Brussels Airlines new plan

[Inquirer]

So do I get this right, flanker2?
Do you want to make us believe lufthansa is as stupid as to give 100 million euro through an unsecured loan?
Just how stupid do you think they are in Frankfurt?
Or alternatively: just how stupid do you think the people reading this site are?

May I remind you that it was you who pointed out brussels can never repay its loans, yet somehow you have no problem to suggest lufthansa would just add another 100 million to its debt ceiling, without any securities nor a plan on how to get their money back? Doesn't sound very credible as a claim, IMHO.

And the excuses you come up with for this intelectual weakness:
1) recovering 100 million through maintenance work?
My god: they actually do the work contracted, don't they?
I admit I don't know how much a C check costs, but even if they overcharge for it (do you have proof of this?), how long does it take to regain 100 million plus the capital expenditure? 50 checks? 100? Forever?
2) Lufthansa could easily recover its 100 million through a liquidation process?
From what assets exactly?
And just how does that all match up with your first statement then, about them being unable to repay their loans?

Allow me to say there's something quite wrong in your thinking, I am afraid.
It really shows some are a little bit too eager to see this company fail, and your analysis above cetainly shows signs of it.

What I see here is a company that has just improved its financial position by probably some 200 million euro (if one is to assume that the historic creditors have made a similar gesture as lufthansa, which seems to be what tolipanebas is hinting at, but confirmation would be appreciated) and which has tentatively been taken over by lufthansa in the process: I'd say there are far worse deals to strike and you can do all the math you want, but you clearly completely misjudged the commitment of all stakeholders to this airline, which is the only thing which really matters in the end if you want to predict the next step, doesn't it?

Just to show you a calculator is an indispensable tool for sure, but feeling is even more so when trying to read a business.

[teddybAIR]

Thought I'd contribute by just adding some superdry facts & figures in the discussion:
Net result (code 9904) Brussels Airlines (BE 0400.853.488)

2011: € -79,7mio net result
2010: € +5,2mio net result
2009: € -39,8mio net result
2008: € - 6,8mio net result
2007: € +25,6mio net result

Source: Nationale Bank van België (Jaarrekeningen)
Remark: Merger with Brussels Airlines Fly accounted for (since 2008)

[airazurxtror]

Wasn't SN Brussels Airlines at the time of the start up supposed to go bankrupt after 6 months??? NEWSFLASH, they are still around.
And guess what? People are talking about the great new cabin, the excellent service on board, they are winning awards...
something else than a certain airline [with] employees telling about getting bullied and forced to do things they dont want to do.

Brussels Airlines is not yet bankrupt ? What a performance ! Surely, they are to be congratulated for such an achievement !
And they are also much talked about (but not winning awards) for their financial worries rather than for their profits ...
The SN employees of SN were also bullied into doing things they didn't much want to do : namely work part-time with a corresponding loss of revenue ...

[Airbus330lover]

flanker2(ex NCB, flanker and current airzurxtor too),

Not bankrupt and expanding LC network.
Are you so angry ?

[cnc]

Just putting the Brussels Airlines' situation in realistic perspective brings out the worse from the SN supporters, as amply demonstrated here above.
Are those guys so desperate ? Yes, and one can understand them : the situation of their favorite loss-maker airline is also rather desperate ...
Let's not be too harsh with them : they need all the compassion they can find !

you retard you have no realistic perspective...
and im not pro or contra SN.
its about time they ditch you from this forum

[airazurxtror]

flanker2(ex NCB, flanker and current airzurxtor too),

Not bankrupt and expanding LC network.
Are you so angry ?

Neither angry nor happy, I couldn't care less : I very, very rarely fly with them.
But : SN getting 30 millions this way, 42 millions that way, it's like in the good ol' time of Sabena, I feel twenty years younger !

[RoMax]

But : SN getting 30 millions this way, 42 millions that way, it's like in the good ol' time of Sabena

13 million/year and again, I agree they shouldn't get it BUT only when RYR doesn't get their tens of millions/year either. And the 42 million, as long as SN is able to make profit again (and yeay I know you don't believe in that, lucky enough you are not taking the decisions) they'll see their money back.
In the case of Sabena we were talking about hundreds of millions with not a single sprankle of hope it would get better in the end (so that the government would see their money back). And no, that's not like the current SN-LH case, tough you may claim it is.

Anyway, future will tell

[Tomskii]

flanker2(ex NCB, flanker and current airzurxtor too),

Not bankrupt and expanding LC network.
Are you so angry ?

Neither angry nor happy, I couldn't care less : I very, very rarely fly with them.
But : SN getting 30 millions this way, 42 millions that way, it's like in the good ol' time of Sabena, I feel twenty years younger !

It's easy to say SN gets money from the gov when FR are the kings when it comes to getting money from every government of countries they fly to.

Don't know if your dutch speaking but anyways: Soms moet men de hand eens in eigen boezem steken

[Flanker2]

FR gets government subsidies to stimulate the demand. Ultimately, the big beneficiary is the passenger, as the subsidies translate into lower fares. So subsidies that bring advantages so we can claim something from the ridiculously high taxes we pay. And yes, they still support many local jobs, many Belgian cabin crews, pilots, ground operations staff, maintenance technicians.
Some of them maybe don't pay taxes in Belgium, but they still pay rent, buy food, tank gasoline, buy clothes, etc...

SN gets government subsidies but pax still pay the same high fares.
Ok they save jobs, but for how long?

So do I get this right, flanker2?
Do you want to make us believe lufthansa is as stupid as to give 100 million euro through an unsecured loan?
Just how stupid do you think they are in Frankfurt?
Or alternatively: just how stupid do you think the people reading this site are?

I didn't say that, but you're saying that yourself:

2) Lufthansa could easily recover its 100 million through a liquidation process?
From what assets exactly?

What I see here is a company that has just improved its financial position by probably some 200 million euro (if one is to assume that the historic creditors have made a similar gesture as lufthansa, which seems to be what tolipanebas is hinting at, but confirmation would be appreciated) and which has tentatively been taken over by lufthansa in the process: I'd say there are far worse deals to strike and you can do all the math you want, but you clearly completely misjudged the commitment of all stakeholders to this airline, which is the only thing which really matters in the end if you want to predict the next step, doesn't it?

Where is that 200 million financial position improvement coming from?
Let me teach you a lesson on basic accounting.
When SN gets a 100 million loan, it doesn't improve the financial situation at all. You add 100 million in assets but you also add 100 millions in liabilities. The result is that the company is still worth the same, it just has more cash on hands.

When the government bailed out SN for 42 millions, it reduced liabilities by 42 millions with no loss of assets, so there you have a 42 million improvement.

Add another 80-100 million loss for 2012 and you wipe out that bailout and are 40-60 million in the hole.
The only thing that can still affect the balance sheet significantly in SN's case is the accounts payable and receivable. They also did some reshuffling between the holding and SN itself but that doesn't change a thing, it's just the same as shuffling between the bank accounts of the same person.

And if LH provided a secured loan it's very good for them, because if they liquidate, they are first in line to get their money back. So the pax who have paid their tickets in advance, which is usually 100 millions that SN has at any given time on their bank account, will get what's left of the rest.

LH smartly got the government to forgive part of their debt, which means less waiting in the line for LH in the case of liquidation.

One more thing: I don't know how much real estate value SN owns at resale value.
Companies amortize their real estate assets, which show them as decreasing in value on paper, but in reality we all know that real estate value usually goes up with time, if well-maintained. This always give a nice bonus when liquidating.

You want more?
An overhaul of a single A330 engine, no matter what kind, is a 2 million dollar enterprise.
C-check costs depend a lot on what kind of C-Check. On old aircraft like SN's, it's kassa-kassa.
Half a million to a million for man-hours only, count the parts that need to go out for overhauls or need to be replaced and you're easily looking at several millions per aircraft.
Sure LH has costs too, but if they were cheap, they would have used them before the LH buy-out too.

But in the meanwhile, LH is milking the lucrative BRU-FRA link all alone, while LX is milking BRU-ZRH.
Plus all the longhaul pax that they get from SN, that's all real money into LH's pockets.
That counts too you know.

[RoMax]

Ok they save jobs, but for how long?

At this moment it was the best they could do, it's as simple as that.
That's daily business, just as the PMV (same as the FPM, but than from the Flemish government) is part of the savingplan for Alfacam (had debts with the PMV, on the edge of bankruptcy, even worse than SN, but soon to be saved by an Indian holding that will own a big controling share in Alfacam, the debts with the Flemish government were swapped for shares), just to name another recent case.
Saving jobs and reducing the (possible) loss for the government, that's what they are supposed to do. Even if that includes 'supporting' a foreign company. That can turn out in a big succes or that can fail.

You are 200% convinced that the SN-story will be one of failure, others say the opposite, again: future will tell. I'm not going furter into that anymore, because you are too convinced of your arguments and that's your right for sure, but don't expect everyone to follow your opinion either.

And about RYR...when supporting the local economy and job market, there is more in it, sorry to say it, than to let the whole Belgian population fly on RYR, supported by subsidies. Of course that brings jobs and a contribution to the local economy (in special that of the CRL region), but that doesn't mean they have to forget SN, JAF, BRU, HQ,... who also offer jobs to tens of thousands of people (all these companies and their suppliers combined) and represents quite a percentage of the Belgian GDP.

[FlightMate]

Some see LH 's strategy as being similar to SR's strategy at the time of Sabena. ie milking the good routes and eventually letting the daughter company with heavy losses.

I think the situation is a bit different today.
SN is expanding, and has taken routes from LX.
Previously, SN had only a couple of BRU-FRA a day. That wasn't such a lucrative route, although fares were always huge.

But let's be realistic, LH's goal is to make money for LH's group. If that involves milking SN and letting it go bankrupt, they won't care about the rest (jobs,...)
I just don't believe it is their strategy right now.
But I agree with Flanker that by offering a loan, they saved SN in the short term, without taking a bigger risk themselves.
But I see the difference between the loan and exercising their option as, in the case of a loan, the money goes to the company to use it as seen fit. And should they exercise their option, the money would just go to the previous shareholders.

And a serious question: Any idea of how much Sabena received in state aids in the past? As we were talking in Belgian francs, still...

[cnc]

FR gets government subsidies to stimulate the demand. Ultimately, the big beneficiary is the passenger, as the subsidies translate into lower fares. So subsidies that bring advantages so we can claim something from the ridiculously high taxes we pay

i never fly FR yet i pay for it... oh yes this is very beneficent! its bad enough already i pay for the OCMW etc

[Inquirer]

Let me teach you a lesson on basic accounting.

Yes, I have noticed you really like to do that, but let me tell you there's no need for.
Your knowledge is far too limited to make any sensible comments.

When SN gets a 100 million loan, it doesn't improve the financial situation at all. You add 100 million in assets but you also add 100 millions in liabilities. The result is that the company is still worth the same, it just has more cash on hands.

May I point out to you that it is a loan not to the airline, but to its holding company?
It may be all the same to you, but there is a clear difference, notably when it comes to repayment options.
If its to the airline, then they have to repay in cash, period.
To the holding however, a share transaction can be -and often is- another repayment option and interestingly enough such a transaction was already planned: its the full take over. Add the 2 together and you can easily see how this loan to the holding company is an outright cash injection of which the liability is on the book 'pro forma' only, waiting its cancelation in the call process by a linear deduction from the total purchase price.

If anything is to be remembered from all of this, then it is that this latest discussion has shown none of us here has a good enough insight in the shareholders agreement and that as such its fairly pointless to look at just the numbers published to distil a story from it; you need to assume all sort of malicious things and last time round when you tried it, it didn't turn out to match reality, did it?
Personally, I'd refrain from making the same mistake again and just stick to the obvious conclusion, which is that Lufthansa is injecting 100 million in cash and that you have a very hard time explaining how they'd even be able to get it all back, if not through a share swap?

At just a few hundred thousand euro of possible overcharge per 1 to 2 million euro maintenance check, or maybe a few millions in unused tickets not claimed back to which Lufthansa may lay its hands on post any liquidation, you are in fact an extremely long way from explaining how Lufthansa could ever manage to recover 100 million, so your version above is science fiction only: a nice theory, but it just doesn't match reality.

If you suspect a swissair scenario to be happening all over again, you'd be looking at Lufthansa forcing Brussels Airlines to throw around as much money as it possible can, say in the area of 10 times the cash injection, so you'd have to be looking for a massive plane order or something through a Lufthansa investment branch for instance, but as far as I know, none of that happened?

What you come up with are just peanuts: at that pace it takes centuries to come up with the money (not taking into account cash expenditure), so if that's the best you can do, it's best to remain quiet, because what your contribution shows is not what is happening, but what you'd wish to be happening.

[Anonymous320]

A quick word about the "LH-loan" : It should be understood as a financial support UP TO 100 million euro. As B. Gustin himself said in one of the managment-employee meetings; the actual amount should be much lower and only used for fleet-harmonisation or fleet-investments.

Furthermore I'd like to mention that some (if not all) of the discussions on this forum, wich COULD be interesting, are rendered mute because of a pointless feud between members. Honestly, it is shameful to read poor, distorted arguments in order to attack the messenger instead of the message.In fact the message always comes down to the same: a morbid wish to see one or the other company fail.

Just something for the self-proclaimed kings of this forum to think about...