The Lufthansa / BMI Thing (merged)
Mach 3
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answer=42,
The traditional explanation of the put/call options as most people understand, means that SMB was betting his company was going to lose value over the term of the agreement...
The idea that he didn't anticipate deregulation to finally reach fruition prior to the deal expiring is crazy, whereupon, the only conclusion I am left with is, that the deal as traditionally understood is incorrect.
Notwithstanding that, it doesn't mean that the CEO of LH is not stating the truth of the matter in his recent statement.
Nor do I understand anything that SMB is said to have said recently to exclude the possibility of LH acquiring the majority stake in the business...
The traditional explanation of the put/call options as most people understand, means that SMB was betting his company was going to lose value over the term of the agreement...
The idea that he didn't anticipate deregulation to finally reach fruition prior to the deal expiring is crazy, whereupon, the only conclusion I am left with is, that the deal as traditionally understood is incorrect.
Notwithstanding that, it doesn't mean that the CEO of LH is not stating the truth of the matter in his recent statement.
Nor do I understand anything that SMB is said to have said recently to exclude the possibility of LH acquiring the majority stake in the business...
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I think its fairly clear that Lufty will buy BMI to get ~10% of the LHR slots. They will then put 9 of their A380's on LHR to New York and they will make a fortune as their product and service is wonderful compared to the tired offerings they would compete against.
On the outside there is a chance that they will merely sell on their purchase of BMI to Branson with a small premium for their trouble. Though I doubt he can raise the finance in the current climate. He may be a very rich tax exile but he runs his companies on a lean diet.
Whichever story comes to pass the future of BMI Baby is bleak. They won't be here by Christmas 2009. Their brand makes no sense, they own no slots, they have the wrong fleet and they will be losing money.
On the outside there is a chance that they will merely sell on their purchase of BMI to Branson with a small premium for their trouble. Though I doubt he can raise the finance in the current climate. He may be a very rich tax exile but he runs his companies on a lean diet.
Whichever story comes to pass the future of BMI Baby is bleak. They won't be here by Christmas 2009. Their brand makes no sense, they own no slots, they have the wrong fleet and they will be losing money.
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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. The future of the business will be determined with the best interests of bmi, its shareholders and staff being paramount.
a) If there is a call option, an approach from Lufthansa could not be regarded as "opportunistic" - it has been cast in stone for some time
b) The share holders are SMDB, Lufthansa and SAS. Therefore, in respect of the shareholders "decide another course" or "bounced" firstly Lufthansa have a role in that process even if not a overriding one, and secondly with SAS being known to want to bail it only leaves Sir Bish to make a decision to jump (or have his hand forced)
c) As previous, the "best interests of... its shareholders" involves Lufthansa too
As far as SMDB's "train set" is concerned, Regional could still remain as SMDB's trainset for his retirement. Sell bmi to Lufty, dispose of baby somehow, and keep bmir as the toy... Sounds eminently logical to me
A
mostly harmless
SR71 / teamax (who basically have the same view)
The put/call structure is compatible with an expectation that bmi was going to lose money. But without knowing the prices, it's impossible to verify.
SR71's view that:
certainly made me think:
It's not deregulation itself that has changed the value of bmi but its EU-wide scope.
The current position has been brought about because four events have taken place:
1. The EU denounced previous air traffic agreements such as Bermuda II as discriminatory
2. The European Commission obtained negotiating rights from EU Member States for a transatlantic open skies agreement
3 The USA conceded European 'nationality' for EU airlines during air traffic negotiations - this is the key element
4 The open skies agreement has come into force
Without point 3, any UK-USA open skies agreement would have required partipicating airlines to be 'British' or 'USA'. And to be 'British', they would have had to have been at least 50% + 1 share UK owned. Which is precisely the structure of bmi.
It is therefore point 3 that makes the remaining 50%-1 shares so valuable to Lufty.
In 1999, if I remeber correctly, points 1 and 2 were under discussion but points 3 and 4 were still a million miles away.
Of course, I am open to alternative arguments
The put/call structure is compatible with an expectation that bmi was going to lose money. But without knowing the prices, it's impossible to verify.
SR71's view that:
The idea that he didn't anticipate deregulation to finally reach fruition prior to the deal expiring is crazy
It's not deregulation itself that has changed the value of bmi but its EU-wide scope.
The current position has been brought about because four events have taken place:
1. The EU denounced previous air traffic agreements such as Bermuda II as discriminatory
2. The European Commission obtained negotiating rights from EU Member States for a transatlantic open skies agreement
3 The USA conceded European 'nationality' for EU airlines during air traffic negotiations - this is the key element
4 The open skies agreement has come into force
Without point 3, any UK-USA open skies agreement would have required partipicating airlines to be 'British' or 'USA'. And to be 'British', they would have had to have been at least 50% + 1 share UK owned. Which is precisely the structure of bmi.
It is therefore point 3 that makes the remaining 50%-1 shares so valuable to Lufty.
In 1999, if I remeber correctly, points 1 and 2 were under discussion but points 3 and 4 were still a million miles away.
Of course, I am open to alternative arguments
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I really dont see why LH would NOT want baby and Regional.
While not all of them feed into the BD hub at LHR they serve their own purpose. The fact of the matter is that it is impossible for us to know what parts of the group swallow the cash other parts generate.
LH have clearly set out a model where they are represented across the world in most of the major market niches.
Full service - LH, LX, OS, Air One, etc
LCC - B6, 4U, Hapagfly.
Regional - All the regional partners in the "Lufthansa Regional" banner.
I think baby and regional will be taken as well, and Bish could well be made chairman or something like that. What is far more interesting to me is wither WW stays as a relatively small player or gets merged into different parts of the LH group, perhaps with bits going to 4U, BDRegional (with possible E190) and mainline.
While not all of them feed into the BD hub at LHR they serve their own purpose. The fact of the matter is that it is impossible for us to know what parts of the group swallow the cash other parts generate.
LH have clearly set out a model where they are represented across the world in most of the major market niches.
Full service - LH, LX, OS, Air One, etc
LCC - B6, 4U, Hapagfly.
Regional - All the regional partners in the "Lufthansa Regional" banner.
I think baby and regional will be taken as well, and Bish could well be made chairman or something like that. What is far more interesting to me is wither WW stays as a relatively small player or gets merged into different parts of the LH group, perhaps with bits going to 4U, BDRegional (with possible E190) and mainline.
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flapsfullretard
Why not? Its fun...a bit like having a SIPP and seeing if you can beat the experts at their own game....
Topslide6
Merely re-stating your argument doesn't make it any more valid....unless you do have inside information?
Not that you might not be right....
If what you suggest is the case, what exactly did LH pay for in 1999? How does such a "call" option derive any value?
only had hand full of people know what is on the contract....no point speculating about who will force whom to sell to who!
waste of finger typing
waste of finger typing
Topslide6
Yes but.....If SMB doesn't wish to sell, he doesn't have to.
Not that you might not be right....
If what you suggest is the case, what exactly did LH pay for in 1999? How does such a "call" option derive any value?
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Luffty (along with SAS) paid to stop BD operating in their respective home markets, i understand that put/call options often have a buy out clause whereby you can buy the call options. I think that SMB will sell, but it will be interesting to see the detail of what is left, it wont be "i'm gone" Bye
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Lufthansa CEO confirms intent to buy bmi
Further to the thread which has been closed on bmi ownership, see this article http://www.reuters.com/article/rbssI...27354020080429
Straight from the horses mouth - I dont think there can be any doubt about future ownsership
Straight from the horses mouth - I dont think there can be any doubt about future ownsership
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My bet is that they will try the fledgling AUA first, another fine airline run down by the lethal combination of stubborn socialist unions and incompetent management dominated by politicians.
AUA has lost about .7 Mio € per day in Q1 08, a little less worse than superfluous bankrupt Alitalia, curently loosing 1.5 - 2.0 Mio € per day. Debt pay back period out of free cash flow for AUA is now 42 years (!), which is 6 times longer than crappy United. AUA is flying 15 different aircraft types, a legacy of the past where they bought from the manufacturer who "alimented" the prevailing ruling party.
Frank
AUA has lost about .7 Mio € per day in Q1 08, a little less worse than superfluous bankrupt Alitalia, curently loosing 1.5 - 2.0 Mio € per day. Debt pay back period out of free cash flow for AUA is now 42 years (!), which is 6 times longer than crappy United. AUA is flying 15 different aircraft types, a legacy of the past where they bought from the manufacturer who "alimented" the prevailing ruling party.
Frank
More from LH in this Reuters article
LH to buy BMI in 2 stages
This quote is interesting
LH to buy BMI in 2 stages
This quote is interesting
Mayrhuber also confirmed that the airline had resolved to exercise its option to buy the majority in UK airline bmi [BMID.UL] 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.
My bold
My bold
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STOP PRESS: Lufty in talks with BA
Could someone expand/explain why Lufty management are at LHR talking to BA today.
Is this to do with the deals revolving around bmi and Iberia trading!!!!
regards
Keepitlit
Is this to do with the deals revolving around bmi and Iberia trading!!!!
regards
Keepitlit
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Lufty are meeting with senior BA execs and maybe WW to smooth out any objections that there maybe to their take over of BMI. If there can be an agreement in principle of a small number (7) of route transfers then BA will not oppose the Lufty take over. I believe a similar exercise will take place with Virgin.
I had my hopes up then.....I wonder what BA would have been like if run by half decent Lufthansa management that concentrated on growing the business rather than attacking its staff. What a shame.