Lufthansa plans to sell BMI

[sn26567]

Germany's flag carrier Deutsche Lufthansa plans to sell its unit British Midland International (BMI), news agency DPA-AFX reported on Thursday.

Lufthansa's management board member Stefan Lauer said on Wednesday evening that the situation at BMI remained difficult and the German company was weighing options for its British unit, DPA-AFX reported.

In addition to the weak British market, BMI faced significant burdens resulting from the social turmoil in northern Africa, Lauer said.

The management board member affirmed Lufthansa's plans to completely integrate Austrian Airlines (AUA) into its structures. AUA is expected to raise its earnings in 2011, the manager said.

Lauer has also rejected rumours that Lufthansa intends to bundle AUA, German Wings and BMI into one low-cost carrier.

http://world.seenews.com/news/Deutsche_ ... ort_144228

[euroflyer]

hm, the source you are quoting does not say "wants" but "may"; in my understanding that is an important difference. I highly doubt they would find anyone at the moment willing and able to by bmi anyway

[RoMax]

hm, the source you are quoting does not say "wants" but "may"; in my understanding that is an important difference. I highly doubt they would find anyone at the moment willing and able to by bmi anyway

Maybe not for BMI itself, but for sure for their valuable LHR slots. I'm sure BA and/or Virgin would be very interested in buying BMI for the slots.

[andorra-airport]

hm, the source you are quoting does not say "wants" but "may"; in my understanding that is an important difference.

You are correct, my mistake. I was reading the news in German ("Lufthansa will britische Tochtergesellschaft bmi verkaufen" + "Die Deutsche Lufthansa stellt ihre verlustreiche Tochtergesellschaft British Midlands (bmi) zum Verkauf") , wrote the title, and looked for the news in English. Thats why.

Here in German: http://www.aero.de/news-13396/Lufthansa ... aufen.html

[Flanker]

This reminds me of this 2009 headline, almost exactly 2 years ago.
Cash-strapped Lufthansa could sell BMI to Virgin
http://www.telegraph.co.uk/finance/news ... irgin.html

Interestingly, almost all Lufthansa Group companies but SN have been mentioned.
This deep silence about SN can mean that either LH is really committed to SN or that it has other plans for SN.

BMI is the perfect example of the airline that LH wasn't able to turn around. Now LH is equally struggling with AUA and its own European network. I really hope that LH shareholders see the real value of SN and don't use it for another round of asset-stripping, as they did with BD slots at LHR that they've redistributed throughout the LH Group airlines.
Due to this, BD saw its LHR weekly slots stripped from 588 in 2008 to 384 in 2011. As we all know, SN got 24 of those stripped slots and we need to ask ourselves if that brings any positive value to SN over its former LGW operation.

LH is naturally going after the German-speaking markets. After Germany and Switzerland, they now integrated Austria into their network. Although there is much less to tap in Austria than at LHR, they clearly prefer to invest in Austria and shrink in LHR. An unsettling trend, if you want my opinion, given that Belgium isn't a German speaking country...

[fretn]

given that Belgium isn't a German speaking country...

[tolipanebas]

The trend I read into all this is that LH is committed to airlines which bring them a plus, wich is perfectly normal. In this aspect, it is noteworthy to mention LH was forced to take control of BMI under an old shareholders pact and even wondered if it would fight in court the put option excecuted by the then majority shareholder of BMI, Sir Michael Bishop. As such, the dynamics of the BMI take-over hasn't been great from the start, to say the least!

It has always been striking to see that whereas OS and SN are being integrated into the commercial structure of LH at record pace, with many departments and offices merged and moved around to sit under one roof allover Europe, bmi has always been kept entirely apart from LH's structures, even in the UK! That clear difference alone leaves doubt on their long term commitment to their UK subsidiary, IMHO.

However, I doubt anybody is going to be willing to take over BMI under the present form, so I guess LH will just have to shrink the airline and bring it closer to profitability first: it's slots could be a very good asset to finance such a plan. Oh, and let them start by cutting bmibaby, first! BMI are miles away from bringing any plus to the LH group by runing a Midlands based LCC! Profitable and carefully selected medium haul point-to-point flights from LHR (taking the long haul STAR feed to LHR as a welcome bonus) and connecting the main regional business destinations in the UK with the LH group hubs on the continent should be their ONLY focus really.

Finally, as to LH only being interested in German speeking airlines: what about Air Dolomiti, then?
In fact, selling off bmibaby as well as the main chunk of BMI's LHR slots, while merging the profitable left-overs with BMI Regional and turning that newly-created entity into the UK's version of Air Dolomiti woudn't be such a bad idea, IMHO.

[regi]

Oh, and let them start by cutting bmibaby, first! BMI are miles away from bringing any plus to the LH group by runing a Midlands based LCC! Profitable and carefully selected medium haul point-to-point flights from LHR (taking the long haul STAR feed to LHR as a welcome bonus) and connecting the main regional business destinations in the UK with the LH group hubs on the continent should be their ONLY focus really.

BMI is British Midland and as the name says serves the needs of an important part of the British population in the Midlands ( and north )
"Everybody should be at LHR" is maybe a statement done by many insiders. But others prove that you can be big without LHR, cfr Ryanair.

So maybe BMI should return to its roots and serve the people from the Midlands ? From Manchester, East Midlands and other airports.

What many people don't realise is that travel time ( over land!) is enormous in the UK. A survey of some years ago showed that UK people traveling for work had the longest commuting time of entire Europe
This has historical backgrounds:

very few connections between east and west UK
a lack of investment in rail from 1970'ies up to 2000.
terrible road connections to Scotland and in Scotland. ( but also other parts served by the infamous A1 ( is not the M1! ), driving to Cornwall, East Anglia, Wales... )
from the moment you leave the highway you end up on very narrow roads going through historical centres , without many bypasses ( as we know in Germany with the Landestrasse )

[euroflyer]

Now LH is equally struggling with AUA and its own European network.

hm? have I missed anything here? so far as far as I know it is still one of the most succesful and profitbale European airlines?

BMI is the perfect example of the airline that LH wasn't able to turn around.

Not sure they already really tried to turn it round so far. But the situation is indeed clearly different than with LX or OS (and SN as well), thats true

I really hope that LH shareholders see the real value of SN

.
The 'shareholders' will have no real say on this ... it is the management board which will take any decision. And the point they will be interested in: does any additional investment in SN give more or less return than the same investment made somewhere else? And 'somewhere' could by any kind of investment anywhere. Of course a part of tha equation is as well what others might do IF LH would pull back from SN and the Belgian market. The possible reactions of AF/KL and BA/IB have always to be taken into account.

LH is naturally going after the German-speaking markets.

Do not think this is true. The second biggest market worldwide for LH has for a long time been Italy and with Air Dolomiti they are still quite actice down there to get Italians to the LH hubs in MUC and FRA (despite the end of the LH Italia project). Plus Switzerland is not really (only) German speaking . I think LH goes to places where they can make good money in a secure and stable economic and social environment.

The problem with bmi might be that they have a relatively (!) big European and domestic network to/from LHR, but no long-haul of its own. So it serves as a nice feeder airline for Star partners at LHR, but that is something LH probably does not like so much ... They want to feed pax into their own long haul operations in MUC, FRA, ZRH or VIE (and hopefully soon more in BRU as well). The Air Dolomiti concept for northern Italy is doing exactly this.
Domestic air travel in the UK is with heavy competition (different from my experience than in France, Italy or Germany and Spain) so not so attractive either.
So indeed, either make it a full competitor by merging it with Virgin for example to have its own long-haul operations to feed (but that would mean go in full collision course to BA/IB in LHR which might provoke reactions again from their side) or shrink it down to an Air Dolomiti type of feeder airline from secondary and primary airports in the UK and Ireland to the LH hubs in BRU (the closest geographically than ...), FRA, ZRH, MUC, VIE and so on.

What many people don't realise is that travel time ( over land!) is enormous in the UK. A survey of some years ago showed that UK people traveling for work had the longest commuting time of entire Europe
This has historical backgrounds:

very few connections between east and west UK
a lack of investment in rail from 1970'ies up to 2000.
terrible road connections to Scotland and in Scotland. ( but also other parts served by the infamous A1 ( is not the M1! ), driving to Cornwall, East Anglia, Wales... )
from the moment you leave the highway you end up on very narrow roads going through historical centres , without many bypasses ( as we know in Germany with the Landestrasse )

That is something I cannot confirm anymore today. The road network in the UK has improved a lot, so has railway on many connections. The long commuting times are probably more because people tend to commute to London from places very far away because so many things are concentrated in Central London. And here traffic is indeed, well, difficult .

[cathay belgium]

Hi,

Indeed Regi is right, British Midland is born in and for the Midlands,
where there's a hugh demand on domestic and european connections..

BMI Baby maybe be a strange deal in our view,loadfactors of BMI flying out to AMS and Belfast for instance or quite big !
Don't think BMIBaby is making the big losses here, I even think they must be a part of the profit within BMI.

BMI grew out of LHR but they can refocus on BHX/EMA altough maybe this choice could be too late as Ryanair and FlyBE already took a hugh piece of the Midland cake...

Hard to handle.. a start of Air Dolomiti UK should be grew at LHR in direct competition with BA homebase..

Interesting times ahead..

BTW

About the long commuting times in the UK, the're still there... around London,BHX,Manchester.. and trains are no better option because there way too expensive (even compared with ..BMIBaby ? / Fly Be ! )
The UK still needs a nice domestic airroutings..
For this reasons FLYBE and Ryanair are still trying to expand on these domestic routes..


CX-B

[Comet]

It would be nice to see BMI improve its services in the north (ie Yorkshire). Here we have the appalling Leeds Bradford, served mostly by Jet2 and the only airline providing anything like a decent inflight service is BMI, but they only fly from LBA to GLA and EDI, the BRU service is not daily. People in Yorkshire wanting a good service to BRU have to go to MAN or up to Edinburgh.

[Flanker]

Flanker wrote:
Now LH is equally struggling with AUA and its own European network.

hm? have I missed anything here? so far as far as I know it is still one of the most succesful and profitbale European airlines?

Let's see what we got.
http://www.aviationweek.com/aw/generic/ ... gy%20Shift

In his view, the group has made some progress in turning around the loss making European network, although much work needs to be done. According to Franz, Lufthansa is looking at various scenarios, some involving incremental change and some more drastic measures, but no decision has been made yet.

The 'shareholders' will have no real say on this ... it is the management board which will take any decision

huh? The shareholders are the ones who have all the say. It's their company, not the management's.

Do not think this is true. The second biggest market worldwide for LH has for a long time been Italy and with Air Dolomiti they are still quite actice down there to get Italians to the LH hubs in MUC and FRA (despite the end of the LH Italia project). Plus Switzerland is not really (only) German speaking . I think LH goes to places where they can make good money in a secure and stable economic and social environment.

The second biggest market for LH is Italy because of all the Germans that go to Italy. Not because of transfer pax originating in Italy. LH Italia has closed down, despite all the promises of opening long-haul routes, etc...

The problem with bmi might be that they have a relatively (!) big European and domestic network to/from LHR, but no long-haul of its own.

They used to have more long-haul and aspirations to grow it to compete better against BA. Why else would you operate out of LHR? LHR is a long-haul airport, not a short and mid-haul airport. Everyone at BD hoped that LH would come in and give them additional long-haul aircraft. LH didn't make the investments, Bishop got fed up and now BMI is reduced to what it is. A domestic airline, a feeder for LH operating some insignificant and loss-making mid-haul routes.

or shrink it down to an Air Dolomiti type of feeder airline from secondary and primary airports in the UK and Ireland to the LH hubs in BRU (the closest geographically than ...), FRA, ZRH, MUC, VIE and so on.

If you insist, Air Dolomiti is the perfect example of not only what BD, but also what SN would be like in a few years. Brussels Airlines. The perfect name for a feeder airline.

Give me the name of an airline based in a country where German is not the dominant language, where LH has invested heavily to make it a stand-alone airline with at least 10 long-haul airplanes.
If you find one, we'll talk.

[euroflyer]

Let's see what we got.
http://www.aviationweek.com/aw/generic/ ... gy%20Shift

hm, ok, I see your point. But I as - sorry - somebody to has the pleasure to give from time to time such interviews myself and knowing how the text is 'done' would not believe too much of this kind of information

huh? The shareholders are the ones who have all the say. It's their company, not the management's.

for a company like LH that is THEORY, but what do shareholders actually do? umm, aeh ?? They meet maybe once a year at the general assembly and vote for the members of the supervisory board and ask some nasty (or stupid) questions. They have no influence whatsoever in the day-to-day management decisions ... Might have been different for SN over the past years with a few high-level investors as shareholders. But normally the world is different, believe me (and if not, well, than continue to live in your fantasy world )

The second biggest market for LH is Italy because of all the Germans that go to Italy. Not because of transfer pax originating in Italy.

HM ?? Sorry, that is just plainly wrong. Just spend a day at MUC and you will notice just from hearing people speak how many transfer pax from Italy are there. For many flights even in FRA the announcements are made in Italian in addition to German and English. LH Italia was the try to serve this market from within Italy directly, this did not work so now it is back to transferring them even more to MUC and FRA. And by the way, a "market" is not a place you fly to but a place where you SELL something. So if Italy is the second biggest market it means LH sells many many tickets there - probably all one way tickets to all the Germans going there so that they can come home

Give me the name of an airline based in a country where German is not the dominant language, where LH has invested heavily to make it a stand-alone airline with at least 10 long-haul airplanes.

Give me the name of any airline that has invested in that way in any other country than in its home country? I think in Europe you will only find AF taking over KLM. LH did it in at least two countries already (OS and LX, now hopefully SN). That there is more than 1 German speaking country in Europe is not the fault of LH ... But yes, of course it is easier to invest in a surrounding where you are aware of the culture and the habits ...

[Flanker]

And by the way, a "market" is not a place you fly to but a place where you SELL something. So if Italy is the second biggest market it means LH sells many many tickets there - probably all one way tickets to all the Germans going there so that they can come home

Let's clear this misunderstanding.
In aviation terms, the market size of a country is measured by inbound and outbound traffic, passengers and/or by its revenue. When there are connections on the same ticket, the origin and destination points get credited. According to a simple Google search, the second largest market of Lufthansa isn't Italy by the way, it's the U.S.
Any revenue generated inbound and outbound of Italy counts for half as the revenue of the Italian market, it's got nothing to do with where the ticket was booked or where the pax lives.

Italy is a large inbound tourism country, so it's a big market for all airlines operating to Italy.
Italy is overtaking the UK as Ryanair's biggest market.

I wish some research had been done before throwing things like that.
Next thing you know, we're discussing why the moon is Emirates' biggest market.

[tolipanebas]

Give me the name of an airline based in a country where German is not the dominant language, where LH has invested heavily to make it a stand-alone airline with at least 10 long-haul airplanes.

Is an intercontinental cargo joint-venture acceptable?

I wish some research had been done before throwing things like that.

That is a recurrent problem with your posts indeed: an apparent lack of detailed insider's knowledge of the airlines you're dying to criticize all the time.

[euroflyer]

et's clear this misunderstanding.
In aviation terms, the market size of a country is measured by inbound and outbound traffic, passengers and/or by its revenue. When there are connections on the same ticket, the origin and destination points get credited. According to a simple Google search, the second largest market of Lufthansa isn't Italy by the way, it's the U.S.
Any revenue generated inbound and outbound of Italy counts for half as the revenue of the Italian market, it's got nothing to do with where the ticket was booked or where the pax lives.

Fine, that's one way and your way of defining this: What I meant is actually the revenue generated by ticket sales in this country. And again, sorry, at least when speaking about revenue etc. please do not believe the wonderful numbers you can oh so easily find in the internet; most of them are just bull***t of journalists with a decent 50% knowledge or worse ...

wish some research had been done before throwing things like that.
Next thing you know, we're discussing why the moon is Emirates' biggest market.

do you really want an answer to this another example of your wonderful and nice way of communicating. As obviously the facts you found somewhere on the web are the only ones acceptable to you anyway the discussion is pointless. Oh, and you do not have to answer to my posts by the way if you feel the are below your level of involvement in the industry. And yes, I guess you are convinced the moon will soon be the biggest market for Emirates - because they will serve it with a whole fleet of narrow bodies via northern africa right?

[OO-ITR]

I wish some research had been done before throwing things like that.
Next thing you know, we're discussing why the moon is Emirates' biggest market.

Why not flying to the moon with 600 turboprops... (sorry couldn't help it)

[cathay belgium]

Mm.. VirginGalactic is also a narrowbody I guess ...
Anyone codeshare Virgin..?

CX-B

[tolipanebas]

please do not believe the wonderful numbers you can oh so easily find in the internet; most of them are just bull***t of journalists with a decent 50% knowledge or worse ...

Now carefull: you're actually telling NCB, aka Flogger, aka Flanker that his ONLY source of information is not nearly as good as he genuinely believes it to be... this revealing new fact may very well be too much to handle for the guy!

[cnc]

should LH need the money to get TAP?