The Brussels Airlines press conference of 30 January 2014

[Air Key West]

I have refrained from entering the SN/FR batlle field so far. However , I cannot refrain to comment to b.air's press conference. BTW I think I'm one of the few who are neither stricktly pro SN nor pro FR.
I still don't want to fly FR because I'm old fashioned and believe that one should take into account some ethics when doing business. I don't fly FR because MOL and his airline are cheaters and blackmailers.
Cheating : FR flies for instance to Frankfurt when its Hahn, 100 km further away, or to Brussels when its Charleroi (even if its called Brussels South, so why not call Antwerp Brussels North, Liège, Brussels East and Ostend Brussels West) ;
Blackmailing : If MOL does not get what he wants he threatens to leave and if he doesn't get it, he does indeed, in most instance, leave or reduce capacity.
Now MOL knew he wouldn't get what he wants at BRU. So, what is his hidden agenda ? Perhaps (or probably) MOL wants to "kill" SN ; when the airline disappears BRU will offer him what he wants to make up for the loss and MOL will arrogantly triumph again. My guess, fwiw of course.

B.Air : the question which immediately came up to my mind when I heard of the announcements at the press conference was : ok, and what's going to happen after the summer with all those seats that will become available because b.air will no longer fly to the nine new summer destinations ?
I sincerley hope that I am wrong but I think this new strategy is close to suicidal. Smaller or weaker airlines cannot beat FR on FR's own turf (basically leisure destinations and or predominantly leisure travelers).
So, let FR transport leisure pax and backpackers. Don't try to beat them. It's pointless. FR has too much brand recognition in this market segment (I know so many people who don't even care to compare fares, they automatically go to FR's web site and book FR ; and when FR does'nt have a flight on the day they want to travel, they just travel one day earlier or one day later; they don't even care to check what other airlines might offer them).

Four new b.air products without impact on b.business and b.flex ? Why remain so vague ? Does it mean four classes instead of three in the aircraft cabin (b.light with one free piece of luggage and perhaps a free glass of water and b.basic (?) with nothing except a seat ?).

And now passengers will be called "guest" ? Sorry, but in terms of hospitality, if you don't offer your "guests" at least a free glass of water, you don't know what the words "hospitality" and "guest" mean.

This reaction from b.air imho is a panic reaction and as we say in French 'la panique ou la peur sont mauvaises conseillères" (panic and fear are bad advisors).

What b.air needs is not nine new summer destinations, but modern brand new aircraft (not the CRJ LH wants to dispose of) with low fuel consumption and low maintenance costs and a network where short/medium haul and long haul feed each other, not a few summer destinations which will vanish when the Autumn comes.

[Air Key West]

P.S. (not Parti Socialiste but "post scriptum").
When I typed the last sentence of my previous post, I first used the (American) word "Fall", but changed it immediately to (the British word) Autumn, because I didn't wan to suggest an allegory : Fall will bring the fall of brussels airlines. I sincerley hope not, because it will mean again that Goliath has won. But I'm getting increasinlgy pessimistic.

[sn-remember]

Quoting RoMax
"Based on the current negative yield development on the long haul network (and not only that of SN) compared to a very positive trend on the European network, it's the right time to invest in Europe. "
Sources ?
Anyways, you don't build a l/h network on immediate ROI expectations. It takes some time to create brand recognition on new routes. Postponing the necessary steps is not IMO the right decision.
..
Quoting EBAW_flyer:
"It seems today there is more money to be made on the leisure market than on business destinations"
I have hard time believing that.

[RoMax]

and what's going to happen after the summer with all those seats that will become available because b.air will no longer fly to the nine new summer destinations ?

Most of these 9 routes will be served from May/June to August/September, during these months (especially July/August) there is a lower demand on business routes. Several routes are downgraded during the holiday months. Also WAW will not be relaunched until halfway September. And I assume some of the upgrades of existing routes such as Tel Aviv will last through the winter season as well. These 400 000 seats don't neceserally mean just additional aircraft, but also higher fleet utilisation.
Of course fleet utilisation in winter will be much lower, but these extra destinations are not going to make a terrible difference. Also mind that about every carrier in Europe has too much aircraft in the winter season, especially an airline such as Ryanair (or others that are very active in the leisure, holiday markets). That's partly why Europe is a loss making market for basicly every EU carrier, it's the art to stretch the success of the summer as long as possible.

Smaller or weaker airlines cannot beat FR on FR's own turf (basically leisure destinations and or predominantly leisure travelers).
So, let FR transport leisure pax and backpackers. Don't try to beat them. It's pointless. FR has too much brand recognition in this market segment (I know so many people who don't even care to compare fares, they automatically go to FR's web site and book FR ; and when FR does'nt have a flight on the day they want to travel, they just travel one day earlier or one day later; they don't even care to check what other airlines might offer them).

I think this is too much seen as a direct war against FR. It partly is of course, but SN is not going to launch such routes without knowing they CAN succeed (not saying they will), certainly not with support of LH. As has been the case with many Southern European routes that were (re)launched in the last 2 years, SN most of the times has lucrative contracts with touroperators such as for example Club Med, Thomas Cook,... I'm quite sure SN has at least for the majority of these destinations some very attractive contracts that cover the costs (or a large share of the costs).

This reaction from b.air imho is a panic reaction and as we say in French 'la panique ou la peur sont mauvaises conseillères" (panic and fear are bad advisors).

SN has been working on this for much longer than just since they knew FR was comming. But it obviously speeded up things, though I wouldn't call that a panic reaction.

[RoMax]

Quoting RoMax
"Based on the current negative yield development on the long haul network (and not only that of SN) compared to a very positive trend on the European network, it's the right time to invest in Europe. "
Sources ?

What about SN itself? Or maybe LH? ...

Anyways, you don't build a l/h network on immediate ROI expectations. It takes some time to create brand recognition on new routes. Postponing the necessary steps is not IMO the right decision.

Indeed a l/h expansion is not based on immediate ROI, true. But why is it always a story of OR Europe OR l/h...? No SN didn't announce long haul expansion today, but that was not expected, was it? It has been said for months that for the time being their would be no immediate long haul expansion. Why? Why first Europe? I'm not going to repait what I have already said numerous times.
With the upcomming Vueling and Ryanair bases it was time for SN to show what they can offer in Europe.

Quoting EBAW_flyer:
"It seems today there is more money to be made on the leisure market than on business destinations"
I have hard time believing that.

If you don't believe it, you should look at the latest results of (big) companies focussing on the leisure market. As long as you have the right partners and the right customer base (not necessarily that of SN, could also be that of touroperators with which they are working), yields on the leisure market are quite good in the summer season and bookings for summer 2014 are very promising.

[brusselsairlinesfan]

I am very pleased with this significant move from my favourite airline ! Support and success to brussels airlines !

[Air Key West]

OK, RoMax, I can accept some of your points (like SN has some good contracts with tour operators which will make the flights profitable, but...for all nine new destinations ?). OK, I'm prepared to leave them the benefit of the doubt.
But if

SN has been working on this for much longer

why is everything still so vague ? I mean the "new" products. The fact that it's still pretty vague, to me suggest (and there I will disagree with you) that it was prepared after FR's announcement about BRU. The only thing that SN has been working on for much longer is certainly most of the summer destinations for which they negotiated good contracts with tour operators. The vagueness of the information on new products suggests that this is very recent and they don't know the details themselves. And if you are right and it has been on the table for quite a while (which, I admit, is possible since I don't have any proof to the contrary), it shows again that b.air's management(and shareholders including LH) are too slow and without a vision (yes, I dare to say that LH has no clear vision AT THE MOMENT for b.air).
B.air needed a shock (like FR at BRU) to be pro-active.
I cannot imagine, for instance, that they were not aware that their web site is pretty disastrous. I and other members here on the forum have said that we occasionally booked SN flights on the LH web site, because it was not possible to book them via SN (open jaws for instance). I cannot imagine this was not relayed in one way or another to b.air, but they remained deaf or blind, or are now looking to hire the right people, a webmaster and a Web Quality Assurance Analyst (if the info on Brussels Airport web site is up-to-date) :
http://www.brusselsairport.be/fr/jobs/community_jobs/
And if b.air already has recruited these people, why are the jobs still advertised ?
As I have said before, b.air is an airline run by amateurs (but fortunately has good pilots and flight attendants) trying to compete with an airline run very efficiently (also with good pilots and probably good flight attendants - for the flight attendants, I say "probably", because I never "experienced" them).
If you're a small modest football team (won't name any), it's not impossible, but yet highly unlikely you will win from Manchester United playing on its own turf. I'm very sad and would rejoyce if I am proven wrong in the end.

[RoMax]

why is everything still so vague ? I mean the "new" products. The fact that it's still pretty vague, to me suggest (and there I will disagree with you) that it was prepared after FR's announcement about BRU. The only thing that SN has been working on for much longer is certainly most of the summer destinations for which they negotiated good contracts with tour operators. The vagueness of the information on new products suggests that this is very recent and they don't know the details themselves. And if you are right and it has been on the table for quite a while (which, I admit, is possible since I don't have any proof to the contrary), it shows again that b.air's management(and shareholders including LH) are too slow and without a vision (yes, I dare to say that LH has no clear vision AT THE MOMENT for b.air).

I said they were working on it already before the Ryanair announcement, but also said they speeded up the launch/announcements because of Ryanair. A new product is not something you do in a few months. That takes very thorough market analysis and very extensive evaluations. That's a major decision that is not taken in just 2-3 months (ranging from the start of the evaluation/ideas to the announcement), not at all, impossible. If an airline does that, they are stupid (or a great wonder), simple. Why is it still vague and do they say that they'll announce the details at a later moment? As I said, they speeded up the announcement because of Ryanair. Besides, if you have lots of news to announce, it's not such a bad thing to announce it spread out over a longer period, it keeps the attention at your own company when the media tries to put their focus on another.

I cannot imagine, for instance, that they were not aware that their web site is pretty disastrous. I and other members here on the forum have said that we occasionally booked SN flights on the LH web site, because it was not possible to book them via SN (open jaws for instance). I cannot imagine this was not relayed in one way or another to b.air, but they remained deaf or blind, or are now looking to hire the right people (if the info on Brussels Aiport web site is up-to-date) :
http://www.brusselsairport.be/fr/jobs/community_jobs/
http://www.brusselsairport.be/fr/jobs/community_jobs/

The website is one of the things I don't understand either. But it is not like they don't realise it needs replacement. Do you remember their announcement about a new website quite some time ago? They also put some previews at their facebook page and the new website even went online for a short moment. But it was back offline quite soon and since then they have been working on it...why it took so long? I don't know, but I firmly agree the website is long overdue.

As I have said before, b.air is an airline run by amateurs (but fortunately has good pilots and flight attendants) trying to compete with an airline run very efficiently (also with good pilots and probably good flight attendants - for the flight attendants, I say "probably", because I never "experienced" them).

LH doesn't seem to agree with you. The current management is basicly how it has been put together (approved) by Lufthansa. Some have been replaced over the years or switched positions, some came from other parts of the LH Group and left again after leaving their knowledge behind. In my opinion the management of SN has made crucial mistakes over the past decade, many of them between 2005 and about 2011-2012, but I can't say that of the latest few years actually (at least no major strategic mistakes).

And LH has no vision about SN? I don't agree. It's not because, contrary to the LH under the previous CEO, they now take the cautious approach, they have no vision. They have been working with SN behind the screens but the prime task for SN was to reduce their costs and make crucial investments in the long haul product in which they succeed (costs were down 10% over 2013 and the long haul passenger satisfaction is about the highest in the Star Alliance based on the internal Star surveys). Now it's time to take the next steps, one of them is an updated European product, a new online product (which is indeed long overdue) and maybe long haul expansion (it has still been said by the VRT for example that SN will add another A330, it was just not said when and today at the press conference they didn't talk about long haul, that doesn't mean LH and SN are not working on it, but long haul is something that has to be decided not only with LH but also with Swiss, Austrian, Atlantic++ partners, and with the drop in yields in Africa in 2013, I can imagine they are cautious).

Btw for example the dedicated loyalty program they talk about for Europe. I have to see the details, but that could be a great hit. Miles&More is not attractive anymore for passengers that fly within Europe only, a dedicated loyalty program for pax who mainly (only) fly within Europe could be very attractive for numerous frequent flyers.

[airazurxtror]

I have just seen Mr Gustin on the RTBF news.
I don't doubt that Mr Gustin's press conference was most interesting for those who were there - but on the TV, it's appalling.
With all due respect, he should hire a coach to teach him how to dress, how to behave and how to speak in front of the cameras. No, it's not unimportant.

[FlightMate]

I quite like that idea of opening new routes. Specially as the frequencies seem not too risky. I mean, once or twice a week to leisure destinations, more to business ones.

What I criticize, is how the strategy keeps on changing. Cutting frequencies, cutting service, adding routes, adding frequencies, improving service, ...

Well, at least now, I trust they are on the right track, specially as this is with LH money

Now replacing the 330 would be nice. Flying brand new reliable, fuel effective planes is most needed to beat the competition.

[convair]

I think i can agree with most of the comments made by RoMax.
Air Key West says SN is reacting out of panic. I believe the plan announced today has been under preparation for some time. But maybe the 4th product they mentioned (probably an "LCC" class) was prompted by the FR arrival, hence the "vagueness" on its content.

Some members here see the current move as a big risk for SN. Well, let's put it in perspective.

If you forget for a moment the WAW flights that will only (re)start in September, the 10 other destinations will be served by a total of 22 weekly flights. Now, Ajaccio, Bastia, Cagliari and Figari (+ Lamezia Terme which seems to have been dropped now) were served every week-end last summer by SN-operated charter flights; even Athens saw a few SN charter flights. My guess is there was a total of about 10 SN-operated charter flghts every summer week-end. If you deduct those from the 22 "newly-announced" ones, the real addition is 12 weekly flights, or 19 if you take into account the additional daily Madrid flight; that merely requires slightly more than 1 aircraft I believe. They say they will order 2 immediately, so part expansion, part replacement. And if the "new" flights are partly filled with tour operators' customers, it's a good plan.

It looks to me to be sound policy.

[FlightMate]

Yes, 2 extra aircraft is not too risky. I would have been worried if they had announced an order for 20 a320.
And anyway, as I said, as long as it is with LH's money...

About the new product, a very basic fare with à la carte options? If they offer the same prices as ryanair, that'd be nice. Good way of making money with 'hidden charges' as well

[Flanker2]

Let's summarise what was announced:

Good stuff
TLV increase in frequencies: it's a healthy route and no LCC competition (yet).

Mixed feelings
-A319/A320 to replace RJ100's. I would have preferred a more comfortable option with Q400's but I'm relieved that they didn't go with the CS100, which would in my opinion have offered no advantages over second hand A319/A320's on top of the longer wait.
-WAW was dropped because it was not profitable. Now they're going back, allbeit this time with larger aircraft.
I think that Warsaw was one of those routes that they shouldn't have stopped operating, but I also think that a daily A319/A320 isn't the way to do it, given the amount of competition on this route.

Less exciting stuff
-CAG, Bari and CTA will be a bloodbath for SN. Even 2 weekly on CAG, it will be too hard for them to compete against FR out of CRL. Also note that FR covers AHO as well out of CRL and EIN. If travelling to Central Sardinia both AHO and CAG are equally good options. FR owns the Sardinian market now.
-Malta is already well-covered by Air Malta, FR flies there from EIN. I doubt that there's any room for SN even for 2 weekly seasonal.
-Corsica, despite the tour operators and the incentives from Corsica itself, even the LCC's don't see much of a market except domestic within France.
-Even if some of these routes break-even, how do you get rid of the extra capacity in the fleet during the winter?
-The risk isn't that big? It's not that bad, but we can anticipate them to widen their losses from their current 50 millions due to FR and VY on the other routes where they are going to compete. So isn't this a waste of resources that generates only risk and at best maybe (big maybe) a marginal profit?

The sad stuff
"LH are investing 100 millions over 3 years for these routes". What does this mean exactly? Does this mean anything?
Does it mean that LH is going to sponsor these routes for 3 years and compensate the losses that SN will take on them? Or pay all expenses of operating these routes so that all revenues are pure profit for SN?

I'm sad, not because they didn't announce new longhaul expansion plans because that wasn't anticipated, but because they're wasting 100 millions (?) for something that has no solid foundations, that they could have invested in more solid longhaul, which would have made them both less vulnerable to FR and VY because of feeding (afternoon wave). For instance by starting routes to Asia, they could have strengthened their African network while at the same time slowing TK's momentum in Africa, differentiating their offer in an area that no LCC could compete and even bite a leg off the Dutch swan who relies a lot on that market.

If they did that by adding for instance 5 A332's for Asia, the replacement of the RJ100 by A319/A320 would have been more natural.
Last but not least, based on past results, it will take more than 33 million euro's a year to keep SN alive.

[Stij]

What I conclude:

- a cautious expansion of the "core" offer: extra / new flights to MAD, WAW and Krakow. (equivalent of 1 aircraft)
- a fleet optimization during the summer weekends with leisure flights (probably in corporation with tour operators.
- the 4th offering: combine standard Lufthansa with Germanwings service levels in 1 aircraft.

In 3 words: expansion, optimization and differentiation.

I applaud!

Stij

P.S. 1 suggestion: can't we optimize the fleet during winter weekends as well with flights to Sion, Chambery, Salzburg and Innsbruck?

EDIT: "words" added

[teddybAIR]

adding 400k extra seats might seem like a risky move, but if you do it by replacing an avro fleet by an airbus fleet, then those 400k extra seats are almost free extra capacity as the avro's gozzle as much as an airbus.

[Airbus330lover]

1 suggestion: can't we optimize the fleet during winter weekends as well with flights to Sion, Chambery, Salzburg and Innsbruck?

Quite a very good idea....
Sion ans Salzburg should be a very good idea....

[FlightMate]

Now that SN is starting an official war against FR, it'd be interesting to know if they can compete.

In order for them to have a clear win, they need to drive FR out of Brussels, by stealing them their pax and making Ryanair lose so much money they can't withstand the competition.
I don't see that happening.

Is the market big enough in Brussels for SN and FR to share?
If not, can FR and SN be successful with 50% loadfactor?
If they stick with the same yield management, Ryanair will be cheaper initially, until the planes fill up, then SN will be cheaper until they fill up as well, etc...

In the end, victory will go to the one that can sustain losses the longest.

They will both operate same planes. FR has got deeper pockets, but SN can count on LH for more money.
Taxes will be the same. Difference will be in operating cost (for which I believe FR has a clear advantage).
Service won't make the difference (specially as for leisure destinations, people will fly the cheapest, FR or the new SN's basic)

Is it really a good tactic to compete head-on with THE No1 budget carrier in Europe? On their turf?
Knowing FR's CEO, I don't see him surrender quickly, it will be a looooong battle.

[sn26567]

-WAW was dropped because it was not profitable. Now they're going back, allbeit this time with larger aircraft.
I think that Warsaw was one of those routes that they shouldn't have stopped operating, but I also think that a daily A319/A320 isn't the way to do it, given the amount of competition on this route.

WAW will be operated by AR1.

[YYZ727]

Now that SN is starting an official war against FR

This is also how it is perceived in the Flemish press.' De Standaard' of this morning has a cartoon on the front page showing an F-35 in Brussels Airlines colors ready to engage a Ryanair 737, all this under the title 'Luchtgevecht op Zaventem' (Dogfight at Zaventem).

Anyhow, i think it's a good thing that SN switched from a tactical survival mode to a strategic attack mode.
Growth is the only way to go, though i have some doubts that an all out attack on FR is the right way to do it. FR's war chest will be a lot deeper than SN's.
I've seen some comments in this thread saying that SN should focus on long haul first. I don't agree with this. Most of the strong long haul networks are built on a solid home turf. Even PanAm couldn't survive without the short haul. (And their acquisition of National was too little, too late...)

[YYZ727]

Also in the Standaard there was a small insert focusing on the Washington-route. It said Brussels Airlines wasn't doing as good as expected on this route and that they might try changing the flight to a morning flight.
Was anything about this said at the press conference, or was it just the good news ?