The Lufthansa / BMI Thing (merged)

[Walnut]

If the finance director of Lufthansa has gone on record saying he is buying an option that must be a fact, particularly as he said it to the Geman Stock exchange. Lufthansa unlike most European airlines is doing very well and the ability to control about 20% of LHR slots must be a great worry to their biggest rival BA.

[BAladdy]

Yes very true but remember all the old BMED slots go back to BA wef Winter08/09. So BD have a interesting summer ahead trying to rearrange the ex BMED routes into new slots. So maybe LH are giving up some of there slots to give to BD in exchange for a higher % share

[wingattack]

Off the top of my head the ex BMed routes only require 8-10 slots per day which is approx 10 % of their total portfolio. Easy to find by rearranging their current shorthaul slots which include a lot of 'slot-keepers'.

[Count von Altibar]

So whom do we believe then? The Germans or bmi management? It seems that Lufthansa have a call option and there's little SMB can do about it. All this we are aquirers bollox was a load of tosh. A nervous few months ahead for the staff in the bmi group, especially the management!

[INKJET]

Count

Nah me thinks Bish as a cunning plan, nothing with bmi is as it seems????

[answer=42]

Count von Altibar wrote:

So whom do we believe then?

Your Countness,

Prithee may I try and have a stab at the right answer.

For Lufty to take over bmi, the board has to agree to do so, on the proposal of the Chairman, President or whatever. The shareholders might also have to vote. The Chief Financial Officer (CFO) is not in charge of the process. But you can be pretty sure that in a large company like Lufty, what the CFO says is happening is probably happening.

So, in a way, they are both right.

bmi is, in effect, suggesting that there is a split between the CFO and the Chairman, President or whatever. This is unlikely to be the case. So, it is a signal of non-cooperation in a situation where there is no scope for negotiation. i.e. bmi are angling for a better price.

[SR71]

The woolly pully better get his pully off and his skates on.

[answer=42]

SR71

If what I said above is correct, then whatever strings the pulley pulls, he will have no effect. His woolyness has missed the boat, skates or no skates.

[Hudson Bay]

So that's it then, all Regional and bmibaby staff have been stuffed. Led up the garden path by management yet again. The day we realise we are Pawns in a much bigger game will be the day announcements such as this won't hurt as much. Why we bother to put our all into the Line flying, LPC checks even shaving our faces to look presentable on duty is mind boggling. Take, take, take guys cuz those bosses don't give a s--t.

[scorpio88]

"Lufthansa to takeover BMI"

"Lufthansa will take majority ownership of its British affiliate BMI, according to a statement made by CFO Stephan Gemkow."

“We are committed to exercising this option,” Gemkow said on Friday during a conference call with reporters. There are no ongoing discussions with BMI’s current majority owner, Michael Bishop, but Gemkow does not consider them to be necessary.
http://www.aviationweek.com/aw/gener...e%20Over%20BMI

"One transport banker said: "Lufthansa is going to get Bmi's slots, throw everything else away and bring in the A380s" -http://www.telegraph.co.uk/money/mai...6/cnbmi126.xml
What does he mean by "throw everything else away"?

http://business.timesonline.co.uk/to...cle3819873.ece

INTERESTING TIMES FOR BMI!!!

[hetfield]

Lovely.

plus 10 characters

[tunalic2]

In the Financial Times an article said


"Lufthansa already holds a stake of 30 per cent minus one share in BMI alongside SAS Scandinavian Airlines which holds 20 per cent. Majority control is held by Sir Michael, the 66-year-old BMI chairman, with a stake of 50 per cent plus one share.

A structure of put and call options between Sir Michael and Lufthansa has existed since the German airline took its initial stake eight years ago. Sir Michael holds a put option running from December 2005 to June 2009 to force Lufthansa to take majority ownership, while Lufthansa holds a call option running from December 20 2008 to June 19 2009 to take over Sir Michael’s stake."

So surely there is no surprise for the parties involved, just for people like me who didn't know that had already happened.

[Facelookbovvered]

Nothing new here

The put & call options have been mulled over many times in the past, things are a foot and i think recent moves such as delaying further A330 and short term leases on the 757 are all part and parcel of what ever is going to happen? i would think that it wil be 6-12 month before its in the open, with the most likely out come that SMB will still have an airline to play with (baby) which doesn't fit in with Luffty and a chunk of cash to invest.

[Yarpy]

I used to work for SMB and, whilst I didn't approve of (or enjoy) his airlines working practices, I always had huge respect for him.

He is now the Grandad of British airlines. Watching all the suitors dance to his tune is hilarious. I am sure he enjoys running bmi far too much to relinquish control.

[Charlie Roy]

brussels airlines

Sorry if this is off-topicish, but Belgian media are reporting today that Lufthansa are interested in taking over Brussels Airlines too

[Easy Ryder]

http://news.airwise.com/story/view/1209506525.html

Quote:
Mayrhuber also confirmed that the airline had resolved to exercise its option to buy the majority of UK airline bmi in two stages in the next two years. The timing and price had already been agreed with bmi majority owner Michael Bishop and the money had been set aside for the transaction.

[SR71]

Maybe, but the point of the call option is that if LH want to buy, SMB is obligated to sell.

That is what the call option is! (http://en.wikipedia.org/wiki/Call_option)

However, I find it strange that SMB would have ever put himself in this position.

There must be more to the contract than meets the eye....

[Mr Flaps]

If people go and read what SMB said the aviation council last week he is being very clever about what the feature plan for the bmi group is. He said and I quote. 'However, at the same time we are actively seeking new opportunities through bolt-on acquisitions for strategic expansion.' SMB, (2008) So is bmi looking for something new to take on or are they looking looking at jumping into bed with LH full time.
I quote SMB again.
'However, I can confidently say that shareholders will not permit an event to arise through which bmi would become the subject of any opportunistic or under-valued approach. Whether bmi remains independent and grows through acquisition or whether the shareholders decide another course, we will not be bounced into any particular direction by comments from other carriers or the media.' SMB, (2008).

He is not saying in public what he wants to do with his share as some have said bmi is his train set will he want to sell he train set to someone else. LH my have called it but is that headline grabbing on the part of LH. No one will know unless you are either SMB, LH or SAS.

I think lets sit back and wait. See what comes out of the Hall and LH. Jo public will not know until the press statement is read out.

[answer=42]

I'm sorry, but this is silly. Lufthansa have said that that they will exercise their call option. That means they will buy bmi at the pre-agreed price. Nothing the Bish can do to get out of that one. Putting out inaccurate press statements (and perhaps posting on pprune) is just bmi's way of saying that they won't go quietly into Lufty's arms, so can they have a little bit more money please.

Lufty's Chief Executive Officer was quoted in the Financial Times today as explaining exactly how the call option will be exercised (in 2 lots). That's the press statement: he read it out.

SR 71 asks a reasonable question:

However, I find it strange that SMB would have ever put himself in this position.

I would guess that the Bish wanted an exit strategy for his stake in bmi. That's the 'put' option: he can force Lufty to buy. And the price of the 'put' option was - yes, you've guessed it - the 'call option: Lufty can (and will) force him to sell.

Where the Bish's crystal ball went U/S was that he did not forsee that the Open Skies agreement with the USA would come into force before the expiry of the call option. This means he's forced to sell to Lufty for less than bmi is currently worth. ho hum.

[teamax]

So back in 1999, SMB thought Open Skies would not happen for at least 10 years! All this after getting within a day of breaking the Bemuda 2 in 2000, hence the A330 purchase.
Good try, but you will have to come up with a better explanation for me.