Full take-over of Brussels Airlines by Lufthansa ?

[tolipanebas]

The question here should be, CAN Lufthansa already take over Brussels Airlines?

The single most impartant thing in this context is that all bilaterals between Belgium and African countries need to have provisions in place for the Belgian designated flag carrier to be owned by a non-Belgian owner, otherwise these countries can refuse SN to operate there after a full take-over.

Now, as we all know from a different topic, the bilateral between Belgium and Senegal for instance is NOT the one under which SN has been operating for some years already, but rather a much older one because the Senegalese never officially ratified its successor treaty and were thus able to pull the 5th freedom flights from DKR... Now the question is: does this old bilataral which is the only valid one includes provisions for foreign ownership of the designated flag carrier? And are the other bilaterals already taking care of this?

If not, then LH can not take over SN for the time being, purely due to unsolved diplomatic problems...

[shogan1977]

As far as I can see - you have proven my point. Yes of course I would get 125-150% extra if I pay for business or first class fares - that is a given. But as a star alliance gold i get 150% on economy class travel if I travel LH or UA - this is not the case with BMI, SN, Swiss or Austrian...

[RoMax]

Now, as we all know from a different topic, the bilateral between Belgium and Senegal for instance is NOT the one under which SN has been operating for some years already, but rather a much older one because the Senegalese never officially ratified its successor treaty and were thus able to pull the 5th freedom flights from DKR... Now the question is: does this old bilataral which is the only valid one includes provisions for foreign ownership of the designated flag carrier? And are the other bilaterals already taking care of this?

Since Monday Belgium, Senegal, Senegal Airlines and Brussels Airlines are negotiating about a new bilateral agreement in wich Senegal Airlines and Brussels Airlines will 'help' each other to grow on the African market. I'm quite sure a full take-over of LH will be included in this new bilateral agreement.

I'm more worried about some other countries and not only in Africa but also Russia. Russia is always doing difficult when LH takes over another airline. OS for exemple has quite some flights to Russia, but when LH took over OS Russia started to see them as one single airline (same with LX btw) and by that they were treatining to limit the traffic rights of the LH group to Russia. This problem became even worser when OS wanted to end/limit the codeshares with Transaero. So OS is still working together with Transaero to avoid Russia to become 'very angry' and limit their flights to Russia.

[airazurxtror]

"Le Soir" today, page 26 :
According to trhe information gathered by the newspaper, Lufthansa will not buy this year the remaining 55% of Brussels Airlines.
The owner of those 55%, is SN Airholding (GDF, Suez, Solvay, KBC, ...).
Etienne Davignon, president of SN Airholding says : Lufthansa has not informed us of their intentions for the coming weeks.
Lufthansa can buy those 55% during the second quarter of each year until 2014.
It seems that Lufthansa has other priorities at the moment.

[BrightCedars]

Yes, it is in the press this morning, but as long as the 2nd quarter isn't over (a full 3 months), who can tell what Lufthansa will do as long as Lufthansa itself doesn't speak out.

If it is true that there was some playing with the accounts to make them look nicer than they actually are and that this has pissed LH, the consequences of this are probably still expected.

Now for SN this would be bad news as they need to have some certainty about their future to see where this leads, to review and align their strategy, to plan for fleet renewal, etc.

[Bralo20]

As far as I can see - you have proven my point. Yes of course I would get 125-150% extra if I pay for business or first class fares - that is a given. But as a star alliance gold i get 150% on economy class travel if I travel LH or UA - this is not the case with BMI, SN, Swiss or Austrian...

You are correct but unless you fly SN discount Y you'll always get 100% when flying in Y... No bonus indeed...

[b.lufthansa]

Rumour has it LH discovered some window dressing in the BruAir anual results. They are not amused and will probably not excercise their option this year.

Strong allegations you make there! I cannot believe this!

[RoMax]

In an article about this (http://trends.rnews.be/fr/economie/actu ... 119697.htm) they also give a small analize of the value of SN currently.
The value of SN is based on their financial results (wich was not the case with LX and this became an expensive thing for LH) and there is a limit of 250 million on the remaining 55% as we all know. But based on the latest financial results the value of SN would be more something like 140-160 million.

But as stated before Etienne Davignon/SNairholding does not expect that LH will take over SN this year. And in the article they give some reasons why LH wouldn't do it now (except from possible bilateral problems). LH is in the luxurious situation of having a lot of time to make the investment without having the risk that anyone else will run away with SN. Also the coörperation between the LH group and SN is already running very smooth and the African expansion together with LH and Star Alliance is going well (for exemple the high amount transfers pax from European and American Star partners)altough it could go faster (LH is pushing(/helping) for more long haul aircraft). And SN is not making any big decisions without LH.
So basicly LH can wait to invest in SN if they think they have other, more urgent investments without losing control over SN. Especially since late this year/early this year you can clearly see the influence of LH in the daily business of SN and this while they own 'only' 45%. At least this is wat the article seems to imply.

[tolipanebas]

Meanwhile, SN is futher increasing their codeshares with Lufthansa and has added their code to LH flights
from Frankfurt to Bergen and Stavanger,
from Frankfurt and Munich to Gdansk, Wroclaw, Poznan and Tel Aviv,
from Milan-Malpensa to Palermo and Olbia.
A codeshare agreement between Frankfurt and Buenos Aires is pending government approval...

[Air Key West]

OK, Great, Tolipanebas, but I fail to see the use of these code share agreements especially for b.air. Isn't the main purpose to fill LH planes ? What's in it for SN ? Pretending b.air is flying to B.AIres when it isn't ?
I fail to see the use of these code share agreements for SN, so please shed some light on this for me.

[euroflyer]

well,
(1) SN can offer their customers a greater choice of destinations within the own "network" .. thereby avoiding people which have to go to Buenos Aires once in a while take AF or BA for this purpose and end up with doing all flights with AF or BA afterwards.
(2) well, hm, was it SN being in the process of buying LH or the other way round? What do you expect, of course, as LH is paying quite some money for SN, they want to see a return, no surprise that they want to fill their own planes (too)

[sn26567]

In addition, every customer buying an SN ticket to whatever destination served by LH will see a part of the ticket price go into the pockets of SN.

[RoMax]

Funny to see how some/many people can get critical in situations like this. Well what did you expect, LH is not God or something, they are a company like any other wich want to make profit, as much as possible. So when they take over an airline and they make an agreement wich is very good for them, so what, isn't that normal... And like said by euroflyer codeshares like this are good for SN also, I don't see the problem actually...

[FlightMate]

SN has always had a lot of codeshare agreements.
I think they even had more codeshares on long haul than their own flights.
Must be more profitable to be a travel agency than an airline, these days...

[sn26567]

Lufthansa will decide on Brussels Airlines options next year

Deutsche Lufthansa will decide next year whether to exercise call options to boost its stake in Brussels Airlines, its Chief Financial Officer Stephan Gemkow said.

"We have decided not to exercise them for now and to make the decision next year based on progress in improving results," he said during a conference call this Thursday (3 May).

Lufthansa bought 45 percent of Brussels Airlines in 2008 and secured options to buy the rest of the Belgian carrier by 2014.

Source: Reuters

[BrightCedars]

In other words, LH is showing the way by pointing the door to 3,500 redundant staff and is expecting SN to do just that and more to join the family. Also, SN shareholders shouldn't expect much of a bonus next year, as expected when it was said the price would be related to performance.

LH group will get SN for peanuts, and maybe that's fair.

[Air Key West]

LH might get SN for peanuts and, indeed, that's all the shareholders deserve. They never wanted to invest more in a profit-making airline so that it would make more money, but management takes part of the blame since (that's my analysis, FWIW) management thought LH would run the airline for them when LH took a 45 % participation in b.air and they just sat back, relaxed and waited for the Germans to step in. Only when LH did not exercise its opinion to fully own SN, did management wake up and decided to take action (at least, that's how I see things from the oustide ; I'm sure there will be someone from management to tell me I'm completely wrong).

Now, don't forget that the Reuters' dispatch says that LH will decide next year WHETHER to exercize its option. It does not say that LH will decide next year TO exercize its option, but WHETHER.... So, there's no certainty that LH will buy the remaing 55 % of SN. As I already mentioned before, Christoph Franz is a bad omen both for LH Group workers and pax. The man is only obsessed by cutting costs by all means. Hence, LH's plan to cut its administrative staff by half in Germany. Wonder how the unions will react. Making substantial cuts in your staff when you announce at the same time that you nevertheless expect to end the year making a profit, seems quite provocative to me. But to get back on topic, I would not count on LH buying the remaining 55 % of SN (next year), unless suddenly the airline makes a profit in 2012, which is highly unlikely. Franz will say he does not want to acquire another loss-making airline (after BD and OS) to get rid of b.air which he does not really want in the LH Group (he does not care about a few destinations in French-speaking Africa). I'm expecting the worst. Of course, SN cannnot survive alone. Let's hope there will be other possible partners....and b.air will survive.

[tolipanebas]

It does not say that LH will decide next year TO exercize its option, but WHETHER.... So, there's no certainty that LH will buy the remaing 55 % of SN.

Nothing is certain in life, and even that isn't.

I would not count on LH buying the remaining 55 % of SN (next year), unless suddenly the airline makes a profit in 2012, which is highly unlikely. Franz will say he does not want to acquire another loss-making airline (after BD and OS) to get rid of b.air which he does not really want in the LH Group (he does not care about a few destinations in French-speaking Africa).

Franz came to BRU last month and explicitly and litterally said he wanted to take over SN as soon as possible, but needs to see clear signs of a firm turn around first, clearly mentioning that signs of a turn around are something different than being profitable already.

Stephan Gemkow is ecchoing exactly the same message if you read the reuters quote, which should not be surprising really, as this is still the official strategy of the German airline.

We can all speculate on whether there's a hidden agenda or not, but let's just wait and see what the future brings: there is no urgency involved and the things which need to be done first to make SN profitable in the long run, are the same whether SN is fully owned by LH or not: i.e. expand on long haul, which I agree have been put off for way way too long, while this airline was wasting its time (and money) on medium haul.

[Flanker]

LH might get SN for peanuts and, indeed, that's all the shareholders deserve. They never wanted to invest more in a profit-making airline so that it would make more money, but management takes part of the blame since (that's my analysis, FWIW) management thought LH would run the airline for them when LH took a 45 % participation in b.air and they just sat back, relaxed and waited for the Germans to step in. Only when LH did not exercise its opinion to fully own SN, did management wake up and decided to take action (at least, that's how I see things from the oustide ; I'm sure there will be someone from management to tell me I'm completely wrong).

You're not wrong. SN management thought that they would get it all: cash and freedom to make their own decisions. But look, they got neither.

Now, don't forget that the Reuters' dispatch says that LH will decide next year WHETHER to exercize its option. It does not say that LH will decide next year TO exercize its option, but WHETHER.... So, there's no certainty that LH will buy the remaing 55 % of SN. As I already mentioned before, Christoph Franz is a bad omen both for LH Group workers and pax. The man is only obsessed by cutting costs by all means. Hence, LH's plan to cut its administrative staff by half in Germany. Wonder how the unions will react. Making substantial cuts in your staff when you announce at the same time that you nevertheless expect to end the year making a profit, seems quite provocative to me. But to get back on topic, I would not count on LH buying the remaining 55 % of SN (next year), unless suddenly the airline makes a profit in 2012, which is highly unlikely. Franz will say he does not want to acquire another loss-making airline (after BD and OS) to get rid of b.air which he does not really want in the LH Group (he does not care about a few destinations in French-speaking Africa). I'm expecting the worst. Of course, SN cannnot survive alone. Let's hope there will be other possible partners....and b.air will survive.

The search has to start now, otherwise it will become easier to restart with a completely new structure and people.

From what I gathered, 4 in 5 managers at SN don't have any interest in aviation. You can't even talk to them about airplanes, they don't know anything because they're not interested. Ask them what would hypothetically be the better replacement for the A333, they will talk to you about the 767, joke about the 747 and "some Russian plane" and mention the Dreamliner between the lines without a shadow of confidence.
I wish I could find a less pejorative word for it, but many are true suck-ups who are there to brag about their position to family and friends. During important meetings many don't talk out of fear of making their superior uncomfortable, fearing it could destroy their long-term (see the irony) career paths, which is now unfortunately a very common phenomenon in the corporate world.

I've seen some clever people ask the right questions, but those are part of the small 1/5.
Many of those 1/5 who have actually earned their seats and are genuinely interested in aviation, have left, many for other industries where they have a better chance of being recognized for what they do.

Fortunately that ratio of lack of interest is reduced the lower you go in the food chain and sometimes you can find genuine aviation maniacs, which I find always so interesting to talk to as they can teach you things that you can not learn elsewhere.

My opinion is that the best companies and products are built by putting maniacs together in a small building.
Examples? Google, Facebook, Lockheed Martin, Pininfarina, Apple, Ryanair, ...

SN needs to do some housekeeping in its management if it wants to turn around. Many people hold positions for which a genuine interest and good aviation culture/common sense is required, while never having paid for an airline ticket of their life!
If you take the spotters of this site and put them together to draft a turn-around plan, I can see them reach a better result than the current management.


Tolipanebas says that there is no urgency, like always.
For a company the size of SN and the negative momentum, it will take years to turn-around.
How much cash is left? What's the expected loss for 2012?

[FlightMate]

That´s a nice opportunity for our managers to just cut on jobs/salaries, with the threath of LH not buying SN should we fight against it.