Virgin/BMI merger

[sidestick320]

Virgin aims to merge with BMI

http://uk.biz.yahoo.com/02042008/323/virgin-atlantic-aims-merge-bmi-pushes-lufthansa-approve-deal.html

http://www.birminghampost.net/birmingham-business/birmingham-business-news/other-uk-business/2008/04/02/virgin-atlantic-wants-merger-with-bmi-65233-20711397/

[ukeng]

http://news.bbc.co.uk/1/hi/business/7330137.stm

Looks like they might already be looking at ways to pay for it.
:uhoh:

[bluepilot]

Now that would be real competition for BA and openskies.

[Seat62K]

According to the Yahoo! link above, Lufthansa would have to pay £229 million (plus an adjustment for inflation, but how much could this be?) for Bishop's shares. Is this all it would cost Lufthansa to control 80% of bmi's shares? Given the value of the slots alone (and open skies, of course) I'd have thought Lufthansa would be mad not to exercise its option to buy. Or is there something I'm missing here?

[Denzer]

Interesting article here on the whole bmi situation - spells out some of the possible options

http://www.flightglobal.com/articles/2008/03/18/222304/insight-the-future-of-bmi.html

[JB007]

Seak62K,

That's how I read it too! Wow...

If this goes through, and Lufthansa would be mad not to, UK Pilots are running out of airlines and choice of work place...

[Cater]

This merger comes to the news at fairly regular interval, where did this one start ?????

[Jay.Walker.DUS]

The last paragraph in particular is interesting. If SQ is to divest its 49% in VS, well, LH is hardly cash strapped!

LH is already sitting on 30% of BMi, and could conceiveably buy SK's 20%. LH has a purchase rights on Bishops shares, and could conceiveably buy SQ's 49% of VS. With this in mind, why on earth should LH allow VS to take over BMi, when they could own the whole lot - and at a bargain price to boot!

[PAXboy]

For many British, this has looked like a 'no brainer' for the past ten years. But on each occasion, Mr Bishop has always refused.

The only certainty is that BMI is due for a change, VS or LH.

[Flintstone]

Oooops, that'll teach me. I'd assumed this was a charter type flight. RTFP next time.

Even so, would it be permitted? Aren't these handheld radios allowed to be used by the unlicensed because of their limited range (which will be less limited at altitude)?

Tech Forum anyone?

[Hudson Bay]

Bishop is under no obligation to sell. bmi, regional and baby all belong to him, it is his train set.

Judging by the noises comming out of Toad Hall SMB is ready to takeover another Airline not merge with Virgin or anybody else for that matter.

[Southernboy]

I heard they were sniffing around Globespan

[b mi baby]

Bishop is under no obligation to sell. bmi, regional and baby all belong to him, it is his train set.

This only reflects part of the truth. Bishop does indeed own the train set BUT keeping it beyond June 09 will cost him millions of pounds. IMHO the ownership of the business will change within the next 15 months but no one can predict what the implications of this will be for the existing staff.

[Carl Rawson]

I was at Midland for nearly 20 years and one thing that I can tell you is that Sir Michael Bishop is a tremendously charismatic bloke. If you have the pleasure of speaking to him then for those few moments he will make you feel like you are the most important person in the world.
More importantly I think that few would deny that he is an extremely shrewd business man. I remember that we all thought that it was curtains when he took £22M out of the company coffers on 9/12/2001 ( yes I do do my dates the American way...can’t get out the habit ) but the company went from strength to strength.
As for what’s coming out of Toad Hall then I would think that the Chinese whispers come from the Belvedere Suite itself to help throw off the hounds.

Having many friends at BD and despite one huge misfortune there myself I hope that the company does well in the future and maintains it’s identity if only so that it can still assert that it’s the only airline in the world with a stately home as it’s head office. :8
I think that I’m also right in saying that SMB did once say that he intends to hold on to the reins until Midland goes Trans Atlantic from LHR. ( I will humbly accept corrections to that ). I also think that he has the option to buy back the SK and LH shares at the price they paid for them all them years ago. Very cleaver if that’s the case.
One thing that I feel quite sure of is that when the truth comes out it’ll be far more interesting that the fiction.

[mickyman]

So,the raining back of BMI's 'open skies' plans and the putting
off of new aircraft deliveries starts to unravel this scenario.

Interesting times for BMI/BA at Heathrow!

MM

[jacksparra]

I have to praise Bransons PR machine. All the press refers to Virgins Takeover of bmi or Virgin's merger with bmi. This is due entirely to Bransons amazing PR ability and therefore image as being a huge player with the commanding position regarding takeovers etc.
If bmi converted all of its slots to long haul, it would be 5 times the size of Virgin. Currently Virgin has a large proportion of its business in the transatlantic market, at a time of US recession and increased transatlantic competition, add to that fuel costs.......
bmi on the other hand has held back from the dangerzone to watch the fallout from these bad times, whilst seeing a significant growth in high yield medium haul. It is no wonder that people want to buy bmi, after all, it is the best looking kid on the block.
Virgin is in a very bad place. I suggest it will start to cut it's frills very shortly and it's true state of affairs shall start to become apparent. If any of the big wigs start to jump ship then we can be certain.

Virgin doesn't want a tie up with bmi, it needs one. And Sir Michael has the upper hand. So wouldn't it be more logical to assume that bmi takeover Virgin than the other way round?? after all they are 5 times the size (in potential and assets) and in relatively far better shape.....I didn't even need to mention LH and all their money.

Don't be sucked in my the brainwashing of the beareded one.

Perception is a funny thing.......

[teamax]

At last, someone who actually understands the facts. Virgin are in deep trouble, expect more PR from them.
When the EU deemed the Bermuda 2 agreement illegal, a few years back, SMB stated that `the shoe was firmly on the other foot`, well Richard, goodluck you are going to need it.

[PAXboy]

Hudson BayJudging by the noises coming out of Toad Hall SMB is ready to takeover another Airline not merge with Virgin or anybody else for that matter.Yes, that is how it has been for a long time and I expect that it will remain so until his death. He has been waiting for Open Skies and it is now arriving at the wrong time of the economic cycle and his star is past its apogee.

Two full-on entrepreneurs tend not to see eye-to-eye on the subject of mergers ... these two never have and never will. Nonetheless, from the point of view of a simple pax, with almost no doubling of routes and HUGE brand awareness of both, it appears to make the most sense.

[lexxity]

If this ever did happen what sort of size would the company become assuming all routes were kept? (I'm including regional and intgrating baby into mainline?) Would it be comparable to the size of BA?

[Another procedure]

Virgin have always been interesting competition for BA, now with BMI on side it will be even better! and all a snip at half a billion!

[speedtouch]

I agree with jacksparra's post.

BMED was a smart move for bmi and despite more than a few teething problems, they are starting to make the mid-haul routes pay [a VERY important point]. Of course SMB with not say anything, we all agree that he is shrewd and by the nature of business it WILL go to the 11th hour before something [if anything] happens.

This year bmi have to prove to the industry that they are not all just spin/marketing and that they are able to support themselves without the European Agreement previously in place. [This is where profitable mid-haul routes come in!]

However, having spoken to VS people, I understand that VS are confident that things will work out their way.....supposedly to the point that they have discussed ways of levelling crew remuneration and even the implementation of a Y-shaped seniority list.

IMHO I think that a tie-up between the two would be healthy for the consumer, LHR and of course the staff! But, without knowing who will end up with SMB shares/Singapore's 49% in VS and what LH has in mind, I might suggest that VS are a little premature!

An interesting time for all........:D

[Facelookbovvered]

Nuff said......................................................

[pointless username]

y shaped seniority list....
do me a favour, VA might have agreed it amongst their own CC but I would bet my mortgage that it will never happen that way. BALPA head office will be forced (if only by the bmi CC) to insist on the "precedent" set by bmi/Bmed seniority merger. that was an alignment on DOJ.

[The Big Easy]

Jacksparra

Spot on! Tried for years to get my big foot through the door without success! Now, not with a barge-pole, as they say!

TBE.

[Mister Geezer]

Interesting to note that there is very little mention of baby or Regional in any press extracts that link a potential tie up between bmi and Lufty. This seems to be confirmed by the noises from those that I know at bmi as well, since I am led to believe that Lufty have no interest in keeping baby or Regional if they acquire bmi.

[moebius]

Jacksparra has it exactly right - IMHO
With no active partners, no alliance and no more slots VS has nowhere to go.
If SMB is astute (and he is very astute) then he just has to wait.

[acbus1]

Get real.

bmi still exists for the same reason everyone wants a slice --- Heathrow slots.

Don't pretend it has anything to do with hardware, staff and certainly not management at any level.

Buy the slots, move in, clear out the dead wood, manage it properly and watch the profits multiply at last.

Don't expect zero redundancies amongst the poor common folk, though. Much bloodshed, I think. Very sad (with some deserving exceptions).

[jerboy]

acbus - Perhaps a few years ago you would have been correct. The the thing is that bmi nowadays are actually turning a fairly decent profit in pretty crappy operating conditions (high fuel, security costs and fog at LHR last year). in 2007 their pre-tax profit was £29.7m, and from what I've heard looks to continue this year. Also lets not forget the bargaining power of a couple of billion worth of LHR slots...

Virgin's profits, however were only £3.5m, dramatically reduced from the few years previous. Jacksparra has it right - they have all their eggs in one basket - transatlantic. With openskies beginning to take effect Virgin could see their one niche market severely eroded.

I doubt we'll see the bmi name disappear too soon, especially not under the banner of Virgin. At the very most, I think we'd see a 'bmi-Virgin' sort of airline (which I'm not saying is necessarily a bad thing). Or things could trundle along as they always have but with perhaps a bit of ownership change here or there (which I'm not saying is necessarily a good thing, but perhaps the most likely).

Sources:
http://news.bbc.co.uk/2/hi/uk_news/england/leicestershire/6616419.stm
http://www.travelmole.com/stories/1121367.php

[Pelican]

Why do I get the feeling there are many BMI employees posting here :)

The name may be Virgin Atlantic, but I think you will find that Virgin has a route network extending in all directions. Certainly not just to the US, they learned that lesson after 911.

Someone mentioned brand awareness. As an independant observer (and an international one), I have to say that BMI may be a well know brand in the UK (possibly), but internationally hardly anyone actually has even heard of it. Virgin is a well known brand all over the world.

Anyway, just some points to make to put some balance back into this argument.

[jacksparra]

Pelican your points are all correct. But proportionally Virgin is very heavily weighted towards the USA. Under the Bermuda 2 USA routes from Heathrow were afforded significant profits to underight more challenging (yet prestigious) destinations. I'm sorry to say that the profit levels are down because the Bermuda plug has been pulled, and it shall not be replaced.
Virgins other routes were chosen largely to increase the image and move Bransons brand further around the globe. They were underwritten by the transatlantic flights.
bmi is appalling at PR and advertising. I'm amazed it's lasted 70 years, but I think a new dawn has arrived.
Virgin on the otherhand is in it's sunset. There will be big changes there soon in order to last through the night.

[scroggs]

My, there are some interesting posts here - but not a lot of facts.

On company size, Virgin Atlantic is approximately twice the size of bmi measured by staff. It has around 40 large longhaul aircraft, with a further 21 on firm order, compared to bmi's 34 (with, I believe, 3 on order) predominantly short and medium haul fleet. Revenues at VS are considerably larger than at bmi. Profit at VS last year was hurt badly by losses at Virgin Nigeria (which is owned 49% by Virgin Atlantic, not Virgin Group), but the 07-08 results (and the pure VS 06-07 results) are expected to be strong. Trading is currently very good. Virgin continues to slowly obtain slots at LHR, and is expanding its operations at other UK airports. Like bmi, it has refused to rush into reacting to the interim Open Skies agreement, preferring to wait until full ratification and the opening of the US market - if it ever happens. If it doesn't, Open Skies is dead.

If any merger is to take place between bmi and Virgin Atlantic, the value of bmi's slots will feature highly in the deal. How they are valued and paid for, and proposals for their use in the future, will have to be very carefully handled. There is no regulatory guarantee that bmi's slots would be available for expanding VS's longhaul operation, even if Virgin managed a cash buyout of Bish's, SAS's and Lufty's shares.

Interestingly, it's being reported today that SRB and Virgin people are in Dubai trying to raise capital for a range of possible deals. Inevitably, bmi is being postulated as one of the potential targets for that money. However, that's pure speculation and there's no news from either Virgin or bmi to confirm or deny the rumours.

[barroon]

The last comment isn't exactly that factual either! VS may have 40 laonghaul aircraft but easch departure from LHR usually will not return until the following day. each of bmi's shorthaul fleet will arrive /depart LHR numerous ( perhaps upto five times a day. On a similar vane VS may have more employee heads however what % on a daily basis are sunning themselves downroute by the pool wheras a bmi Captain may be on his 5th working day out of LHR. You cannot compare these two companies in this way. If you use the slot portfolio at LHR as a guage then indeed bmi is a much bigger company than VS.

[Max Angle]

wheras a bmi Captain may be on his 5th working day out of LHR.And normally is, with a 6th day still to go. Ahhh, shorthaul don't you love it.

[The SSK]

Some pretty strange ways to measure 'size'.

Try using a normal industry standard of tonne-kms performed. That would make VS exactly five times as big as BD (AEA 2006 data).

Yield per tonne-km is two and a half times bigger on shorthaul than on longhaul. So VS operating revenues would be about double BD's.

[22/04]

Gentlemen aren't we missing the essential point

As SLF a Virgin/BMI merger would be a positve move for the UK creating a complementary carrier possibly within the Star Alliance.

Sale of BMI to Lufthansa or virtually anyone else (including God forbid BA) would not.

[stansdead]

let's face it. None of us have a clue what may happen.

[sidestick320]

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3745858.ece

[VAFFPAX]

Oooooooo... LH and VS possibly cooperating in purchasing BMI to create a European super carrier? Novel concept, just a question of whether SRB would want to give up his significant stake for a diluted stake in the new one... after all, it'd be LH, DIC, SRB and SIA who would have a stake in this new organisation (provided they pull it off). How much value an organisation like LH would see in gaining access to the Virgin brand remains to be seen.

Thanks sidestick, this is really intriguing.

S.

[EI-BUD]

So what would a merged bmi and Virgin be called?

bmivirgin???:uhoh:


On a ligher note Delta and Northwest to merge to create a mega carrier!!

[Count von Altibar]

All this mines bigger than yours bollox is really missing the point. The pilots at Virgin and bmi will have to go with the flow come a merger/takeover whatever it may/may not be. Pilot seniority will be low on the agenda for the movers and shakers at the centre of such a deal. Doesn't matter on the size of your plane or what you do with it. I think VS are in a potentially precarious position with the ensuing financial crisis with the world economy(especially US)/open skies/high fuel costs/lack of alliance partner. bmi also suffer from a couple of these factors but to a much lesser extent. Virgin are hurting as the subtle cutbacks become evident but all airlines are entering what will be a difficult time. A tie-up would make sense for for both but I just can't see SRB & SMB seeing eye-to-eye on this one. The backdoor route for Virgin through LH seems much more likely.

[22/04]

VS are in a difficult positon now. They can't cut capacity- they only serve many of their markets once daily so they can't cut back - or business cusotmers (like me) will stop using them. They have to fill their current capacity. Trouble is evident cuts in service mean the have less and less differentiation so they are likely to lose existing customers and will find it difficult to gain news ones. The Virgin will have to marry IMHO.

On a lighter side re the earlier post on name

British Virgin anyone?

[bplgaz]

Along the lines of the Delta/Northwest merger I would think the name would probably be...
Virgin Atlantic

maybe with a Virgin Europe or Virgin UK

What is to stop LH taking SQ's 49% of VS and then VS (financed from Dubai) buying LH's stake in BD after they have bought out SMB.

SQ are known to want to unload their VS stake and I'm sure LH would love to own 49 per cent of BA's main competition.

VS for Star Alliance should it all happen?

[scroggs]

What is to stop LH taking SQ's 49% of VS and then VS (financed from Dubai) buying LH's stake in BD after they have bought out SMB.

Not very much! In fact, if LH bought SQ's 49% of VS, and VS acquired SAS's 20% stake in bmi, then the advantages of scale could be achieved without necessarily losing either Virgin's or bmi's identity. There may be some merit in this approach...

As for the pilot seniority thing, unlike the pitched battles seen in recent (and ongoing) US airlines' mergers, bmi's absorbtion of BMED showed that these things can be achieved amicably and efficiently if sufficient thought is put into it. At any rate, it's not likely to be a stopper!

Anyway, we've been here so many times before (bmi/Virgin) that all the arguments for and against have been heard several times. SRB wants it to happen, SMB doesn't.They don't see eye to eye on anything much. It'll take third-party influence to get past the historical barriers to a combining of the two. LH may be the deciding factor, but equally it may not. We'll just have to wait and see.

[brian_dromey]

I agree with the post above. It really is in the hands of zee germans as to wither BD and VS merge or not.

Effectively LH can take control of BD anyway, with or without the SK stake. LH can then take 49% of VS from SQ wither SRB and/or SRB like it or not. I dont know if LH are going to do this or want to do it but the reality si that nothing is going to happen without the agreement of LH, it is the only one I can see who can get the keys to the Hall without physically killing off SMB having altered his will!

Just the way I see it. Personally I think BD and VS could be good together, I dont know that both brands would have to disappear in the medium term though. VS is stuck in T3 for the foreseeable future and BD is in *A heaven at T1, if they do merge I think it might be more of a back room thing, and of course VS would join star, sponsored by BD and seconded by LH.

Brian.

[mutualswap]

word on the street is that virgin are in no position to buy any1
if anything was to happen it would be the other way round
bmi to take virgin is this true? :ugh:

[scroggs]

As all the news reports (as opposed to rumour) at the moment (Forbes (http://www.forbes.com/markets/feeds/afx/2008/04/15/afx4889367.html)) (The Times (http://www.forbes.com/markets/feeds/afx/2008/04/15/afx4889367.html%5B%5DForbes%5B/URL%5D%29%28%5BURL=%22http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article3745858.ece)) are about Sir Richard Branson and Virgin negotiating for finance for acquisitions, it would seem that they, in their ignorance, would disagree with you.

[CaptJ]

mutualswap

since when did not having money mean any such thing.

Did not ferrovial buy BAA with virtually no money of their own!

[boeing boeing.. gone]

CAPTJ

Good point didn't the glazers buy Man utd without putting much of their own cash in?? sorry this is not aviation linked but I thought it suited the discussion

[bplgaz]

If LH owned 49 per cent of VS and 50+ per cent of BD (It could happen) then the Germans could surely push through a merger.
VS...49 per cent owner by LH buys LH stake in BD (using Dubai capital?) and all the pretty blue planes get lovely new red tails.

[bhd-lonFLYer]

Or maybe LH could merge the two and announce it LH UK!

[SinBin]

I am laughing my nuts off at this speculative chit chat!! :rolleyes:

[Dash-7 lover]

It's all about branding. Virgin has a strong global brand name where as bmi hasn't. Bmi lost it when they decided to drop 'British Midland' to sweeten the USA market and I think have been paying for it ever since.

[Muizenberg]

Virgin-BMI; or BMI-Virgin would work quite well...no puns about CD's or record labels please.

[Count von Altibar]

There's no doubt that Sir Dickie has or can raise more cash than SMB based on his assets alone. Branson is infinitely more wealthy than Bishop. That's not to take away from Sir Michael his success in British avaition and after all he's been around much longer than Branson.

All this bmi buying Virgin talk is just wishful thinking. Times are getting tough for both bmi and Virgin and consolidation in todays aviation world is top of the agenda. LH have a call option coming up which they will almost certainly exercise, what happens from there is conjecture but the above senarios seem very plausable. BA will not put up without a fight and will have set financing aside to do so. Interesting times ahead.

As far as pilot seniority in a Virgin merger is concerned, it isn't that complicated. You can be assured though that a 17,000 hr bmi Captain flying the A330 won't end up as an F/O on an A340 with Virgin. The real world will dictate and 'needs must' as they say. The bmi/BMED situation is the method BALPA will follow and I'm told it's closest to current employment legislation.

[max nightstop]

Surely any new name would need to combine the brands of the previous airlines, whilst updating it to a more modern sounding tone...

B Mirged Aye!

[Facelookbovvered]

The T&C's on the put/call options on both parties are not in the public domain, i would doubt very much that SMB has put (no pun) himself in a position where has no say or choice in the future of bmi to the benifit of LH, indeed all the pain that the group has gone thro over the last 5 years has been done on the knowledge that the ECA ends soon. If he had no say in the outcome why bother?

One thing is certain, that the people who have said that SMB/BMI is over cautious will have egg on their face around now, can you say now would have been a good time to have gone longhaul to the states out of LHR? or that an order for 20+ aircraft (at the top of the price cycle) for baby would look clever, no i don't think so, plus with oil price the midhaul plan to (many) oil producing states looks spot on to me, aircraft ordered in the winter of 08 will be better value than any ordered in 2007 all the more so if you have bought dollars this year. :ok:

[mutualswap]

Surely any new name would need to combine the brands of the previous airlines, whilst updating it to a more modern sounding tone...

B Mirged Aye!



:yuk::(:rolleyes::ugh:

[squeaker]

Wouldn't Lufthansa UK just be called..er...Airline?

[doo]

how about bm-i-virgin-baby

[bplgaz]

It's all speculation...but isn't it fun!
Seriously, I can't see BMI being part of an merged brand.
Virgin is a global brand, BMI is an already diluted British product.
LH would want to capitalise on the VS brand power if they were to push through a merger.
As much as they might be loved in here, a merger would see the British Midland name lost forever, just like the mighty Pan Am, Eastern, TWA, and (soon) Northwest.

[Mod Kit]

What about British Virgin Airways?? or does that already exist?? A cross between British Midland and Virgin Atlantic....

All this rumour and speculation is great - just goes to show we don't have a clue until something happens.

If anyone does know - go on, tell us and I'll keep it a secret!!!!

Article from Aviation Interactive on the same subject:

Cash-rich Lufthansa ponders purchases
Lufthansa CEO Wolfgang Mayrhuber has hinted that Germany’s flag carrier may soon pursue airline acquisitions in Europe and the US, pointing out that Lufthansa’s healthy finances made such activity a viable option. Lufthansa recently completed its formal takeover of Swiss. However, a spokesman said the company had no plans to buy Alitalia.