Brussels Airlines future and financial perspective

[Flanker2]

First, SN is not a listed company and LH while listed barely mentions anything about SN separately in its financial reports to the shareholders.

Also, even as a listed company, this wouldn't be seen as a change of accounting practices, but a change in revenue allocation or simply pricing. Companies don't notify their shareholders about every single change in pricing for their products, because it changes so much. They could at their discretion and if they deem relevant, decide to inform the shareholders that they "balanced" the revenue allocation to give more weight to Europe, but they are not required to do so. If they did notify the shareholders, how should we know, unless you are Davignon or one of the other SN shareholders?

Market/segment/region performance is not a required item in the financial reports and is offered to shareholders by some companies as additional information.

[FlightMate]

Not saying they've done it. Just saying it is possible.

You know, I remember 8-10 years ago how SN, after having made 12m euros profits, were provisioning 10 millions. Thus showing a net profit of only 2 millions.

The next year, operational profit being only 2 millions, they used the provision to inflate their net result: 12 millions euros.

from the shareholders perspective, it was better to show an increase in net profits years after years.
Yes, their aim was to sell the company, and it looked better this way.

Smart buyers would look at the numbers in more details and reveal the decrease in operating profits, but hey...

So here, just saying, they could have done it again, specially if their 'goal' given by LH was to turn europe profitable.

[Flanker2]

I second Flightmate, we're saying that they maybe did it, we can only suppose it.

[RoMax]

I second Flightmate, we're saying that they maybe did it, we can only suppose it.

I still see no reason in making Europe artificialy profitable, while making the long haul network loss making or less profitable, while the essence of LH taking over SN is all about that long haul network...

[convair]

I tend to think Flanker is right in this case, Inquirer.

So you think you can just decide to shift a higher portion of a combined revenu to one business unit, WITHOUT notification of this matter to shareholders? It's just not legally possible, period, believe it or not. Otherwise, you'd have a FORTIS case every month, I am sure, but I doubt that many managers like to be thrown shoes to their head!

Of course the shareholders are aware of that shift, if any. Don't forget that before being sent to, and eventually accepted by, the Shareholders' Meeting, the accounts go to the Board where the shareholders' representatives must and will ask for all kinds of explanations (this is no longer Sabena where you only had sleeping political creatures on the Board!).

There might very well be acceptable explanations for a shift in revenues allocation, such as: for a new AFI destination, they might have decided to minimize revenues from the european legs as a commercial promotional action for a limited period of time. And I would also be surprised if they must have fixed ratios of allocation.

But again IMHO!

Now, nothing to do with allocations, the use of 5 Q400 i.s.o. RJ85 may have helped tilting the balance (to Flanker's delight! ) .

[Inquirer]

First, SN is not a listed company and LH while listed barely mentions anything about SN separately in its financial reports to the shareholders.

Indeed, but note how that became largely irrelevent to our little discussion as you have also accused Lufthansa itself of artificially improving their European results, hence me taking you on on that front as its financial and operational data is much more public source, so to say.

Also, even as a listed company, this wouldn't be seen as a change of accounting practices, but a change in revenue allocation or simply pricing. Companies don't notify their shareholders about every single change in pricing for their products, because it changes so much. They could at their discretion and if they deem relevant, decide to inform the shareholders that they "balanced" the revenue allocation to give more weight to Europe, but they are not required to do so.

Let's keep it at Lufthansa's level for clarity.
The German airline is currently shifting all of its direct services to Germanwings in what is probably their biggest strategic reorientation of this decade, yet you think they wouldn't inform their shareholders about their detailed accounting methods (and possibly any recent changes to that to the routes which remain with Lufthansa after the shift) on exactly those sectors?
I can assure you this is a business field which is particularly scrutinized by institutional investors of theirs to see whether -or not- the new strategy indeed bears any fruits, something they'd want to know asap in order to see where their equity investment is going.
Pretending it's not a relevant piece of information to shareholders and will thus not be shared with them, is just ridiculous.

Market/segment/region performance is not a required item in the financial reports and is offered to shareholders by some companies as additional information.

It is done by Lufthansa and as such it is subject to the usual regulatory review, so any change in the methods used by them to come up with the performances will always have to be mentioned, something which hasn't, so you just ran out of valid arguments in support of your shift through theory, really.

I'd just stick with the much more probable one, which is also their official version: they are managing to cut their costs with a significant amount, which is making all the difference. Somehow it seems beyond the realm of possibilities for you that this is indeed the case: I do wonder why?
It's not like easyjet or any other company has a magical formula to running a lean European network, you know and whatever cost difference that may remain may be offset through better services to corporate customers: in the end not everybody wants to spend the night at the Ibis (which in itself is quite comfortable, don't get me wrong) when going on a citytrip either, some people tend to stay at more upscale venues too, provided the additional qualilty offered justifies the slightly higher price. What they don't want to do is pay 2 or 3 fold what they'd have to pay at the Ibis.

[Inquirer]

the use of 5 Q400 i.s.o. RJ85 may have helped tilting the balance (to Flanker's delight! ) .

Nice to see another discussion topic being added, because the other one is getting a bit boring in the absence of any proof: It remains a matter of belief in malicious reporting or not.

I guess that indeed their plan to get rid of what is said to be an uneconomical plane like the Avro 85 is contributing a lot to their improved results on European routes. I think they have first tackled the most urgent part, being the smallest planes, but now remains the question of the Avro 100.
i've asked here before, but got no answer so far: any rumours as to what they'll do with those?

Also, are they going to expand/extend the leases on the Q400, because they seem to have had their fair amount of problems with those, frequently moving them around on their network. How do they rate these operations: any reports from them on that?

[FlightMate]

Another reason why the european network might be (close to) profitable, is the launch of new (loss making) long haul routes. Thus bringing more passengers on the european network.

And the loss is not for Africa only, but also the new transatlantic routes.

[convair]

Also, are they going to expand/extend the leases on the Q400, because they seem to have had their fair amount of problems with those, frequently moving them around on their network. How do they rate these operations: any reports from them on that?

I believe Tolipanebas mentioned some time ago that they were not 100% satisfactory and that some of them would be discontinued for S14.
BTW, he is the one who could give some answers to our questions here but apparently he's not willing/allowed to give them at this stage.

[RoMax]

the use of 5 Q400 i.s.o. RJ85 may have helped tilting the balance (to Flanker's delight! ) .

Also, are they going to expand/extend the leases on the Q400, because they seem to have had their fair amount of problems with those, frequently moving them around on their network. How do they rate these operations: any reports from them on that?

From what I heard, they prove to be a good choice for certain regional routes, but proved to be operationally not suitable for most of the European (transfer) routes, so 5 is more than enough for them. I believe I read that they'll not extend the lease of the Q400 of Tyrolean.

The replacement of the RJ85's and the 737's resulted in a smaller fleet, but also a fleet with a higher average capacity per aircraft. Together with other cost reductions, this resulted in a seriously lower average CASM on the European network. Thanks to changes in the network and the increased amount of transfer passengers, there was no reduction in loadfactor either (quite the opposite, as the loadfactor in Europe increased). You currently see several routes that were served by RJ85/RJ100 in the past that are currently served by a mix of A320series and RJ100 and still they operate with higher loadfactors and lower costs per seat. For certain routes that resulted in a lower frequency, but apperently that's not all that counts to return to profitability.

[flieger]

Well, in any case user "Inquirer" is correct about accounting and auditing practices.
Thinking you can just decide yourself what the cost of a product is, are banana republic (to re-use wording here) practices... There are always creative accounting and taxation methods used within every company, but everything has its legal limitations...
Also, seems like other members have no clue about transfer pricing regulations and audit principles either.
Much more is regulated/ controlled/ audited than most forum members seem to grasp.
Running a larger company is not the same as the bakery at the corner of your street...

[fcw]

Well, in any case user "Inquirer" is correct about accounting and auditing practices.
Thinking you can just decide yourself what the cost of a product is, are banana republic (to re-use wording here) practices... There are always creative accounting and taxation methods used within every company, but everything has its legal limitations...
Also, seems like other members have no clue about transfer pricing regulations and audit principles either.
Much more is regulated/ controlled/ audited than most forum members seem to grasp.
Running a larger company is not the same as the bakery at the corner of your street...

I think the shift of revenu may even be unintentional.
BruAir changed there fuel surcharge into airline fees. Probably these fees are taken into account differently than the former fuel surcharge.
Anyhow, only the bottomline is important and that line says minus 50.000 000€, to be corrected for state aid.

[airazurxtror]

At the beginning of the year, SN claimed that the loss for 2013 would be between 0 and 20 million euros.
At present, they speak of a 25-30 million loss with subsidies, 46 million without them ...
Some discrepancy !

[Passenger]

At the beginning of the year, SN claimed that the loss for 2013 would be between 0 and 20 million euros.
At present, they speak of a 25-30 million loss with subsidies, 46 million without them ...
Some discrepancy !

Indeed, but they had two costly strikes this year: one from the ground handlers, one from the pilots.

[Flanker2]

Thinking you can just decide yourself what the cost of a product is, are banana republic (to re-use wording here) practices...

You may call it what you want... in Europe they call it yield management. Yes mostly, it's banana republic practices.

What you say is not correct, but even if there were superstrict, paranoic accounting rules, how difficult would it be to bend say 40 millions from Africa in favor of Europe? On a one-way 400 euro connecting ticket to Africa, would you notice 40-50 euro's more being allocated to the Europe sectors?

Like FCW points out, just playing a little bit with the fuel surcharge can yield quite big results.
Ie, it's been pointed out that SN sometimes charged more fuel surcharge than the actual cost of the fuel on that flight... so it's kind of ridiculous to say that there are any sacred rules governing the allocation of revenues when even the fuel surcharge goes way beyond its purpose...

[FlightMate]

The 'disguised' state aid is approved.
19m euros will be offered to BRU airport for their security.

Only airlines bringing more than 400.000 pax a year will be allowed to get a discount.

Will that keep Ryanair out of the scheme?

It' s funny how, even in the press, Wathelet admits it is a 'disguised' state aid to Brussels Airlines.
And then says he is confident the EU will allow it.
Would have been better to keep it quiet, IMO.
I highly suspect he is after some votes next year.

Future will tell if that was a good idea.

[sean1982]

FR is expected to bring a lot more then 400.000 pax per year to BRU, so they will benefit.

We wouldnt want to un-level the playing field now would we?

[airazurxtror]

It seems, according to "Le Soir" that the number of pax is the last number available, ie that of 2012 - and in 2012, Ryanair had 0 pax at BRU. Clever, isn't ?
And the subsidies which have just been decided are valid for three years. Thus, in the meantime, no subsidy for any other company. In 2016, we will see !

[cathay belgium]

Hi,

19 million /400000 = 47,5 euro per pax ?

I know this means nothing but just a number..
Altough I like aviation,SN,BRU and all.. This state aid ,together with AZ operations and many other ways of state aid,may not be possible imo.

A government who seeks money in their main inhabitants, the lower and middle class and starts giving money to independent companies like SN,and giving gifts of millions and millions euros to tax avoiding and illegal businesses... after some little juristic procedure..
Some people in government get their C4 this year because of the lack of money for their departments, and even you may not believe it but some were really main core governmental departments...

A guy who don't like to fly or still can't afford it, yes they exists still now with FR here, would be disguised by this form of state aid.
A normal business would be ok to stand on his own without tax aid!
This is so for SN in BRU,for CRL and FR, for aid to the farmers here, and so on so on...

I strongly believe a start-up or innovations or research support can be handed over to some businesses but SN is way beyond this point... And guess JAF don't need this really

Besides,.. In a LH way of view, or we again giving our money away to the French,German,Swiss...
The main sickness of the belgian politicians is still here and is here to stay...

CXB

[airazurxtror]

This year 19 million euros will come from the fines to be paid by the foreign drivers - those fines now can be recovered thanks to a new European rule, whereas it was impossible before.
SN subsidised having got round all EC rules, and what is more, subsidised by the foreigners : how cute from Wathelet !