Air Anchluss A Reality - LH aquires OS

OK so this is just a little naughty of me - and I know there will be some people who wont find this funny - but the theory has now become fact. After what seems a tortuous process including multiple trips to Brussels, LH has finally succeeded in getting control over Austrian Airlines Group.

So now comes the tricky part of integration. The chaps from Frankfurt have their work cut out for them. On the other hand judging by the success of the integration of LX (a larger airline) into the LH family - the prognosis has to be good that this will be a good program.

For the boys and girls in Vienna - this must be a huge relief.

Cheers

EC wakes up - LH expansion might be an issue

I like LH - another of my favorite airlines - but I have to say I have been worried at the extent of their expansion. It raises a number of competitive issues in the consolidation of the airline industry.

I think by now you all know my position. Consolidation by itself is bad and no panacea for bad airline behavior that got us here in the first place.

Anyway it seems that the European Community has finally woken up to the same set of issues and is launching (albeit a little late) a review of probably the LEAST competition restrictive deals of LH. A bigger issue should have been the OS+LH post the LH-LX merger. But - that is for the boys and girls in Brussels to go figure out. (Hint Brussels airlines is used by a lot of Eurocrats!)

Cheers

Air Anschluss approved – LH looks North and East

As Austrian’s sale is approved – the German march for European hegemony appears to be unabated with LH eyeing both SAS and LOT next.

Austrian Airlines seems to be all done bar the shouting: "We are pleased that it has proven possible to reach an agreement between ÖIAG and our alliance partner of many years, Lufthansa. The strategic concept removes our structural weaknesses, such as a lack of international sales strength and disadvantages in purchasing. Together with our own measures, this will enable the almost total retention of our network strength. As a result, the benefits for our customers can be retained. None of this would have been possible - even with a great deal of additional capital - had we tried to go it alone," Alfred Ötsch, CEO said on 4th of Jan.

Looking northward, Lufthansa International Director, Karsten Bentz, stated that “after the German and Italian markets, Scandinavia is the most important for Lufthansa”. Lufthansa has reportedly been in talks with SAS, rekindling speculation about a planned acquisition. Confirming this Bentz is also quoted as saying: "We want to take an active part in the consolidation that is taking place in the European airline industry, and that subject is often the focus of Lufthansa management meetings." Meanwhile to the east, Poland’s Treasury Minister, Aleksander Grad, reportedly stated the government may increase the capital of LOT Polish Airlines if no investor other than Lufthansa bids for it.


So LH's has laid out its stall - what about BA and AF/KL?

Cheers

BA’s Bad Dating Habits

It seems that the dating habits of the world’s once favorite airline are not going that well. After just 3 weeks the Kangaroo jumping seems to have come to an end. The Spanish are not happy as the original deal is now not as attractive to them. Go failed, they have missed out of Brussels Airlines, Austrian Airlines amongst others, American Airlines is going no where fast… so in what could be described as desperation now they are going after CAI and AZ. British Airways: “What we are offering, under current conditions, is a credible collaboration that will leave the Italian company the possibility of deciding its own future in a flexible manner," Willies Walsh, CEO. (Thanks to Professor John for this one).

At this rate their next opportunity will be Olympic but if they do that they will be up against Etihad and James Hogan.


Cheers

The Lufthansa Behemoth Gobbles up German Wings

So not content with everything else they have acquired - they are now mopping up.

Only days after agreeing to acquire Austrian, German Wings (already partially owned) will become a wholly owned subsidiary of the German Barons of Frankfurt.

LH is definitely determined to be one of the top 5 no matter what.

Cheers

Air Anchluss to Grow for a price of 366,000 Euros

Lufthansa has finally made its formal bid for Austrian Airlines. The German airline intends to initially acquire the 41.56% share in Austrian Airlines held by the Austrian government's holding company, (OIAG). It has offered to pay just 366,000 euros ($463,280) for the Austrian government's share, plus 163 million euros ($206 million) if Austrian Airlines hits certain performance targets. Given the current climate that will be hard. Then, Lufthansa make a public takeover bid for private and institutional shares. Lufthansa plans to pay 4.44 euros per share, or 215 million euros ($272 million), for the outstanding shares.

With LX firmly under control, The German empire of Lufthansa will embrace most of the central part of Europe.

Next up - SAS or AZ or both. Then the others will fall like flies - Poland's LOT etc.

“Austrian worth – 1 cent per share” says Lufthansa

So while echoing history in trying to build a Hapsburg like Alliance, at the last minute Germany’s Lufthansa was the only carrier to put in any number to bid for fellow Star Alliance member Austrian Airlines.

While the Austrian government was expecting a significant number to offset the approx Euro 500 million required to put OS to right, LH’s offer fell a little short. In fact it said it was willing to pay just €360,000 ($454,090) for OIAG's (The Austrian government’s organization) stake, or €0.01 per share.

Ouch!

And to make matters worse LH even stated that the Austrian Government would still have to fork out the 500 million to put things right.

The Austrian government has now put in a further deadline of December 31st. Unclear is to whether they will allow new bidders to the table. Previously interested parties included Turkish Airlines, S7 Sibir, AF/KL and Aeroflot plus a dark horse bid was mooted from BA.

Speaking personally I think it’s worth 1.0001 Euro cent per share. But clearly LH has a lot more on their mind than little old Austrian.

Cheers

Line up Airlines begining with the letter A...

And having ownership travails..... Alitalia I think comes before Austrian...

The deadline for Austrian Airlines sale passed yesterday with no confirmed bid. AF/KL declined to bid and the two declared contenders LH and S7 requested more time.

Is this all a plot we could ask ourselves?

Does someone have a vested interest in the situation?

clearly BA has no ability to be interested with its own troubles in getting its slam dunk deal completed. So what can we see here... the great mega carrier redraw may become a damp squid. With oil currently trading below $70 today (Nymex) the airlines may just be better off together. All those dire predictions seem moot. Although many (including the Professor) dont think these low numbers are sustainable - they just might be.

So Austrian better get a move on and not necessarily assume that there will be a sugar daddy coming to save the day.

Eurosharks - The Germano-Austro-Russo-Siberian Connection

So thanks to the other Professor Alex for this one. There are two and I will need to figure out a way to differentiate them. They are for the record both German!

So it seems that what is going on in Austria is far from a simple battle within our industry. it almost reads like an international spy novel. Take the explosive mix of the mega EuroShark Carriers (LH, AF-KL and BA) and the minnow S7 all in a fight for the carcass of Austrian Airlines. We know what is going on with the big chaps but if we scratch the surface we see that the "minnow" is not so small. It may actually be a great white in disguise. Read on...

Let's just ignore the hilarious attempt at participation by THY Turkish "oops not on time" Airlines who found out they did not have time to mount a serious effort to buy the Austrian carrier. Next time chaps call those nice people at T2Impact - they are very good at this sort of thing!

But S7 does appear to be serious. They have been running ads in the local Vienna papers extolling the benefits of the S7 deal and alluding to the fact that they have lots of energy cash to slosh around. Actually I have been impressed with the chaps at S7, they are not your average CIS carrier. Couple that with the fact that on their payroll they have a very interesting lobbyist.

So you thought the Germano-Austrian part was for LH. Not so my dear friends. This is in reference to the (said) powerful lobbyist one Mr Gerhard Schroeder. He is the chap who is engaged to fight for the inclusion in the party of S7 in the deal with the Austrian Government for their shares in Austrian Airlines. Still with me?

Hmmm but what about the Russo part? Well guess who Mr Schroeder's real employer is? It turns out to be Gazprom OAO, THE Russian Energy Company. Gazprom has a strong investment in S7. Of course most people were somewhat surprised when Schroeder left office and then announced he was going to work for Gazprom. He definitely caused a lot of consternation when he left the leadership of one of the west's largest democracies and headed to work for one of Mr Putin's friends.

I present for your further reading pleasure an article on the switch from none other than the Washington Post.

http://www.washingtonpost.com/wp-dyn/content/article/2005/12/12/AR2005121201060.html

So this sounds like a bit of a soap opera. The Austrians must on the one hand be very happy that they are going to off load their national airline to another poor sucker and that a bidding war has broken out but on the other they had better be careful what they wish for... it might just happen.

Cheers

Timothy