Brussels airlines future and financial perspective

[toto1]

Hello Papysn,

I don't know the exact boong on the JFK flight s but a new destination needs almost a year to prove itselfs before it is really bringing money. People need to know about the product before they become frequent customers.

Wait and see...
Krgds

[airazurxtror]

http://www.deplacementspros.com/Brussel ... 15099.html


Brussels Airlines is committed to Lufthansa to save money. In its plan "Beyond 2012-2013" presented last November, the freeze of hirings was one of the solutions adopted by the company that "wants to reduce its costs, in 2012, a double-digit percentage"
The company confirmed April 26, 2012 that employees who left the company will no longer be replaced and that it would now offer only fixed-term contracts. To cope with peak summer activity, the carrier will rely on temporary jobs.

Well, well ! that desperate, are they ?

[RoMax]

Well, well ! that desperate, are they ?

I wouldn't call that desperate. I would say they finally realise LH will not help them out of all their problems. Lufthansa wants SN, but they also want that they can solve their problems theirself.
And when you reduce your network (in Europe), there will be too much staff at a certain moment...than it's a very logicall next step not to hire new staff, or at least only temporary jobs for the peak moments. At least if you want to avoid big layoffs.
Last year SN lost about 80 million euro. About 40 million was the result of unexpected things (mainly with Abidjan and Dakar they lost a lot of money). The other 40 million was mainly due to the fuel prices (and the failing hedging strategy?). This year there were no really unexpected things yet, but the fuel prices are way up. SN already said they may loose 80 million again, only due to high fuel prices if they don't save money on other things (like staff, network, fleet,...).

[Inquirer]

Desperate is a word some like to use quite randomly here.

Reality is this is a fairy normal and even sound HR approach in todays economic climate:
At my company (world's biggest packaging group) we also have our little cost savings plan (sic) and one of the measures for our European plants is not accidentally also not to hire any permanent back office staff this year, and in fact I think you will find this very same HR policy in place at many places throughout Europe as several independant surveys show hiring plans throughout Europe have softened.

Since I was in need of some help on several integration projects however, I had to hire 2 SAPers on temporarily contracts too... Nothing desperate about it, just the reality of the day; being a good pilot or a plane fanatic knowing route maps, timetables and cabin layouts by heart clearly doesn't guarantee managerial skills nor sound economic analysis...

[papysn]

Hi,
@Inquirer

At my company (world's biggest packaging group) we also have our little cost savings plan (sic)

To be honest,it not here a question of "little cost saving" ,Bru air is already years understaffed in frontliners (and overstaffed in management tb honnest). due bad decisions and mismanagement.

There is a limit in cost saving (see greece FI),when it has large effects on passengers,it's not a good way of doing.
As i told earlier,In this world you have to be or the best (thus invest in service/not possible as share holders don't want to give any money) or the cheapest (not possible for Bru Air due inherited Sabena management structure).

Regards.

K.

[Flanker]

Aren't we all forgetting something here? Yes we are!! Why is it so quiet around Korongo?
Starting up with a 737 is very ambitious but if you can't fill the seats?

Same story as JFK here, a long-term investment that should have been launched when they had too much money.

Just less than 12 months ago, they were still convinced that the volume strategy is the right way to go for Europe. The funny thing is that they were so blinded and marveled by the extra revenues that they achieved through that program that they forgot one detail. Larger aircraft cost more money to operate

I said it so many times.
The A32S are nice aircraft and burn only a bit more more than the Avro's, but the pain in the neck is the higher lease rate, slightly higher maintenance costs, higher staff costs, higher landing and parking fees and the big problem of filling them without losing on the yields.
They should have limited the A320's to 7 or 8 units, operating them to the few city pairs and midhaul routes where the capacity is necessary, and for the rest downgraded the capacity to the smaller Q400's, even if this was temporary, and explored new routes similar to Hannover in the 500 miles arena.
They should have stopped focusing too much on cutting insignificant costs and should have refused to roll out the now famous slimseats. They should have waited a few months until they received the first feedbacks from the customers of other LH airlines prior to installing them.
Instead of installing those low cost airline seats, they should have gone with an upgraded business class product and marketed it as "the best business class in Europe" and added Q400's to configure them 6C/66Y or even 12C/54Y on business heavy destinations like GVA. Many business travelers would have used BRU as an alternative hub for intra-EU travel if the product was the best any airline in Europe could offer.

They can blame Ryanair and the government if they want, showing us once again what a classy bunch they are to not be able to admit their own failures and mistakes and try to focus on that to turn-around.

[Inquirer]

They should have limited the A320's to 7 or 8 units, operating them to the few city pairs and midhaul routes where the capacity is necessary

How many airbusses were added? I don't think much more than that? Most in replacement of 737 too...

To me, they have simply reduced the size of their fleet more than anything else and when I look at their operational numbers as you can find them online for the first few months of the year, it's fairly obvious they are correcting the corresponding seat cut through using slightly bigger planes more often.

You may call that a volume strategy, but that's only true on an the level of the individual flight really!

Don't be fooled by its name, as I feel it is a clearly misleading you: as their passengers and seat occupancy figures clearly show, not more volume was offered on a global scale (quite on the contrary even), so what they have used was more of a consolidation strategy than anything else (hence the need for more voluminous planes) and that is a very wise choice indeed.

for the rest downgraded the capacity to the smaller Q400.

You can also downgrade capacity on routes by reducing frequencies, which is what they appear to have done. Such also fits well into a consolidation strategy which they are using. The benefit is you achieve basically the same result on a global basis without need for changes in the fleet and you can do it right away even throughout the entire production cycle, something a complete change of fleet can not bring as that takes time.

Indeed, you proposal would take far longer and take far more investment.
On top, it would probably have to be combined and accompanied by much more of a real volume strategy than what they have been doing; I wouldn't want to see the financial results of such a strategy in today's climate, but the manager in me tells me not to sign this off!

They should have stopped focusing too much on cutting insignificant costs and should have refused to roll out the now famous slimseats. They should have waited a few months until they received the first feedbacks from the customers of other LH airlines prior to installing them.

Whatever your personal opinion about the new lufthansa seat, there is clearly no commercial handicap from it, given passenger numbers are up despite the consolidation strategy, so I fail to see the problem you think you have discovered here? None, in my view....
There may be a lot of whiners to find for sure, but nobody is walking away from it, because everybody is just looking at getting the best deal in the end and the new seat helps make that possible.

Instead of installing those low cost airline seats, they should have gone with an upgraded business class product and marketed it as "the best business class in Europe" and added Q400's to configure them 6C/66Y or even 12C/54Y on business heavy destinations like GVA. Many business travelers would have used BRU as an alternative hub for intra-EU travel if the product was the best any airline in Europe could offer.

The business community is not going to return to C class on short haul, forget it.
You are dreaming about rebuilding the Crossair product of 20 years ago, which I knew well, because I often used it. Times have changed however, and not just in aviation. There's a reason why you don't have a Crossair clone in Europe any longer: no more market!

[BrusselsAirlines]

people are travelling for business on Easyjet or Ryanair you know. Flying 70 seat turboprops to GVA is just plain (plane) stupid. It's all about fares and competition. Maybe people are willing to pay 10% more to fly from brussels with iata advantages etc but they will not pay 200% or 300% more to fly in a business seat on a turboprop.

Why not call Dornier and ask if they can make us some 32seat jets or Canadair with 50 seats crj. Oh yes, why did those product lines have to be stopped?

If we cannot manage to fill some A320's & 330's out of brussels, we better close the airport and make it a big park.

Keep on dreaming mate.

[Air Key West]

Whatever your personal opinion about the new lufthansa seat, there is clearly no commercial handicap from it, given passenger numbers are up despite the consolidation strategy, so I fail to see the problem you think you have discovered here? None, in my view....
There may be a lot of whiners to find for sure, but nobody is walking away from it

I'm among the whiners who has walked away from it whenever possible (not always possible, but quite often one has a choice, just like with any other product). SN/LH Group have lost me as a faithful customer and I will loose my Senator status, but that's ok. I'll probalby get Gold status with AF-KL, instead (easier to get Gold with AF-KL than LH anyway). It's wrong to believe that a company can impose anything it wants and that all its customers will accept it. We may not be the majority (yet), but I cannot imagine I'm the only one who has decided to walk away (because of the seats and the general downgrade of the SN/LH Group product in Europe).

[Flanker]

The business community is not going to return to C class on short haul, forget it.
You are dreaming about rebuilding the Crossair product of 20 years ago, which I knew well, because I often used it. Times have changed however, and not just in aviation. There's a reason why you don't have a Crossair clone in Europe any longer: no more market!

Crossair clone?
Its name is Swiss International.

The Crossair of 20 years ago has nothing to do with anything I proposed.
A bit confused perhaps?

You sound like SN management.
The business community is not going to return to name-only business Class.
It works in Asia and the middle-east, why shoudn't it work in Europe?

[RoMax]

You sound like SN management.
The business community is not going to return to name-only business Class.
It works in Asia and the middle-east, why shoudn't it work in Europe?

Don't you think that IF it would work that other airlines would have already tried it? I assume you are not the only smart one in Europe that came up with the idea of (re)introducing reall business seats in Europe...
Two exemples I can think of that operated business seats in the latest years are BMI (altough only for their longer routes operated by the A32S) and Olympic Air (for their LHR flights). Neither of them proved to be a succes, Olympic Air scaled down to a regional carrier (mainly domestic) and BMI is being disambled by British Airways. Of course there are much more reasons for that, but just to point at the fact that it are not the most succesfull airlines that operated business class in their short/mid haul fleet in the latest years.

Reall business seats result in more costs (expensive seats, heavier than normal seats (even if there are less seats installed) resulting in more fuel costs) and less flexibility (not all routes need these seats, and the routes that could use them have a big variety in demand depending on the time of the day and period of the year, you can't use more or less seats for business/economy when the market asks for this, ...). This results in higher ticket prices (at least if you want to earn some money). Well face it that people/companies don't WANT to pay anymore for such expensive tickets for 1-3 hour flights.
And don't compare this with the middle east, Asia or even North America as you CAN'T compare these...

The intra-European (reall) business class era is over, accept it. If SN would be so stupid not to operate this kind of service in Europe, tough "it would work very good", than it's a quite suprise to me they do operate reall business seats in Africa with Korongo. If that's working in Africa, why wouldn't it in Europe?! Oh, right, you don't believe Korongo is working because they didn't communicate on their services while they are 'already' 3 weeks in service...

[Inquirer]

The Crossair of 20 years ago has nothing to do with anything I proposed.

From what you have been saying about your idea, you'd establish a regional network at BRU, consisting of both larger as well as smaller European towns, all of which served with high frequencies in order to allow corporate passengers to use BRU as their intra-European hub of choice for their business daytrips thanks to very short connecting times on the ground and service levels on board which are above those of the large network airlines.
That is exactly the Eurocross model from 15 years ago as used by Crossair at their Basel hub; the only difference is you'd change the Emb145 used back then with a Q400.

http://www.crossair.org/eurocross_strategy_161.htm

Eurocross worked great indeed from a passenger perspective, but it was an incredbily expensive travel option and ultimately it got an explicit prohibition in our travel policity even (as in that of most other clients), for obvious cost reasons... and that was 15 years ago!
Just imagine what the travel policies of today would be saying on this!

You sound like SN management.

Not again, please... accuse someone else of being some kind of an undercover agent!

IF I sound like them, then that's because they have it right: the business community in Europe is not going to return to ANY business class product, it's general travel policy on Europe allover these days and no company is ever going to change that (and accept the cost increase from it).

You may be offering greater frills and more comfort to your business class passengers than anybody is doing today in Europe, but you still don't offer anything of extra value to their company, and since they are the ones paying for the ticket, why should they spend much more on it than they do today? To please their employees? They do that differently, my friend: I prefer to have my bonus or be upgraded in the car policy because that's remuneration I can take home, rather than enjoy the 'privilege' to fly something like real C class on a 1 hour flight, because ultimately that's alternative remuneration I can't take home.

It works in Asia and the middle-east, why shoudn't it work in Europe?

You pretend to be the expert...
Maybe because regional routes in Asia are generally much longer than in the EU, and/or because they are using the very same planes as on long haul routes because of greater passenger volumes on regional routes?
Or maybe because of cultural differences? Maybe the asians aren't where we are yet? Fact is no company in Europe is going to accept to see its travel budget increase significantly only to pay for more frills for its staff. especially not now... your idea is stillborn, believe me, if anybody in a multinational in Europe even tries to book business class on shorthaul flying these days, he'll get shot by his direct travel report and that not because the product itself is not good enough like you constantly say, but because it just isn't the most price conscious travel solution available, and upgrading the product isn't going to solve that, you know?

[crlhub]

http://www.pagtour.net/index.php?tx_pag_pi6[uid]=6117

Le groupe Lufthansa va supprimer 3500 emplois. Brussels Airlines concernée

05 mai 2012

500 millions d'économies à réaliser pour le groupe au niveau des coûts de personnel.

Suite à la publication hier des mauvais résultats trimestriels (perte opérationnelle de 381 millions d'euros), le programme d'économie "Score" du groupe Lufthansa se traduira concrètement par des mesures drastiques au niveau du personnel: au plan mondial, Lufthansa supprimera 3500 postes à plein temps.

Sur au moins 1,5 milliard d'euros d'économies, Lufthansa entend en réaliser un tiers en réduisant les coûts de personnel, en premier lieu dans le domaine administratif. La suppression des doubles fonctions et des activités ne générant aucune valeur ajoutée pour la clientèle doit, entre autres, permettre d'atteindre ce but.

Brussels Airlines concernée ?
Aucune indication n'est fournie sur les conséquences qu'aura ce plan pour les filiales Swiss et Brussels Airlines. 11'500 des 16'800 emplois du groupe Lufthansa se trouvent en Allemagne. Selon le magazine professionnel allemand "FVW", 2500 emplois seraient supprimés outre-Rhin, ce qui signifie que 1000 le seront à l'étranger et donc une partie conséquente chez Brussels Airlines.

Travel Inside et Michel Ghesquière

[Boeing767copilot]

SN financial results 2011:

net loss: 84,886 mil.

source: NBB Centrale des bilans

[Flanker]

Even worse, SN Air Holding's shareholder's equity has reached negative territory.
How much will LH be willing to pay for a company that's worth less than 0 in accounting terms?

I'm afraid that I was right.
With this year's losses, that I anticipate to be even worse than last year's, unless some money rains from Cologne, or some other miracle, I don't see it going too far.

What will impact the financial results of this year:
+ Additional flights to Africa
- Phase out of the Avro/B737 fleet
- Phase in of A332's and A320
- Worse economic climate, lower yields
- New operations start-up expenses and losses: JFK, Korongo
- 25 million long-haul refurbishment
- More expensive C-checks in Malta
- Labour contract terminations
- Propagation of bad news
- ETS 15 million
+/- Lower oil but significantly lower euro.
+/- Introduction of Q400's... but way too small to make a difference . + it's wetlease...

My estimate at this point is a 140 million loss. Will they be able to keep servicing their debt in the winter periods where cash flow will be most compromised?

[regi]

How much will LH be willing to pay for a company that's worth less than 0 in accounting terms?

I know several medium companies ( 100-500 employees ) that were virtually bankrupt, had hardly any assets but were taken over for sums that nobody understood. And they still exist today.
But I do also know some companies that were marvellous gems, but had just a temporarely cash flow problem, and were butchered on the bank's chopping block.
You are right ( pleased to be able that we can agree again ) about using the term " accounting terms". I assume that you also know that sometimes other priorities are more important than the current bad figures.
Time will tell. You make already a negative prediction. I hope that we can say within some years "Flanker was wrong". But I am also realistic about the Realpolitk of German bookkeepers - which is utterly protectionist. See the Opel saga. If Merkel has to chose between LH or Brussels...no further comment is needed I guess.

[Tomskii]

Dont know if this is the right topic, but according to hln.be SN is receiving 25 million euros in support from the SN airholding. This might mean that SN would make a 20 million euro loss this year.

If this is true this means SN's calculations have been right. Profit is only planned to be made maybe next year but probably only in 2 years due to the fleet investment.

[Flanker]

Dont know if this is the right topic, but according to hln.be SN is receiving 25 million euros in support from the SN airholding. This might mean that SN would make a 20 million euro loss this year.

If this is true this means SN's calculations have been right. Profit is only planned to be made maybe next year but probably only in 2 years due to the fleet investment.

It's just bad journalism.
SN's equity is going to run into negative territory by the end of the year, so SN Air Holding is putting more money into SN' balance sheet. Insolvability means that the equity becomes less than zero, that you have more debt than assets.
The equity stood at 50 million on 31/12/2011, so if they need to inject 25 million to keep the equity positive, it's obviously not 20 millions that they are losing...

SN Air Holding will go deeper into negative equity, but I guess that the insolvability doesn't apply for holdings and that issues only start arising if they stop paying back the loans to the banks and lenders such as the Flemish government.

I would be marveled if they can keep the losses within the limits made obvious by this transaction and I'm very skeptic. Either way, a second cash infusion will probably be necessary in the middle of the winter. I also anticipate some start-up losses from Korongo, which would bring the holding into a quite desperate position by the spring. If LH doesn't step in and inject at least a couple hundred millions, the lenders could stop waving covenants and exercise a call.
I just don't see LH doing that after they failed to turn around BD, OS. What value is there in SN other than a strategic but decreasing value of its African operation? Sure you can yadayada about people etc... but I don't think that the board of LH gives any value to something that doesn't translate immediately into cash.
I also don't see why Gustin is adding all those A319's/A320's? They may seem cheap as lease prices are low, but it's not like the economy is going to improve in the next years, in fact we may not have reached the bottom yet. Once the economy picks up again, the NEO's will flood the markets with cheap older A319's/A320's.

So even if LH does decide to invest in SN, how are they going to turn it around? With a massive A319/A320 fleet to fly to god knows where in saturated Europe? I don't think so.
If SN wants to do better, they need to come up with something radical that both increases revenues and reduces costs. How better to do that than to improve their hard product on shorthaul, offer better frequencies and connections, fly to more regional airports, using smaller aircraft that are almost as efficient as A319/A320?
Give LH that and they may invest...

[Vinnie-Winnie]

Dont know if this is the right topic, but according to hln.be SN is receiving 25 million euros in support from the SN airholding. This might mean that SN would make a 20 million euro loss this year.

If this is true this means SN's calculations have been right. Profit is only planned to be made maybe next year but probably only in 2 years due to the fleet investment.

It's just bad journalism.
SN's equity is going to run into negative territory by the end of the year, so SN Air Holding is putting more money into SN' balance sheet. Insolvability means that the equity becomes less than zero, that you have more debt than assets.
The equity stood at 50 million on 31/12/2011, so if they need to inject 25 million to keep the equity positive, it's obviously not 20 millions that they are losing...

SN Air Holding will go deeper into negative equity, but I guess that the insolvability doesn't apply for holdings and that issues only start arising if they stop paying back the loans to the banks and lenders such as the Flemish government.

I would be marveled if they can keep the losses within the limits made obvious by this transaction and I'm very skeptic. Either way, a second cash infusion will probably be necessary in the middle of the winter. I also anticipate some start-up losses from Korongo, which would bring the holding into a quite desperate position by the spring. If LH doesn't step in and inject at least a couple hundred millions, the lenders could stop waving covenants and exercise a call.
I just don't see LH doing that after they failed to turn around BD, OS. What value is there in SN other than a strategic but decreasing value of its African operation? Sure you can yadayada about people etc... but I don't think that the board of LH gives any value to something that doesn't translate immediately into cash.
I also don't see why Gustin is adding all those A319's/A320's? They may seem cheap as lease prices are low, but it's not like the economy is going to improve in the next years, in fact we may not have reached the bottom yet. Once the economy picks up again, the NEO's will flood the markets with cheap older A319's/A320's.

So even if LH does decide to invest in SN, how are they going to turn it around? With a massive A319/A320 fleet to fly to god knows where in saturated Europe? I don't think so.
If SN wants to do better, they need to come up with something radical that both increases revenues and reduces costs. How better to do that than to improve their hard product on shorthaul, offer better frequencies and connections, fly to more regional airports, using smaller aircraft that are almost as efficient as A319/A320?
Give LH that and they may invest...

Your hatred never seized to amaze me...

High cost/premium airline doesn''t work anymore! U'r really out of touch with reality! Come and see what is happening here in the US and you'll find the answer of where the industry is going! your ideas just are totally ludicrous in that sense. You are advocating high cost high service whereas the industry is going low cost low service.

Get real please and stop the bs!

[Flanker]

Your hatred never seized to amaze me...

High cost/premium airline doesn''t work anymore! U'r really out of touch with reality! Come and see what is happening here in the US and you'll find the answer of where the industry is going! your ideas just are totally ludicrous in that sense. You are advocating high cost high service whereas the industry is going low cost low service.

Get real please and stop the bs!

The BS is all yours. The only airlines in the US and Asia (including Midle-East) that are doing well are the airlines offering premium for the money. People in Europe are willing to pay more if they get value for their extra money.
It's all about value but no one is offering it.
Tell me, how will airlines like SN survive when they offer less value for more money?

You get real!