The Lufthansa / BMI Thing (merged)

[Re-Heat]

To clarify some confusion that appears to exist in some posts above, the owners of bmi have an option to sell to Lufthansa at prices set in the past; Lufthansa do not have an option to purchase - they have an obligation to purchase / recompense the bmi owners.

Airlines are not as easy to merge as it may appear on the tin - aircraft types used are one of very many different concerns...

[Re-Heat]

Oh and by the way Paxboy, there isn't much of a case to stop BA buying bmi as far as monopolies and mergers are concerned, just look at the rest of europe and see what percentage of slots are held by the dominant flag carriers at their main hubs. You will see BA is well down the list.

It doesn't matter from a legal PoV what other hold, it matters how they build that position. By merger is an issue; by growth originally is permissible.

[lexxity]

Brian, that's a very interesting assesment, I reckon you'll be very near the mark. It wold give LH the longhaul at LHR and the growth they desire at MAN.

[PAXboy]

brian_d

SRB will sell if the price is right, and allow the Virgin brand to disappear.

Yeah right! In the same way that Sir Michael has put his life into BD, Sir Richard has put his life into VS. Two very powerful and determined men tend not to agree that one of them will give it all away. Do not forget that the 'Virgin' brand is now linkled (indirectly) with four other airliens around the world. The British Midland brand is not.

In this century, global awareness is vital and each use of the name builds brand awareness. A person who goes to Virgin Music or Brides, already 'knows' half the name. That does not happen with BD. OTOH the Lufthansa brand is a global name.

[teamax]

REHEAT - your understanding of the `put option` is correct, but you may want to check if Lufthansa has a `call option` starting at the end of 2008 running for 5 months.
If the article I read is accurate, a quick definition of the above may give you a different view on the situation.

[brian_dromey]

In the same way that Sir Michael has put his life into BD, Sir Richard has put his life into VS.

Well Virgin express became "Brussels Airlines" through a merger, Virgin music was flogged to EMI and Virgin Megastores have become Zavvi. SRB is a businessman above all else, and he will flog any part of the Virgin group if the price is right.

I LH do buy BD, I dont see why Regional and baby would be closed/flogged off, LH have a string recored in each sector.

Brian

[acbus1]

As I understand it, from news reports at the time, Lufthansa (and SAS) picked up a big chunk of the bill when bmi was (still is?) losing millions on an annual basis. When MB jumps ship, it'd be a funny old prior agreement that rewarded LH for their pain by forcing them to play second fiddle to Virgin, BA, or anyone else.
-
I don't have a copy of the prior agreement, though.
-
Anyone have any facts? (or reliable links) on this?

[SinBin]

I'm sorry, I've been reading all these posts on this thread, of which there is not a shred of evidence to say that any sell is going to happen. As a man from the inside I can tell you that there is speculation from within, but I think bmi will be staying put for the forseeable future. Transatlantic somebody mentioned, look at the facts, it's a crap time to go to America from LHR as there's about to be a massive recession there, I flew one of the ex BMed routes last week to the middle east and we were full!! That's where the money is at the moment, not the saturated US market.

[bmibaby.com]

Merger or purchasing speculation has been going on about bmi for many years, the major difference with this current round of rumours is that Open Skies being signed makes bmi's position particularly valuable, and that over the next few years SMB will both be able to, and be forced to sell, bmi. LH has stated publicly that they're interested in purchasing other medium-sized airlines after the success of LX, with BD and JK two of the obvious candidates. What this will mean for baby and regional, whether Lufthansa will also try going for SQ's VS stake to further build up LHR as a hub, when LH might take control ... all of it is up in the air, but the common feeling is that with the terms laid down in LH owning part of bmi, they're coming in some time soon.

[PAXboy]

brian_d

Well Virgin express became "Brussels Airlines" through a merger, Virgin music was flogged to EMI and Virgin Megastores have become Zavvi. SRB is a businessman above all else, and he will flog any part of the Virgin group if the price is right.

Interesting, I had not heard about the Express / Brussels Airlines but I certainly did read that SRB deeply regretted his decision to sell the Music division. He imemdiately started V2 to replace it and that has a strong online presence, as well as the annual V concerts. So, he may have found the point at which his passion really lay and reclaimed the music. What he will do about the airline brands - perhaps there is no guessing.

But there is a stronger indication of BD and Sir Michael. He has never relented and I hold to my suggestion that he would rather die still owning the shares, than see them sold to a UK carrier. After his time is another matter.

[JobsaGoodun]

Make no mistake, SRB sold Virgin Music to fight BA in the courts during the 'Dirty Tricks' saga. I think that clearly demonstrates where his passion lies. His airline is his greatest passion!

I would agree that first and foremost he is a businessman, but I think there was only one error of judgement and that was concerning VS Express.
Virgin Megastores are gone in the UK to Zavvi, no bad thing seeing as more and more of us use the internet to buy entertainment = a sensible move.

Like BMI, VS is still not on the stock market and this is where it becomes interesting. Bishop will sell to whomever he wishes (put option aside etc) and it would be no suprise if he joyously snubbed both VS and BA and put BD in the hands of LH. What LH then do with BD remains to be seen however!

[Count von Altibar]

From what I see reference the BMED routes some of the loads are diabolical. I believe some routes are good and some are pretty dire. If your still in denial as to where the future of bmi is going then cast your eye over the comments of various senior Lufthansa people who are quite clearly putting everything in place to exercise their 'call option' when it becomes available toward the end of 2008.

[bmibaby.com]

The future is definitely Lufthansa, the questions which need to be debated are when and to what effect will this have on the bmi group ie will it remain largely in-tact with it's 3 individual business units, or will their be major reshuffles? Also, what will become of the Hall?

[6chimes]

LH does not have the right to buy, SMB has the right to sell.

The moment SMB names a price and opens negotiations with LH then everyone in the industry knows that bmi is up for a bidding war. What we are seeing now is the chest beating of all the interested parties and chessmanship to either position themselves or fool the oposition.

6

[SinBin]

Couldn't have put it better 6chimes. There's only 1 person who knows what's happening. And he ain't gonna tell a soul.

[acbus1]

There's only 1 person who knows what's happening.

Are you referring to the person who spent years prattling on about open skies and healthy competition (conveniently forgetting to mention, by the way, the protected environment of Heathrow).
-
Is that the same person who then backpedalled when he had to put his money where his mouth had been?
-
Is that the same person who runs a shambles famed for it's constant changes of mind at "the top"?
-
Ah! Right! We really need to know what he thinks, do we?
-
But, here's the problem, is that what he thinks this week or next week or the week after or the week after that or...........

[SinBin]

Well you clearly know more than me. So how long have you worked for SMB?

[P Style]

I am wondering why many people categorically state that lufty have no call option, despite numerous business papers claiming they have a 5 month window from the beginning of 2009. Have those who say this is true seen the agreement signed all those years ago. It would be nice to have a definitive answer to this, which would determine the likelihood of an imminent sale.

[Nubboy]

The best link I have is here:
http://www.telegraph.co.uk/money/mai...=OTC-Autonolnk


enjoy and speculate to your heart's content

[6chimes]

Thanks Nubboy.

For all of you that think that SMB has to sell to LH if they want to buy us, here is one question for you to ponder. SMB had been lobbying for open skies long before the 1999 agreement with LH, so would he agree to being forced to sell his share at the 1999 price when Open skies would vastly improve the price?

6