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Interesting article in the FT
IAG faces lengthy BMI takeover probe - FT.com Not a huge amount of truth in though.... |
Its not a done deal yet.
The losses BMI are incurring at the present might make the IAG board think again if the EU put in to many restrictions. |
IAG are not really buying bmi as a business. They have their own plans of how they will utilise the assets being, slots, planes and people. Changes will happen very quickly. In truth if Lufthansa wanted to sort out bmi it could, but it just is not wanting to invest. Let's hope the EU don't cost 4500 good people their jobs!
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What stops Lufty from just selling the slots to IAG, and closing down BMI, thereby obviating the need to 'buy' BMI?
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What stops Lufty from just selling the slots to IAG, and closing down BMI, thereby obviating the need to 'buy' BMI? |
Then again, if the EC draw things out, and IAG walk away, there would be nothing stopping BMI Group being put into Administration and all the slots going into the pool to be fought over.
It would be like the Astreaus close down on a bigger scale, where the funder simply pulled the plug and the next day Astraeus was no more. That isn't a likely scenario though. IAG regard the slot portfolio as far too valuable, so unless they are forced to give up a silly amount of slots (>40%), they will probably hang on in there. The only thing is that one of the comments on the FT article says that BMI is losing £20million a month. Who is covering that bill? Lufthansa annual report released today http://investor-relations.lufthansa....e_igjfbwpf.pdf |
I believe IAG have already given Lufty a big wedge of cash to ensure BMI keeps going until the end of March.
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Interesting article in Flight this week stating that BMI's slot allocation at LHR has dropped from 800 to 461. The article went on to say Lufthansa's has increased by 248 and BA increased by 154.
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Lufthansa details financial damage from BMI sale
"Other price adjustments - notably restructuring expenses at BMI Regional and BMIbaby - dragged the net sales price into negative figures, says Lufthansa." Can someone explain what restructuring expenses Lufthansa is incurring at BMIr? I though the new owners (when they get control) would be footing any restructuring costs. Rougueg |
IAG won't walk away. This is the last large slot portfolio that will be available at LHR. They'll take whatever they can negotiate with the regulators. Only the price will change and the number of jobs lost.
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No disrespect or criticism intended (am not a top businessman), but in a way LH have been hoist by their own petard. It seems a bit short-sighted to have signed an agreement that forced it to buy Michael Bishop's 50% share of BD (when it owned just 30%) at any time within a ten year period and completely at Bishop's timing and discretion, with no "escape" clauses. It seems a crazy arrangement for any business as no one can tell the future, but in an industry as volatile as aviation......?
Perhaps minds were on other things: slots £££££? They certainly managed to skim off many of BD's slots over the least three years or so. BD was always LHR's second biggest airline with 14% of the slots. Now it's down to about 8% or so. BTW what happened to SK's 20% ownership of BD? |
Can someone explain what restructuring expenses Lufthansa is incurring at BMIr? I though the new owners (when they get control) would be footing any restructuring costs. DLH would probably be expected to allow regional and baby to continue to utilise any IT or support infrastructure for 3-6 months until they have their own independent systems up and running. |
IAG will do whatever they can to secure the Heathrow slots. Latest gossip I hear is that the 777 fleet at LGW will move over to LHR and the bmi 319/320/321 will go to Gatwick to replace the 737-400 fleet. Would be handy if they had a deal approved by the EC though.
It is looking like a car boot sale at Lufthansa these days. Wonder if IAG will snap up that one as well? Lufthansa Considers Selling Austrian Airlines FRANKFURT (WSJ)-Deutsche Lufthansa AG LHA.XE -3.47%on Thursday said it would consider selling its Austrian Airlines unit if it can't turn the struggling carrier around amid a wide-ranging plan to cut costs to combat high fuel prices and sluggish growth in Europe. "It isn't possible to say when Austrian Airlines will break even," Chief Executive Christoph Franz said. "We will stick with Austrian Airlines until we no longer see prospect for profit," Mr. Franz said. "We still see this prospect," he said, though the business is in a critical condition and needs drastic restructuring. Lufthansa has agreed to sell loss-making U.K. unit British Midland Ltd.-known as bmi-to British Airways IAG.LN -0.81%and Iberia parent International Consolidated Airlines Group. It said Thursday it has signed a letter of intent to dispose of its 25% stake small Chinese unit Jade Cargo to China's Unitop. "We have to respond to the change in our industry with flexible structures that enable us to remain Europe's number one [carrier] in the future," said Franz. The German airlines group, which carried 100 million passengers for the first time in 2011, said it would increase capacity by less than initially planned this year as well as reduce purchasing, administrative, and payroll costs as part of a €1.5 billion ($1.95 billion) three-year savings plan. Despite the cost-saving initiatives, Lufthansa said it expects a sharp decline in operating profit in 2012, depending on market conditions, to around €500 million, which the airline described as "the mid three-digit million euro range," down from €820 million in 2011. Last year's operating profit fell nearly 20% as a 26% rise in the carrier's fuel bill to €6.28 billion offset a 8.6% rise in revenue to €28.73 billion. "Although the operating profit for 2011 is generally pleasing in itself, the operating margin is not," Mr. Franz said. Last year's operating margin was 3.4%. Lufthansa has previously said it would generate a margin of 8% in the longer term. Lufthansa said it would limit passenger capacity growth in 2012 to 2% on the year compared with 3% previously as part of various measures to reduce costs. They include centralizing procurement, better coordinating flight plans within the group and trimming administrative and management staff. Lufthansa announced a hiring freeze last week. The German flag carrier, like Franco-Dutch airline Air France-KLM AF.FR -1.46%and northern European carriers SAS AB SAS.SK 0.00%and Finnair Oyj, FIA1S.HE +1.30%are struggling with difficult market conditions, among them soaring fuel prices and fierce competition from no-frills airlines on short-haul routes and Middle Eastern airlines making inroads in European and intercontinental traffic. Europe's sovereign debt crisis and political upheaval in North Africa and the Middle East have slowed growth in air traffic. Lufthansa said the planned sale of bmi should enable the group to swing back into the black this year after a €13 million net loss in 2011. The group, which announced preliminary earnings figures March 7, reported net profit of €1.13 billion in 2010. Lufthansa said bmi made a €155 million after-tax loss in 2011. Austrian Airlines recorded an operating loss of €62 million in 2011. Jade reported a net loss of €38 million. Lufthansa shares fell on the Frankfurt stock exchange as the severity of the problems at Austrian Airlines took investors by surprise, traders said. The stock was down 1.1% at €10.40 around 1 p.m. GMT. Lufthansa shares have declined around 19% over the past 12 months, underperforming the German blue chip stock index DAX over this period. The DAX was up 0.3% Thursday. |
Originally Posted by Fairdealfrank
(Post 7082890)
BTW what happened to SK's 20% ownership of BD?
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Interesting scenario....I have also heard that the 777 will be going to LHR but I can't see the BMI aircraft going to LGW to replace the 737's.It means that LGW will just have a shorthaul operation which I believe is not profitable.LGW is now a stand alone business unit and is financially autonomous.No more financial assistance from the 'mothership' at LHR.Whether it could be made profitable is debateable given the competition from the likes of EZY.
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'I believe IAG have already given Lufty a big wedge of cash to ensure BMI keeps going until the end of March'.
Walsh would be lynched by the shareholders if he did this. With the BMI losses reported by LH expect the plug to be pulled on the non profit making parts of the operation as soon as the deal goes through. |
Frank, LH bought SK's shares some months after they bought SMB's after a bit of a stand off about price. SMB was paid the bulk of his money as compensation for giving up his put option and a low price for the shares....not surpriingly SK didn't feel they should get the much reduced share price so held out for more which eventually I think they got, though not as much as SMB's option price.
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From the IAG press release of 22/12
IAG intends to finance the purchase from its own funds. £60 million of the purchase price will be paid in four instalments to Lufthansa pre-completion. This amount will be secured by Heathrow slots. |
I believe most of that money has gone already.
IAG would get 12% of the slots. Just keeping praying the EU allow the purchase through asap otherwise many of us will be in big trouble paying our mortgages. |
I would be very surprised if the LGW BA 777s go to LHR (though maybe one or two routes may move across). BA LGW long haul is profitable in its own right and BA has already spare long-haul capacity with parked 747s and the 787s and A380s will start to be delivered next year.
BA long-haul growth at LHR with the extra slots is likely to be very cautious and probably will not happen until the 787s arrive. |
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