Virgin and BMI
Paxing All Over The World
I never really understood why bmi decided to allow bmibaby to grow an operation out of Manchester Airport, instead of expanding the shorthaul operations of bmi and bmi regional
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Young Paul I agree that BMI's product is far superior to the loco's (and is good by anyone's standard), but I don't understand how they can reduce costs to the point where they can offer full service at an average fare less than EZ and Ryan, and out of Heathrow too! Something doesn't add up, and I can't see it continuing without some serious pain somewhere!
The problem with entering the Caribbean market (let alone the ambitions that flymeagain mentions) is that there are only 3 BMI A330s and, as far as I am aware, there are no orders in place for any more. They're going to have to spread those aircraft pretty thin! Have further orders been mooted?
The P&O tie-up expains one of the points I questioned, and a contract with Virgin Holidays is interesting. I know that VS postponed further expansion into the Caribbean because of lack of available aircraft and a training department already stretched to cover more pressing needs. How long can BMI keep the Virgin Holidays contract? A year or two may be enough to get them established, I suppose, but it must be a safe bet that the contract will go to VS once aircraft and crews are available?
Pembo330 Virgin used to codeshare with BMI for key connective routes into LHR. Does that not still exist? Even if not, it would not justify buying an airline to provide such a service!
mattred the Air France/KLM merger is not comparable to a BA takeover of either Virgin or BMI in that AF/KLM will not end up with a significantly greater proportion of slots at CDG or AMS - and will almost certainly have to give up slots to satisfy the Competition Commission. There would be absolutely no point (for BA) in BA acquiring either BMI or Virgin and then having to release all the inherited slots (which would certainly be required), even if either of those companies were for sale. And, I repeat, I don't believe that any investor in BA would welcome speculative commercial acquisitions at this time - that's why BA was (and probably still is) courting a quoted equal like KLM, where a merger through equity swap would achieve the aim of expansion without incurring further debt.
The problem with entering the Caribbean market (let alone the ambitions that flymeagain mentions) is that there are only 3 BMI A330s and, as far as I am aware, there are no orders in place for any more. They're going to have to spread those aircraft pretty thin! Have further orders been mooted?
The P&O tie-up expains one of the points I questioned, and a contract with Virgin Holidays is interesting. I know that VS postponed further expansion into the Caribbean because of lack of available aircraft and a training department already stretched to cover more pressing needs. How long can BMI keep the Virgin Holidays contract? A year or two may be enough to get them established, I suppose, but it must be a safe bet that the contract will go to VS once aircraft and crews are available?
Pembo330 Virgin used to codeshare with BMI for key connective routes into LHR. Does that not still exist? Even if not, it would not justify buying an airline to provide such a service!
mattred the Air France/KLM merger is not comparable to a BA takeover of either Virgin or BMI in that AF/KLM will not end up with a significantly greater proportion of slots at CDG or AMS - and will almost certainly have to give up slots to satisfy the Competition Commission. There would be absolutely no point (for BA) in BA acquiring either BMI or Virgin and then having to release all the inherited slots (which would certainly be required), even if either of those companies were for sale. And, I repeat, I don't believe that any investor in BA would welcome speculative commercial acquisitions at this time - that's why BA was (and probably still is) courting a quoted equal like KLM, where a merger through equity swap would achieve the aim of expansion without incurring further debt.
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Mmm. Firstly, I think that bmi's average fare won't fall as low as the loco's. The point is that if you have a choice of paying £6 plus tax to go from EDI to LTN, or £11 plus tax to go from EDI to LHR, which includes all the bits and pieces that come with a bmi flight, and the ability to make a connection to anywhere in the world, all of a sudden bmi doesn't look so bad. Bear in mind that as a private company, bmi doesn't need to show the massive profits that EZ and FR do to maintain their shareholders' interest - it just needs to make a little money and keep increasing in value (and occasionally make and divest itself of assets). This isn't an analysis of the morality of private and public companies, just a comment on the status quo. Incidentally, I think that BA will have its work cut out - remember the statement by the boss that he wanted a 10% profit margin a while ago? Well, that's what it will take for shareholders to look as favourably on BA as on EZ and FR - though it's interesting to see what the effect was to the share price of a threat to the large profit margin of the locos.
There is a more subtle point. Bear in mind that Easy and Ryan have been making large amounts of money in the last few years from the last 10 seats sold on each aircraft - which were probably netting them hundreds of pounds (euros) per flight. But people are cottoning on to the fact that you probably don't need to pay £150 one way from Scotland to London - you can travel with bmi or BA for £60, even travelling tomorrow (www.spotfare.com is kind of up and running now - gives a one-off comparison). So BA and bmi flights are going to be slowly filling with medium revenue pax, whilst EZ and FR flights are going to be slowly losing high revenue pax. Also EZ and FR don't carry cargo .....
I think it's interesting that basically the full service airlines are reasonably bullish at the moment, whilst EZ and FR are issuing profit warnings. OK - it's all relative, they aren't predicting losses or anything like that - but they are realising that they are being given a lot more of a run for their money than they expected.
There is a more subtle point. Bear in mind that Easy and Ryan have been making large amounts of money in the last few years from the last 10 seats sold on each aircraft - which were probably netting them hundreds of pounds (euros) per flight. But people are cottoning on to the fact that you probably don't need to pay £150 one way from Scotland to London - you can travel with bmi or BA for £60, even travelling tomorrow (www.spotfare.com is kind of up and running now - gives a one-off comparison). So BA and bmi flights are going to be slowly filling with medium revenue pax, whilst EZ and FR flights are going to be slowly losing high revenue pax. Also EZ and FR don't carry cargo .....
I think it's interesting that basically the full service airlines are reasonably bullish at the moment, whilst EZ and FR are issuing profit warnings. OK - it's all relative, they aren't predicting losses or anything like that - but they are realising that they are being given a lot more of a run for their money than they expected.
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Yes, you're right. And BA and BMI probably can play a longer game than EZ and FR. EZ problems in the share markets today are indicative of the fact that their shareholders are beginning to realise that the game isn't so simple after all.
I seriously hope that BMI do pull through their current problems, but they will need more (and more public) support from Lufthansa and SAS, I think. Otherwise I can see some firesales of slots to Virgin - possibly under cover of some more codesharing announcements, which would keep the 'merger' rumours smouldering, and, incidentally, keep BMI's price high in the market should anyone else be interested!
In fact, sometimes I wonder if the merger rumour was started by Bish and Branson for their own amusement, to see how rumours develop on the grapevine! It could be true, if only they could stand each other!
I seriously hope that BMI do pull through their current problems, but they will need more (and more public) support from Lufthansa and SAS, I think. Otherwise I can see some firesales of slots to Virgin - possibly under cover of some more codesharing announcements, which would keep the 'merger' rumours smouldering, and, incidentally, keep BMI's price high in the market should anyone else be interested!
In fact, sometimes I wonder if the merger rumour was started by Bish and Branson for their own amusement, to see how rumours develop on the grapevine! It could be true, if only they could stand each other!
