Brussels Airlines future and financial perspective

[Flanker2]

Flightmate, you are right about SN's 2 options.

My concern is: suppose that after 12 years they finally decide on a new strategy. How would they put that new strategy into realisation without a significant investment? After all, the shareholders had plenty of opportunities to make those investments in the past, but preferred to be conservative.
In my experience, conservative investors will try to cut their losses in the face of a certain decline, rather than to keep investing new money to keep the company afloat or to attempt to try a risky new strategy at the company's worst.

Put yourself in LH's shoes:
-4 years of straight losses,
-budgets exceeded significantly for 2 years in a row despite a reorganisation program.
-BRU shorthaul hub in jeopardy as Vueling and Ryanair attack.
-Lucrative Africa not so lucrative anymore, with TK to grow its capacity to Africa by 25% in 2014, while EK is preparing a bomb of its own (I'm hearing rumors).
-They managed to squeeze some money out of the Belgian government (the government earns some of that back through income taxes) but they can't keep doing that.
-2014 uncertain, budgets were not met in the past, so profit unlikely in 2014. Even with a small profit, LH must consider ROI. Too low ROI = better to put money on a savings account zum "rentenieren".
-Balance sheet worth less than zero and no potential for big earnings in the future.

These are facts, not conjecture. They are the same for everyone.
I hope that the SN fan boys finally come to the realisation that all those years of being passive will end up killing SN. I think that doing anything would have been better than doing nothing.
But who am I kidding, this is Belgium, where you can earn almost as much doing nothing as when doing something. It's not in our culture to work towards a goal I guess.

[Pocahontas]

Happy New Year you'all!

[sn26567]

Happy New Year you'all!

Indeed, Pocahontas! With the hope that Brussels Airlines will be able to tackle all the obstacles and comes out stronger at the end of the year. It is never funny to see an airline bite the dust (or go belly up), especially the flag carrier of one's own country.

[sn26567]

As usual, an interesting article of CAPA (Centre for Aviation) about "European airline restructuring: survival strategies for 2014", based on the interviews of several airline CEOs. Food for thought for SN executives:

http://centreforaviation.com/analysis/e ... 014-146503

Excerpts:

A few European LCCs make decent returns, while the majority of full service carriers (FSC) make little or no profit and several (particularly the smaller ones) are loss-making. More bankruptcies cannot be ruled out.

Steven Aliment, Bombardier VP sales for Europe, believes that his company’s aircraft can help carriers to adapt their costs. He argues that smaller FSCs need to differentiate themselves. “They can’t go head to head with Ryanair or easyJet and win. It’s impossible,“ he says. According to Mr Aliment, Bombardier can provide small aircraft with similar CASK (cost per available seat kilometre) as a Boeing 737-800 or an Airbus A320 and this can give smaller carriers a niche.

Christoph Mueller, CEO of Aer Lingus (and formerly Sabena), believes that legacy carriers missed the opportunity to outsource activities and thereby to achieve lower costs in 2009 and 2010 when many faced severe financial difficulties.

Mr Mueller appears less than optimistic on the future for smaller FSCs, noting that “alliance partners are squeezing them out”.

[Flanker2]

Interesting article.

Vueling’s Mr Cruz takes an almost psycho-analytical approach to advising smaller FSCs. “They need to acknowledge they have a problem,” he says, “[…] Once you admit you have a problem, the second step is to begin to deal with it. You have to solve the problem from within, not just say you are looking for a partner to solve it.” Perhaps inspired by the example of Iberia within the IAG group, he believes that this requires a large restructuring project. “This means pain,” he adds, “You need to realise you may lose your job…”.

This is the biggest problem at SN... people higher up don't want to admit that there is a problem with their business model...just a look around on this forum already reflects that very well.
What I wished I would see from SN is not a beyond 2012-2013 plan to get rid of useful resources without any meaningful changes to the profitability, but something like: "We're not doing good. If we continue like this, if it's not tomorrow, it's in 2 years, but it will be game over. So this is our new strategy: ...."

SN is like an irresponsible kid who instead of facing its problems, pretends that they aren't there and wait for them to go away, digging itself deeper and deeper.

Yes, that Bombardier quote sounds like alot of marketing, but I think that there is substance to it, as I have myself been repeating it forever... SN can't compete against FR and U2 with A320/B737, they need smaller aircraft to develop niches such as smaller regional destinations in neighboring countries, and strengthen their mainline routes by adding frequencies that you can't operate profitably with large aircraft.

SN's "larger aircraft with more seats for lower CASM" was a good idea on paper. But it didn't take all factors into account, such as LCC's developping into BRU and flooding it with capacity.
Unfortunately, some have seen this coming and others, including the SN management, haven't.

Maybe it's time to start saying a little bit less and listening a bit more?

The company is still standing, so it's not too late yet, but the longer they wait, the worse and more difficult it gets. I think that sufficient idea's have been provided on this forum alone that could settle SN into a niche.

[airvoltaire]

A couple of weeks ago when Brussels Airlines pilots were on strike journalist Yves Borms (VRT) said that Mr Davignon was seen at Turkish in IST. Anybody more info?

[FlightMate]

I am really worried that it is too late already.
They have their idea of how they want to do it, and don't seem to be questioning it.
They will continue to slowly add a 320 or a 330 now and then. And the day they'll realize it doesn't work is the day they'll run out of cash and LH refuses to bail them out. That day, it will be too late to come up with new ideas.

Or maybe the best thing we can wish, is another bankruptcy, a clean, fresh start, with an inovating new airline.
But that's not something to wish for the employees.

I really start to think that JAF can be THE succesful airline in Belgium. And provide work and pride to everybody.
I hope the government will consider granting them more flying rights.
Or they could try a new cooperation, partnership with SN.

[Flanker2]

That's indeed not something I wish on the staff, not even the most stubborn ones such as Tolipanebas.

I also think that it's too late for SN to make it by itself... SN in its current form can only be useful to serve as a base for a new strategy if someone is willing to invest their money into something that could work.

Unfortunately I don't think that SN can still be sold to a new investor given that no one will be interested to pay for something of such large mass that has a negative momentum in the form of repetitive negative earnings sheet and negative net assets. Oh well maybe EY could be interested because they don't know what they're doing, but LH won't ever ever let that happen. They would prefer to see SN fail.

A significant move can only come from LH, but I think that LH has had enough. Even if they support them in front of the media regarding the "turn-around" theories, I doubt that the board at LH is excited about SN's performance and future prospects.

[Inquirer]

What I retain from this is that the 3 airline exec's all camp on their own position which not surprisingly matches the strategy of their own airline all while the aircraft manufacturer tries to sell his aircraft as a fantastic alternative to pretty much everybody at the same time. No surprises.

Reality is of course that different strategies and business concepts can perfectly exist alongside each other and be successful: it's the case in retail, in hotels, in automobile and why not, also in aviation.

If you really want to relate this general article to the situation at Brussels airlines, I'd say that the way forward will have to be composed of many small and diverse measures -not just a single big change-, all of which need to be crafted and shaped to the specific needs of the airline's customers expectations and it's destinations, and what may work for route A, will not work for route B. Reality is always more complicated than the theory, be it that of a CEO or just us -Peter Pumpkinheads- on this forum, as problems always do emerge in implementation.

To relate back to the article: bombardier's CEO will not like it, but his planes were tested by Brussels Airlines and despite all his theoretical talking, they can't have been such a perfect fit as he pretends as they are constantly moved around the network and are said to be going out again this year. A nice demonstration of how the implementation of a perfectly sound theory can still give a very bad outcome in practice.

Other than that, I wouldn't read too much in these kind of public interviews: CEOs are not going to offer off the rack alternative business plans and strategies to any of their competitors, they are just going to talk about their own strategies and why they are indeed so fantastic, which is exactly what they have been doing here as you can see, so by selecting the guests, the organisation already knows what the remarks and thus the conclusion is going to be.

It's a bit like in political debates: invite VB and the economic crisis will be blamed on the foreigners and the Walloon, invite NVA and it will be on the too high taxes, invite SPa and they will point at the greedy banks, whereas the greens will tell you we need to become greener...

[sean1982]

What a naive reply, I don't know if I have to laugh or cry at your continued denial inquirer. This article exactly points out the problems that SN faces and from many different angles too. Time to wake up and smell the coffee

[Flanker2]

I think that the article mainly points out what is obvious. I think that all including Bombardier are reminding the targeted airlines that they need to work out a way to survive. So criticising the article while saving the airline's face is exactly what the said airlines are doing with their business models.

I applaud however that Inquirer finally sees that things have to change.


I find it hard to believe that the Q400 is not suitable for SN. The cargo space and new bigger overhead bins on the nextgen certainly seem to be sufficient for Ethiopian. Horizon will soon use them out of their new hub in Anchorage, Alaska, a cargo-demanding destination.

I think that between the Q400 and SN, the inflexible one is SN. They would much rather fly with half a cargo compartment empty and not have to worry than to find ways to fly with a full load.
Yep, that's the difference: 75 pax is 96% loadfactor on a Q400 but 60% on an A319... so yes, the Q400 will be all packed, the A319 will have plenty of extra room to carry air... but indeed, the A319 is much less likely to have a luggage problem.

Obviously SN isn't talking to Bombardier, because otherwise they would know that they can now get the Nextgen with 84 seats, larger overhead bins and a larger cargo compartment.

[Flanker2]

I think that the article mainly points out what is obvious. I think that all including Bombardier are reminding the targeted airlines that they need to work out a way to survive. So criticising the article while saving the airline's face is exactly what the said airlines are doing with their business models.

I applaud however that Inquirer finally sees that things have to change.


I find it hard to believe that the Q400 is not suitable for SN. The cargo space and new bigger overhead bins on the nextgen certainly seem to be sufficient for Ethiopian. Horizon will soon use them out of their new hub in Anchorage, Alaska, a cargo-demanding destination.

I think that between the Q400 and SN, the inflexible one is SN. They would much rather fly with half a cargo compartment empty and not have to worry than to find ways to fly with a full load.
Yep, that's the difference: 75 pax is 96% loadfactor on a Q400 but 60% on an A319... so yes, the Q400 will be all packed, the A319 will have plenty of extra room to carry air... but indeed, the A319 is much less likely to have a luggage problem.

Obviously SN isn't talking to Bombardier, because otherwise they would know that they can now get the Nextgen with 84 seats, larger overhead bins and a larger cargo compartment.

[Flanker2]

I think that the article mainly points out what is obvious. I think that all including Bombardier are reminding the targeted airlines that they need to work out a way to survive. So criticising the article while saving the airline's face is exactly what the said airlines are doing with their business models.

I applaud however that Inquirer finally sees that things have to change.


I find it hard to believe that the Q400 is not suitable for SN. The cargo space and new bigger overhead bins on the nextgen certainly seem to be sufficient for Ethiopian. Horizon will soon use them out of their new hub in Anchorage, Alaska, a cargo-demanding destination.

I think that between the Q400 and SN, the inflexible one is SN. They would much rather fly with half a cargo compartment empty and not have to worry than to find ways to fly with a full load.
Yep, that's the difference: 75 pax is 96% loadfactor on a Q400 but 60% on an A319... so yes, the Q400 will be all packed, the A319 will have plenty of extra room to carry air... but indeed, the A319 is much less likely to have a luggage problem.

Obviously SN isn't talking to Bombardier, because otherwise they would know that they can now get the Nextgen with 84 seats, larger overhead bins and a larger cargo compartment.

[Flanker2]

I think that the article mainly points out what is obvious. I think that all including Bombardier are reminding the targeted airlines that they need to work out a way to survive. So criticising the article while saving the airline's face is exactly what the said airlines are doing with their business models.

I applaud however that Inquirer finally sees that things have to change.


I find it hard to believe that the Q400 is not suitable for SN. The cargo space and new bigger overhead bins on the nextgen certainly seem to be sufficient for Ethiopian. Horizon will soon use them out of their new hub in Anchorage, Alaska, a cargo-demanding destination.

I think that between the Q400 and SN, the inflexible one is SN. They would much rather fly with half a cargo compartment empty and not have to worry than to find ways to fly with a full load.
Yep, that's the difference: 75 pax is 96% loadfactor on a Q400 but 60% on an A319... so yes, the Q400 will be all packed, the A319 will have plenty of extra room to carry air... but indeed, the A319 is much less likely to have a luggage problem.

Obviously SN isn't talking to Bombardier, because otherwise they would know that they can now get the Nextgen with 84 seats, larger overhead bins and a larger cargo compartment.

[FlightMate]

I truly believe the q400 would be perfectly suitable for SN. But I believe SN's management has decided for a volume strategy, and don't want to be seen as fools, admitting their mistake.

It's time for the stakeholder to say something (as I believe LH is in for the long term, longer than SN holding anyway, they should be the ones saying something).

Don't forget that SN holding only want one thing: to sell their shares, as quickly as possible, without putting more money in.

Don't forget that the ceo is only there for a few years. All he wants is make money for himself, by cutting cost. Not here for the long term!

[RoMax]

It's time for the stakeholder to say something (as I believe LH is in for the long term, longer than SN holding anyway, they should be the ones saying something).

And you think SN's management makes any significant decision without LH knowing about it and having their say in it. SN is not yet that stupid to take actions LH does not support. Network changes, fleet changes, product changes,... LH is all behind it.

If SN decides not to go on with the Q400, that's a decision backed by LH. So listening to LH is not going to help in this case, I'm afraid.

[OO-ITR]

I truly believe the q400 would be perfectly suitable for SN. But I believe SN's management has decided for a volume strategy, and don't want to be seen as fools, admitting their mistake.

It's time for the stakeholder to say something (as I believe LH is in for the long term, longer than SN holding anyway, they should be the ones saying something).

Concerning fleet decisions, FYI the main shareholder (LH) has a veto right concerning fleet decisions...

[RoMax]

Concerning fleet decisions, FYI the main shareholder (LH) has a veto right concerning fleet decisions...

And even for decisions for which they don't have a veto, but significant enough, SN is not going to make decisions LH doesn't like. SN is smart enough to realise they have to act in the way LH wants or they'll walk away for sure.

[FlightMate]

By downsizing/rationalizing the fleet, sn could be flying full on a lot of flights.

Yes, they will leave passengers behind, but as long as flights are filled up, who cares?

Can they make money if all their q400 in Europe are used as feeder, with bonus point to point traffic, while flying daily A319 or A320 to Africa?

Advantages of adding more 'long haul' planes, is they will become more reliable, with extra backup planes.
Don't know if they could find newer A319 more easily than newer a330?

Think about CX, and how they are "downsizing", by flying 777 and in the future A350 instead of their 747.
They are losing passengers to EK, but their flights are always full, so yields are up, and profit up. That's the important thing, isn't?

Of course, calculations need to be right. But SN have a 11 years history, they know how many passengers they fly, on average. they could easily come up with a type of aircraft that will be full most of the time, while being to small during peak periods. yields would automatically go up.
They just need to keep their premium pax happy, by keeping good comfort in business, good frequencies, good service, and reliability.

Come on, SN, be different!

[Pocahontas]

PAX tend to choose companies flying jets over turboprops (heard from pax, not from forum journalists). We heard people say in cabin that they were happy it was not a turboprop... We even lost pax due to the use of turboprops, TLS fe. Another big issue was the cargo and bag capacities in the hold. Way to small for African citizen size luggage (weight). They tried and it seems the trial was not a success since they already stopped the leasing contract of 1 Q400. More to come, no doubt. I think LH has a very big hand in the decision making @BruAir, far more than we know. Except if you are a high level insider offourse...