensions Regulator to meet Unions over future of BMI Pension Scheme"
"It is thought the German Carrier has agreed to keep the scheme, which has a £183m deficit, in the event of a sale".

Presumably this refers to the Final Salary scheme, is there a newer Defined Contribution Scheme?

Willie Walsh has made lots of negative noises about taking on pension schemes, If this report is true then Lufthansa are left with the funding of this pension (over many years I concede).
This will presumably be factored into the deal price and Lufthansa could eliminate or drastically reduce the pension deficit?