BMI
 

Well according to "sources" IAG is the front runner to buy bmi mainline.

IAG seen as frontrunner as bmi deal nears-sources

To those that balk at the thought of BA buying bmi, who else is going to buy it bearing in mind it's clear that LH want to sell and no-one else has the combination of big enough pockets and an existing operation in which to absorb bmi?

There are numerous reasons for not selling bmi to IAG from Star and DLH's point of view. From surrending LHR (which they do care about) to the fact that the price for the company won't really be that attractive at all.

Selling bmi's fleet isn't really a goer since the aircraft in the vast majority are leased not owned. So asset stripping in this case isn't really worth it.

Since this is dragging on and on, then I am pretty certain that there is an almighty ding dong going on in the Lufty group board room. If bmi is sold off or shut down, then the egg on the face for the people involved in the original deal will be huge, in the past 12 month LH Italia failed and now if they get shot of bmi, they've failed there too. Ego and reputation are important when it comes to things like this.

I'm not saying that IAG won't buy bmi, just that I think there are other options that seem more likely when you think about it in more depth.

What are these other options apart from IAG that seem more likely to you?

Buying or merging with mainline BMI dosn't stack up for BA.

All the pressure is on LH to sell, not for anyone to buy.

BA would not be the purchaser. IAG would buy the slots, they wouldn't want the airline.

I believe the monarch announcment will be before the end of the week.

But merging 2 loss making airlines together doesn't make sense.

Ah.... so the cabin crew are getting a new uniform then? ;)

Flypuppy If BA for eg were to only buy the slots how would they fly them without the aircraft?
There is no way that BA have enough Aircraft to fly 50 extra flights per day.
If a company buys a slot pair they have to fly them the next day!!.They do not have the Luxury in waiting for 27 aircraft to come off the production line.

All this talk about IAG maybe buying bmi and not BA, and that this somehow makes a subtle difference as to whether they can avoid a TUPE purchase/just buy the slots etc is rather spurious if you ask me.

Of course it would be IAG rather than BA, as they are the mother company that hold the purse strings- just like when BA recently purchased the 6 slots from bmi the press release stated that "BA have obtained approval from IAG to purchase....", or to give another example when bmi have needed (lots) of money for anything in the last few years, it was DLH we turned to.

And no doubt you'll see some posters say "told you so, it was IAG" should this come to pass, but it is largely academic which of BA/IAG do the actual buying, as it would be BA, and not IAG that would then do the operating of the assets- let's hope with some well trained bmi crews.

This is a worrying time for bmi employees, and having pontification and schadenfreude doesn't help anyone except the know-it -all armchair generals.

Why wouldn't BA (not IAG) want the slots plus aircraft and crews? The one factor that people are missing at the moment, and why the potential purchase of slots and aircraft to fly them by BA is timely right now, is the Olympics. There has already been discussion elsewhere on Pprune re any potential for BA to operate additional flights in 2012 (not possible). BA is still perceived in many markets as the flag carrier, and has a clear association with the 2012 events. It is therfore uniquely placed to capitalise on the potential additional high yield volumes if it has the slots and the aircraft and crews to fly them. The extra profit generated could go a long way to covering the purchase cost.

I am well aware that IAG owns BA and M&A decision making now sits in IAG.

If IAG chooses to buy BD, whether it sits immediately under IAG or under the BA operating company is IAG's call and will be driven by a whole host of factors, such as tax structuring, financing and management reporting lines of the IAG structure. Ditto for whether it remains as a separate operating company or formally merges with the BA operating company.

Either way, it seems clear that LH want to dispose of BD by year end and it is the airline IAG is bidding for. The issue of BD's liabilities/losses are all things that will be factored into the deal price and terms.

There will be hard work ahead for IAG/BA if it buys BD but they're not going to pass at a once in a lifetime chance to grow significantly at LHR. And IAG has a CEO who is not one to shy away from hard work and difficult decisions.

IAG's Q3 results are out on Friday and they may give an update to the City on what they're doing then.

BA need the slots at LHR to continue to compete with the other large European carriers and Emirates, all of whom have much more room for expansion at their own hubs. I would be very surprised if BA did not acquire the majority of the slots. No doubt, some of those slots would have to be shared out to others for the purposes of competition regulations but I am sure BA would be happy enough with that.

If slots must be used straight away, then a total takeover of BMI seems logical as the aircraft and crew are there to continue flying whilst BA sets about a restructure of its routes and timings.

There is, of course the possibility of benefits being seen across the UK. Operations into the likes of MAN and EDI could be streamlined, potentially with larger aircraft releasing further slots at Heathrow that could possibly see the introduction/reintroduction of connections to other UK POD's. Thus, British Airways could start to truly think of itself as being British again.

With regards to Star Alliance, though they would lose a chunk of Heathrow, it would not mean that they no longer have a route in and out - plenty still serve it - it would more likely have an effect on transit with the emphasis more on Star strongholds such as Frankfurt, Brussels and Zurich.

LD, your correct in BA would not to miss out on expansion at LHR but more worrying is the risk to BA's cash position with a possible economic slowdown on its way.

Whilst i would not rule out further slot sales by bmi (to the highest bidder) in 2012 i think a take over of bmi by the IAG group remains very unlikely, the suggestion that DLH would sell all bmi LHR slots to fund a closure of bmi including its pension deficit is a non starter. Any deal involving the sale of bmi slot portfolio will require the buyer to buy bmi as a going concern, winding bmi up is not on the table.

In simple terms the PR damage done to the DLH brand by putting 3811 employees on the dole and seen to be pocketing 200 -500 million from the slot sale is far worse than the current financial pain DLH are enduring. With regional & baby away and a re focus on its route structure all ready underway it is likely that losses will start to fall in 2012.

DLH and its star alliance partners are not about to walk away from LHR.

What Star Partners think is irrelevant. They're not the ones with bmi bleeding red ink over its balance sheet.

DLH have said their thinking towards LHR had changed. Even if they ploughed in millions to turn around bmi it will still be No 2 behind BA by a considerable margin and bmi is unlikely to cover its cost of capital. DLH are interested in hubs where they are Number 1 (FRA, MUC, ZRH etc).

If Star Partners were interested they could help to offset the losses!

Not to sell bmi after all the noises about it from Frankfurt would be absurd. Gemkow has won the boardroom fight, they want rid of bmi, IAG are the favourites. If they can sort out the price, then the deal will be done. Frankly neither side can afford not to do this deal.

Having bought it, running it as bmi would be mad. They'll want to use its presence to drive down BA short haul costs. That will lead to a fight with the BA and bmi unions, so they'll have to incorporate it into BA and do a "deal" with the employees, a lot of whom will get made redundant.

Looks like the whole bmibaby/Monarch rumour is true then!

It ain't true until the fat lady sings / the contract is signed / Lufthansa publicly announces it (delete as appropriate)

King Surf, IAG is more than just BA. Iberia airframes could be used to fill some of the gaps and there are plenty of airframes that can be ACMI-ed in.

Inkjet, didn't you say that it was "utter tosh" that bmi Regional would be sold?

Seems like a number of people could be eating their own words from this thread once Lufthansa announces what is going to be done with main line ;).

Anyone actually got 1 reason why Monarch actually want bmibaby? Can't understand it myself... :ugh:

14 Aircraft's worth of Boeing experienced crews?

Jet2 would be a better fit though....

The Financial Times also reports that IAG is a frontrunner to buy bmi mainline. Unless there is a big deal breaker, it looks like it's going to happen.

IAG in ‘detailed talks’ to buy BMI - FT.com

Baby would provide instant bases for Monarch, that's the best reason...

Just because the FT rehashes what Reuters said, doesn't make it any more likely! These journalists are utterly idle!

The Financial Times is a credible operation and they tend not to just rehash stories like other papers.

Maybe so, but the FT report brings nothing new to the story that Reuters didn't already mention, so excuse me for being suspicious.

"People familiar with the situation"? Well that could be me!

Flypuppy
 

Pup

My " utter tosh" comment was in response to Ric's suggestion below


My source is pretty reliable. I am told that Eastern have submitted a bid and it is being considered by Lufthansa. Story is that Lufthansa are looking for quick injections of cash to offset the massive losses of the bmi group. I dont think they will be able to keep the regional name or branding. Eastern already have EMB-145s don't they?




DLH do not need a quick injection of cash, in fact the cash will probably flow the other way!, its not being sold to Eastern and the new Regional owners will keep the bmi Regional brand for at least 12 months, so yes it seems to me that it was utter tosh.

The only quick injection to date is the sale of slots, DLH have seen a slow down in Europe and will move to protect their balance sheet in various ways this winter.

(aside)
Reuters - and Bloomberg, Associated Press, Agence France Presse etc - is in business to uncover news stories and sell them on to the press and other media. Of course the FT use their material.

Inkjet,

I am very familiar with the Regional situation and the comment that
is absolutely untrue.

Branding may well be retained for up to 12 months but that does not in any way imply any form of financial input or subsidy from either bmi Group or Lufthansa.

Apart from the leasing costs of flying bmi routes from LHR on the Emb145. This will, presumably, involve cash from someone to the new owners...

Pup

If you say so.

So who's buying baby then?

Not quite sure what you mean max, but the acmi arrangement is a standard contracted service offered by a provider (in this case, Regional) to bmi.

Inkjet, I would have thought you would know better than me :ok:

Rumours I have heard involve two UK based 737 operators in discussion with Lufty M&A.

The chances of a lease arrangement between Regional and bmi being anything close to "standard" are pretty slim!

Why be so cryptic?

If you seperate out bmi from bmi Regional how much of the below makes any sense?

ABZ-MAN - flybe target
ABZ-NWI - monopoly / niche
ABZ-GRQ - monopoly / niche
ABZ-EBJ - monopoly / niche

EMA-BRU - possible Brussels Airlines target

EDI-BRU - Brussels Airlines target
EDI-MAN - flybe target
EDI-LBA - monopoly
EDI-CPH - SAS target
EDI-ZRH - Swiss target

GLA-LBA - monopoly
GLA-CPH - SAS target

LBA-BRU - possible Brussels Airlines target


BRS-BRU - currently op for SN
NCL-BRU - currently op for SN

Take away all the LHR flying and the routes above that former STAR partners will be looking closely at, it's all very niche. The MAN routes would be wide open to predatory action by flybe especially once the bmi brand is removed. Glasgow is already vulnerable as it's a single aircraft that does three rotations per weekday and spends much more time parked than flying.
Edinburgh has potential, but more so for inbound traffic by SAS on the CR9 and Swiss on the RJ100 allowing both point to point AND connectivity, Aberdeen is nicely niche however.

The question I would be asking is just how much will remain after a sale? There are no synergies or economies of scale that I can see here, quite the contrary, and former partners will quite likely be tomorrow's competitors. Four routes to Brussels, two of which are operated on behalf of a (former) partner.

I would imagine that the first thing the new owners of Regional will do is change the name so as to distance themselves from any future BMI troubles.

Although the letter to BMI staff says that regional will keep the winter and summer 2012 schedules. I think that has been said to make the sale of other aspects of the group look more favourable.

I would suggest that some significant adjustments of the routes should be expected, before Summer 2012. Especially bearing in mind what Skipness One Echo said above.

Regional definitly has the Aberdeen market cornered but that is hardly enough to maintain a decent load on a fleet of 18 aircraft full time.

Will be interesting to see what occurs.

I would have thought that a code share or Star partner for bmi regional MK 2 would suit all involved I can't see much change here other than it's off LH books

A memorandum of understanding between IAG and Lufthansa has been signed according to Bloomberg:

Lufthansa May Have Deal to Sell BMI to BA - Bloomberg

Sometimes you have no choice...

There are not that many UK based 737 operators that would fit with bmiBaby though...

A British operator could mean many different things...

Jet2 - Do they need to expand via a ready made low cost airline?
flyBE - Do they have the money?
Thomson - Why do would they need a low cost airline?
Monarch - Seem to have a cautious approach...
British Airways buying both baby and mainline? Doesn't look logical, but you never know...
Virgin - maybe looking at relaunching European holidays?? - Virgin Sun?

Stelios?
Management buy-out/venture cap?