by Lufthansa Flyer | Apr 17, 2012 | Airlines, Industry News |
Just a few days ago, I posted about IAG’s interest in acquiring Royal Jordanian. Today, IAG again is making headlines about it’s appetite for acquisition. This time the cross-hairs have shifted to Portugal’s (and Star Alliance’s)TAP.
IAG’s interest lies in the Lisbon Hub and deeper access into Africa and South America, both seen as major sources of future growth.
Under the terms in which Portugal received Euro 78 billion in bailout funds sponsored by the EU and IMF, the Portuguese government committed to privatizing nationally held assets. TAP is part of Portugal’s national portfolio of companies which include utility companies and other holdings.
According to TAP, there have been other unofficial indications of interest, but IAG has been the only “official” party to show interest. TAP also said that a deal to sell all or part of the airline can happen as early as this year.
IAG of course owes it to it’s shareholders and other stake holders to continuously explore options and opportunities to increase it’s return on equity. Being a bigger airline generally means certain operating efficiencies that allow it to outperform small competitors and to weather poor operating environments successfully.
It’s my opinion that IAG sees a shadow slowly being cast over the global airline industry by a certain Dubai based airline who clearly stated it’s intent was to have it’s aircraft (Yes, all the A380’s that it can get from Airbus) cover the globe. By building it’s portfolio of airlines will only help it defend itself against their competition. Certainly this is only one of several potential reasons that IAG has as it tries to grow by addition.
Whenever IAG sees an opportunity to strengthen it’s timetable and expand it’s reach, it is going to take advantage. You really can’t blame them. When small carriers are struggling to survive, it’s easy for large carriers to find great deals among them. A perfect example was it’s recent acquisition of BMI from Lufthansa. That gambit essentially blocks Star Alliance and Skyteam from having any serious presence in the UK, specifically the global gateway that British Airways has in London’s Heathrow airport.
I’m sure I’ll be back in a few days with a post on IAG’s next target. After all, Finnair and LOT among others are looking for help.
by Lufthansa Flyer | Apr 17, 2012 | Airlines, Industry News |
Reported today on Bloomberg, it is apparent that Lufthansa is having trouble finding a buyer for BMIbaby. According to the article, Lufthansa had two interested parties, both of which have now walked away from negotiations. Lufthansa is actually in a position where it would have to pay someone to take BMIbaby off it’s balance sheet.
As part of the deal to sell BMI to IAG (British Airways and Iberia parent), Lufthansa has the responsibility to sell the low cost carrier “wing” of BMI separately, otherwise it would face giving IAG a stiff discount on IAG’s purchase of BMI. The sale is scheduled to be closed on April 20 so time is of the essence for Lufthansa not to be forced into even a steeper loss for offloading BMI.
The article directly from Bloomberg.com:
Deutsche Lufthansa AG (LHA) is struggling to offload discount airline BMIbaby, potentially reducing proceeds from the sale of its entire U.K. business to British Airways parent IAG.
German turnaround specialist Intro Aviation GmbH, which had expressed an interest in BMIbaby, has ended talks, Managing Director Peter Oncken said in a e-mail. Charter carrier ACL has also dropped plans to make a bid, said a person familiar with the matter who declined to be identified discussing private talks.
IAG, or International Consolidated Airlines Group SA (IAG), agreed in December to pay 172.5 million pounds ($274 million) for BMI, while negotiating a “significant” discount should Lufthansa fail to find a home for the no-frills operation. The acquisition won European Union clearance on March 30, and London-based IAG is aiming to complete it by April 20.
“BMIbaby is not a very attractive asset,” said Joe Gill, an analyst at Bloxham Stockbrokers in Dublin, who follows low- cost carriers. “It’s getting flame-grilled at the moment because the market in northern England is incredibly competitive.”
BMI said March 5 that two parties were in the running to take over its discount arm, one of them an EU-based airline group operating in several countries, the other a U.K.-based company. Both parties aimed to keep BMI’s bases, it said, adding that a deal would be signed with one “in the next few weeks.”
‘Redundant’
“Lufthansa rejected a non-binding offer from us, rendering further discussions redundant,” Oncken, who founded Intro with German retail entrepreneur Hans Rudolf Wohrl, said in an e- emailed response to questions, adding that his company could resume talks with IAG after the takeover.
Like Intro, Dublin-based ACL signed an agreement allowing it to examine BMIbaby’s books, but isn’t currently considering an approach, according to the person familiar with its plans. Calls to the company weren’t returned.
BMI spokeswoman Katherine Hill said talks remain “ongoing” with potential buyers for BMIbaby, which has its main base at East Midlands airport between the English cities of Derby and Nottingham, reiterating comments from British Airways last week. Claudia Lange, a spokeswoman for the German company, referred all enquiries to BMI.
Offer Terms
Interest in BMIbaby has waned because of the terms on offer from Cologne-based Lufthansa, Europe’s second-biggest airline, which would have to pay for the low-cost unit to be taken off its hands, according to another person close to the talks.
BMIbaby competes with Ryanair Holdings Plc (RYA) and closely-held Jet2.com at its main East Midlands base, and also overlaps with Ryanair, the region’s top discount airline, in Birmingham. Both rivals, together with carriers including EasyJet Plc (EZJ), also have bases in cities as little as 50 miles to the north.
Ryanair, EasyJet, charter carrier Monarch Airlines and Flybe Group Plc (FLYB), Britain’s biggest domestic operator, all said they’re not interested in bidding.
The discount carrier’s fleet of Boeing Co. (BA) 737 single-aisle jets is leased and the planes have an average age of 16 years, according to data from aviation consultant Ascend.
BMI is also continuing with efforts to sell its Aberdeen, Scotland-based Regional division before the deal with IAG is tied up, spokeswoman Hill said. The company said Feb. 1 that it had reached a deal to sell the unit to an unidentified U.K. buyer, though BMI Chief Executive Officer Wolfgang Prock-Schauer said last month in an e-mail to staff that the process had been delayed because the bidder had not met “funding requirements.”
British Airways said last week that it may cut 1,200 jobs at BMI, or 44 percent of the workforce, in the wake of the acquisition. Most of that reduction will be at the unit’s Castle Donington headquarters, close to East Midlands airport.
IAG spokeswoman Lorena Monsalves said by telephone that the company is still working toward a completion date of April 20.
To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Alex Webb in Frankfurt at awebb25@bloomberg.net
To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net
by Lufthansa Flyer | Apr 15, 2012 | Industry News |
Reuters has reported Finnair (Finland’s national carrier) is actively seeking a suitor to help it improve it fiscal performance. Over the last 4 years, the oneworld alliance member has lost approximately 250 million Euro.
According to Finnair’s Chief Mika Vehvilainen Finnair has several potential partners that they may lead to some sort of deal. Finnair would like to see a deal announced this summer, and implemented in the first half of 2013. The article suggests that Air Berlin may be one of the potential candidates.
It appears that European aviation is going to have a considerably different look within the next few years. With prices of fuel skyrocketing, and competition from low cost carriers only increasing European based major carriers may become a rare breed. We’ve already seen BMI acquired by IAG (British Airways and Iberia parent), Austrian is being drastically reorganized and Turkish has made it no secret that it wants Poland’s LOT. Who’s going to be left?!?
Here Is Reuters’ Article With Additional Information:
Finland’s troubled flag carrier Finnair wants to find a European partner by summer to help stem its losses on short-haul routes and is not ruling out a pact with Air Berlin, its chief executive said.
Finnair is seeking a cheaper way to feed passengers to its Helsinki hub from where it operates profitable routes to Asian destinations such as Japan, China, and Singapore.
Mika Vehvilainen does not see a conflict in a possible partnership with Air Berlin, although Abu Dhabi-based Etihad Airways owns nearly 30 percent of the company. Air Berlin flies passengers from Europe to connect with Etihad’s Asian flights from Abu Dhabi.
“The products are very different. Helsinki offers much better connectivity and faster connections,” Vehvilainen said.
He also said there were “more than a few, but less than ten” other possible partners, but declined to specify.
“We are talking to a number of companies and we are aiming to have something potentially in place by summer in terms of a letter of intent or something along those lines and aiming to start the operations in the first half of 2013.”
In the past four years Finnair has reported net losses of around EUR€250 million (USD$327 million) in total. The economic downturn, low-cost competitors and high fuel prices have eroded profits of many national carriers around the world.
Vehvilainen, who stepped in just over two years ago, was unwilling to predict when investors could expect profits.
“We haven’t set any particular target on that one. We are working very hard on our costs and also driving the top line.”
Finnair’s first quarter results are due on April 27.
Vehvilainen is currently being investigated by police over the sale of his Helsinki apartment to pension insurance firm Ilmarinen, which rented it back to Finnair while he remained living there.
Ilmarinen is a Finnair shareholder. The Finnish government owns 55.8 percent of the company.
(Reuters)
