Brussels Airlines future and financial perspective

[RoMax]

According to a Twitter post (by Edward Russell, a name I remember from flightglobal for example), Simone Menne (member of the Executive Board and CFO of Lufthansa AG) said Brussels Airlines could make a tentative narrowbody replacement decision by the 3rd quarter of this year. She was also one of the LH executives that commented on the full acquisition of SN by LH once they return to profitability.

So I assume this is about the RJ100's?

https://twitter.com/e_russell/status/316560113278271488

[OO-ITR]

According to a Twitter post (by Edward Russell, a name I remember from flightglobal for example), Simone Menne (member of the Executive Board and CFO of Lufthansa AG) said Brussels Airlines could make a tentative narrowbody replacement decision by the 3rd quarter of this year. She was also one of the LH executives that commented on the full acquisition of SN by LH once they return to profitability.

So I assume this is about the RJ100's?

https://twitter.com/e_russell/status/316560113278271488

Let's start guessing (maybe in another thread) about the choice of replacement for the RJ100's. i would bet for CSeries...

[RoMax]

Lufthansa doesn't stop talking about Brussels this week. Now it was Lufthansa UK's turn. They said Glasgow-Brussels may the next step in their expansion in Scotland. It "might be an option in the future". Direct flights to Frankfurt and Munich are also possible.

Currently they don't serve Glasgow, but soon their EDI-DUS flights will be replaced by DUS-Glasgow flights. This decision was taken because EDI-DUS could cannibalise the EDI-BRU and EDI-FRA flights in the case they would want to connect DUS year-round instead of summer only as has been the case before.

http://www.scotsman.com/news/transport/ ... -1-2860681

[RoMax]

http://www.businessweek.com/news/2013-0 ... -costs-cut

"First-quarter costs, excluding fuel, were 10 to 15 percent below the prior year’s level, Gustin said in an interview at the CAPA Centre for Aviation conference. While cost reductions met goals, revenue growth was more of a challenge"

" “What we have seen so far is we are on plan,” Gustin said. “Our performance so far was much better than last year.”

Brussels Air’s European network, which was largely responsible for last year’s losses, has shown signs of recovery, Gustin said. "

[RoMax]

Harry Hohmeister, the current ceo of Swiss, is rumoured to become member of the board of directors of Lufthansa as director of LH's foreign airlines (including SN).
Currently Stefan Lauer represents Swiss, Austrian and SN in the board of directors of Lufthansa, but he does this besides his main job of personnel director. He leaves at the end of June and Lufthansa wants to replace this function with a full time director function instead of a second job. Harry Hohmeister is rumoured to be the top favorite to become the new director of foreign airlines. The coo of Swiss would probably replace him as ceo of Swiss.

http://www.delloyd.be/Article/tabid/231 ... fault.aspx

[convair]

A good number of comments made under the recent "JetAirways out of BRU" topic would have their place here as well, so I'm starting with a general comment: it may not always be the case but contributors seem to all agree on one thing: SN needs to move, and rather faster than LH is allowing today. And first of all they need more and, hopefully, newer aircraft.
We all know that they will not have the means to expand very fast though, but, if they are close to reaching breakeven today, they would certainly consolidate their finances with some more l/h flights.

On the AFI front, I (imho) think they should add one daily to East-AFI so as to serve the current 4 destinations on a daily basis, and possibly increase some of their triangular frequencies to the West.(i.e. +2)
On NA, assuming they do add EWR next year, they should then go for Boston and YUL.(i.e. +3)

This leads to a total of 5 additional l/h aircraft, ideally within the next 2 years. Is this really too much to ask from mother LH?

[Passenger]

A good number of comments made under the recent "JetAirways out of BRU" topic would have their place here as well, so I'm starting with a general comment: it may not always be the case but contributors seem to all agree on one thing: SN needs to move, and rather faster than LH is allowing today. And first of all they need more and, hopefully, newer aircraft. We all know that they will not have the means to expand very fast though, but, if they are close to reaching breakeven today, they would certainly consolidate their finances with some more l/h flights. On the AFI front, I (imho) think they should add one daily to East-AFI so as to serve the current 4 destinations on a daily basis, and possibly increase some of their triangular frequencies to the West.(i.e. +2). On NA, assuming they do add EWR next year, they should then go for Boston and YUL.(i.e. +3). This leads to a total of 5 additional l/h aircraft, ideally within the next 2 years. Is this really too much to ask from mother LH?

Allow me to disagree with your quote "...but contributors seem to all agree on one thing...". It's not because some repeatedly say that Brussels Airlines has structural problems like "old" fleet and lack of expansion will, that this is the truth.

May I remember that "all contributors" here also agreed that Newark must become the third destination:

So the consensus here is that the next US destination will be EWR

Actually, the anonymous poll isn't confirming "the consensus":
viewtopic.php?f=32&t=50534

[RoMax]

http://www.businessweek.com/news/2013-0 ... rica-fares

Interesting article, some key points:

"Deutsche Lufthansa AG (LHA)’s Brussels Airlines unit said ticket prices and revenue on the African routes in which it specializes face a squeeze as rivals including Turkish Airlines pour capacity into the continent.
The carrier had forecast 5 percent sales growth in Africa this year and now faces a decline, while yields, a measure of revenue-per-seat equating to fares, are also under pressure."

“Africa is still very strong, but not as strong as we had expected,” Gustin said. “Everyone is talking about the new competitors, especially Turkish. We suffer a lot from them.”

"Gustin said passenger numbers on African routes this year should still exceed 2012’s total of 716,000 -- which represented an 11 percent increase -- and that Brussels is defending its market, albeit at a cost of lower average fares all round."

“Africa is about growth,” Gustin said. “There is a middle class developing and people want to travel -- have to travel -- for business. If we don’t invest the others will eat us up.”

"The Belgian business aims to lift overall sales 3 percent this year, less than half the pace of the 7.4 percent gain to 1.11 billion euros in 2012. It projects an annual operating loss as high as 20 million euros, before a net profit in 2014.
Still, Lufthansa CEO Christoph Franz said March 15 that progress at Brussels has been “decidedly gratifying” and that the unit had the potential to become a “new pearl” in the group."

“Being in Africa only, with just four aircraft like we did five years ago, isn’t sufficient,”

"The overall fleet could increase from 39 planes to 50, with 12 BAE Systems Plc Avro RJ100 regional jets replaced either by more regional aircraft or a choice of larger Airbus A320-family jets -- of which Brussels already has 19 -- or the Bombardier Inc. (BBD/B) CSeries model that Lufthansa is buying for its Swiss unit." (the 39 is excluding the newest addition of OO-SFU and without the 5 Q400's)

"Brussels has drawn 45 million euros of a 100 million euro Lufthansa loan, and may not need the rest, with restructuring ahead of plan thanks to lower fuel costs and a more favorable dollar-euro exchange rate. First-quarter productivity improved 15 percent on a new labor agreement and fleet streamlining."

Clearly, keeping their strenght in Africa is very difficult, but that's not supprise. Though he (Gustin) says it himself, that they will be eaten if they don't grow with the growth of the African market, he still says they will grow with "about one aircraft per year" towards about 12 aircraft which are also said to be needed for growth in North-America.

[Flanker2]

I'm glad to see that some reality is starting to kick in at SN top management, at least regarding Africa.
Gustin is finally starting to see clearly what many of us here have been predicting since several years... SN is under pressure in Africa and will lose their market share very fast if they don't act. Adding one A330 per year isn't going to make any difference.

"The overall fleet could increase from 39 planes to 50, with 12 BAE Systems Plc Avro RJ100 regional jets replaced either by more regional aircraft or a choice of larger Airbus A320-family jets -- of which Brussels already has 19 -- or the Bombardier Inc. (BBD/B) CSeries model that Lufthansa is buying for its Swiss unit." (the 39 is excluding the newest addition of OO-SFU and without the 5 Q400's)

Regarding short-haul, the awakening isn't there yet.
The CS100 is a beautiful aircraft, but it's not made for SN. The CS300 could be a good choice if SN can also replace part of the A319 fleet with it, but seeing how cheap the leases are on A319/A320 currently, and given SN's relatively low monthly utilisation, the figures for the CS300 don't make much sense.

With the NEO around the corner, the market is going to be flooded with non-NEO's at cheap lease rates.
With ESG1 already approved, these frames can serve longer as well.

I still think that SN should downsize several of their short-haul thin routes/sectors to where they can get optimal yields and offer frequencies. It's easier to say than do, but in SN's case, it doesn't quite make sense to put CS100's alongside marginally larger A319's, especially if the lease rates are going to be higher than the A319's. Where will the benefit come from?

IMO the Cseries will be a death sentence for SN. The MRJ will be a much better suit and if they confirm their rumored second assembly line, SN could get earlier deliveries of MRJ90's, which are perfect in both size and efficiency. Rests to see whether they can negotiate a good price for them.

[cnc]

With the NEO around the corner, the market is going to be flooded with non-NEO's at cheap lease rates.
With ESG1 already approved, these frames can serve longer as well.

your "around the corner" is still a few years away, should they wait that long?

[Flanker2]

With the NEO around the corner, the market is going to be flooded with non-NEO's at cheap lease rates.
With ESG1 already approved, these frames can serve longer as well.

your "around the corner" is still a few years away, should they wait that long?

The NEO is surprisingly close (even though it feels so far to me as well).
Planned introduction is October 2015, which is only 16 months from now. That's less than a few years.

The lease markets for the OEO starts to factor the NEO a bit sooner already.

[cnc]

With the NEO around the corner, the market is going to be flooded with non-NEO's at cheap lease rates.
With ESG1 already approved, these frames can serve longer as well.

your "around the corner" is still a few years away, should they wait that long?

The NEO is surprisingly close (even though it feels so far to me as well).
Planned introduction is October 2015, which is only 16 months from now. That's less than a few years.

The lease markets for the OEO starts to factor the NEO a bit sooner already.

yes but it will take a few years before the market gets flooded with regular A320 which the NEO will replace.

[Flanker2]

About 30 aircraft per month from the first month... that's just huge.
(Airbus will still produce OEO A319/A321's until those are NEO'ed)

The effects can already be felt on the lease markets. Lessors have decreased lease rates on 48 months and 72 months contracts considerably to place their in-service or stored OEO aircraft within an acceptable period.
Every month the aircraft are parked, it's lost revenue and storage costs for the lessors.

An interesting article on this subject:
http://www.ascendworldwide.com/download ... entary.pdf

According to the above article, at any given time there are about 200 usable aircraft in storage, and even more are still in operation but looking for new owners/operators before lease expiry.
In Q4 2012, only 42 aircraft were removed from storage or switched hands.
The NEO will flood the OEO market with an additional 25 aircraft per month and rising, compared to this low placement rate.

[cnc]

interesting

[RTM]

Planned introduction is October 2015, which is only 16 months from now.

Lets say it is 28 months.

[Flanker2]

I meant to say 26 months... I need a maths refresh course

[sn26567]

An interesting article from Bloomberg's Business Week that says that Turkish Airlines is hurting the Africa fares of "Lufthansa's Brussels arm". Hereunder the main points of this article:

Lufthansa Brussels Arm Sees Turkish Air Hurting Africa Fares

Deutsche Lufthansa AG (LHA)’s Brussels Airlines unit said ticket prices and revenue on the African routes in which it specializes face a squeeze as rivals including Turkish Airlines pour capacity into the continent.

The carrier had forecast 5 percent sales growth in Africa this year and now faces a decline, while yields, a measure of revenue-per-seat equating to fares, are also under pressure, Chief Executive Officer Bernard Gustin said in an interview.

Turkish Airlines (THYAO) is among a clutch of high-growth operators led by Dubai-based Emirates that are adding African routes to feed their hubs. Like Lufthansa, other major European carriers are also tapping historic ties to win custom as a commodities boom boosts demand in the least-developed travel market.

Local companies are likewise seeking a bigger traffic share, with Ethiopian Airlines Enterprise, the No. 2 sub-Saharan carrier, saying last week it plans a transfer hub in the Congo.

Gustin said passenger numbers on African routes this year should still exceed 2012’s total of 716,000 -- which represented an 11 percent increase -- and that Brussels is defending its market, albeit at a cost of lower average fares all round.

“Africa is about growth,” Gustin said. “There is a middle class developing and people want to travel -- have to travel -- for business. If we don’t invest the others will eat us up.”

The African network offered by Brussels Air was one of the attractions of the company to Cologne-based Lufthansa, Europe’s second-biggest carrier, and it’s vital that those routes be “integrated in a general Africa strategy,” he said.

Lufthansa’s overall African seating accounts for only 5 percent of the company’s total offering, versus 12 percent at European No. 1 Air France-KLM Group (AF), according to Goldman Sachs.

Africa failed to contribute growth at Lufthansa last year, with sales down 7.2 percent to 605 million euros ($803 million) -- making the region the smallest of the six for which the company breaks out figures and the only one to show a decline.

Brussels has posted cumulative operating losses of more than 170 million euros since Lufthansa’s 65 million-euro investment in 2009, and the German company has so far failed to take up an option of buying the remaining 55 percent of stock.

Still, Lufthansa CEO Christoph Franz said March 15 that progress at Brussels has been “decidedly gratifying” and that the unit had the potential to become a “new pearl” in the group.

http://www.businessweek.com/news/2013-0 ... ource=t.co

[RoMax]

An interesting article from Bloomberg's Business Week that says that Turkish Airlines is hurting the Africa fares of "Lufthansa's Brussels arm". Hereunder the main points of this article:

Thanks for sharing, but did you notice that I already shared it earlier this week (which resulted in the small discussion about fleet replacement)

[sn26567]

Thanks for sharing, but did you notice that I already shared it earlier this week (which resulted in the small discussion about fleet replacement)

Oops Sorry: I was away most of last week without Internet access.

[Boeing767copilot]

New management structure at the helm of the Brussels Airlines Operations Department
A new management structure will be set up for the operational departments at Brussels Airlines, directly reposting to Bernard Gustin, CEO of the airline and legally responsible for the activities of the company. Peter Kranich, the current COO, is leaving the company in consultation with the management, after having shared his expertise and commitment. Dirk Vrebos and Thibault Demoulin, both already Brussels Airlines employees, take over the helm from October 1st.

http://brusselsairlines.prezly.com/new- ... department