Branson Opposes Parting Out of BMI

Ever since Sir Michael Bishop exercised his put option and made Lufthansa purchase the majority shares stake in BMI - the UK carrier has been headed down hill. It has lost market share and pulled back.  The crown jewels remain its footprint at LHR. As the #3 airline at LHR - the valuable slots are idling there.

There was some hope that LH would use the BD footprint to build a base in the market out of Heathrow for the Star alliance family but in truth the carrier continues its down sizing.

It announced a 50% reduction at Manchester and now comes news of the sale of 6 slot pairs at LHR to - of all people IAG's British Airways unit. Based on the last major transaction at LHR a slot pair is typically worth around $50 million each. Therefore 6 slots would be worth approx $300 million.  This latest transaction will boost IAG's slots at LHR to close to 50%. Interestingly enough that still keeps IAG share of the slots at its home market less than that of its closest rivals - AF - CDG, LH, FRA and MUC.

In steps Sir Richard Branson - who is himself competing to purchase the company for the Virgin group - predominantly Virgin Atlantic. He had a nicer term for it... Salami Slicing. he contends the company should be kept intact and sold as such.

Either way the once proud and feisty airline that could is unlikely to survive in its current form. The 3 divisions - Mainline - largely based at LHR with an HQ in the Midlands, Regional - operating commuter aircraft based in Aberdeen and the upstart BMI Baby also based in the Midlands as a LCC type operator will likely be dismembered and sold..

Cheers

So How Much Was/Is BMI Worth?

About 4 and half LHR slots.

Today LH announced buying the remaining 20% of BD for $38 million. That is less than a slot pair price at LHR. Thus the total value of the airline is - well about - 4 and a half LHR slots.

Last time I checked BD is the #2 carrier at LHR.

It also bought BMED for 30 million pounds. With at least 11 slots at LHR. So you do the maths....

Cheers

Timothy

LH And BMI - To Have And To Hold?

There is quite a bit of speculation surrounding what LH will do with its long and hard fought win of BD.

To recap what did it end up buying for arguably a pretty heft price?

It won a bunch of slots at LHR, and 3 separate airline groups plus some route authorities.

The integration of BD and LH in Europe is pretty extensive. I recently flew LHR-TXL on a LH flight number checked in at the LH counter in Terminal 1 but the metal was BD. The flight attendants and the ground service were not so clear as to which product I was travelling on. BD refused to check me in at the airport.

But enough about me! What about BD.

BD acquired BMED for a song last year and this has translated into a good market. It essentially got it for nothing - selling back the slots to BA. it operates the routes on a more sparse basis and manages to get some good yields with a thin service. The rest of BD's fleet is really Airbus but the A330s are doing mostly charter service and some long haul to KSA. Mumbai and the US routes having been dropped recently.

So it seems natural that BD mainline will be assimilated into LH. I would think it will be operated more like the LH Italia branded product out of Milan. The likelihood of the BMI brand surviving doesn't seem that promising. This is not similar to the case of LX and OS where the national branded carrier is at stake. BMI changed its name from British Midland and has had a fairly innocuous brand since then. It cannot compete in the branding stakes with the likes of British Airways and Virgin. Lufthansa Britannia anyone? (The Sun newspaper would have a field day with that one!).

So what about the other two parts of the airline - BD Regional and BMIBaby?

Anna.Aero thinks that regional will follow the old Brymon and co to Flybe. I would place money on LH wanting to move some of that connecting traffic into Europe and away from LHR. Further LH has a pretty robust regional business both direct and franchised.

Anna.Aero also speculates that LCC BMIBaby with its old fleet of B737-300s and 500s will go to someone in the UK like Jet2 part of Philip Meeson's group of airlines. I also beg to differ. With LH tharted in creating a second tier German airline of its own - it would more likely want to take the idea of expanding the concept to its own LCC German Wings and give the purple and yellow airline another UK base and a broader footprint. Why would LH give up such a business doesn't seem logical to me.

So what do you think?

Cheers

BMI Cancels Most Multi Coded Flight/Route Flybe Steps In And Saves The Day

Before the age of Alliances there was one flight that carried more codeshares than any other on the planet, I recall seeing once that the flight carried more than 21 potential code share designations. This was the morning BD LHR-LBA flight. BD had originally 2 slot pairs for this route (at $40 million) a pop – this was worth a heck of a lot more than the small number of pax who took the flight.

No more. BD – soon to be part of the burgeoning LH empire – has relinquished the route and turn the slots to something more profitable. In its place (at almost no charge for the slots!) Flybe will step in and run 3 daily nonstops from LBA-LGW on Q400 planes.

My things do change….

BA returns to KSA - BMI Pissed Off!

So BA having abandoned Saudi Arabia in 2005 will return at the end of March 2009 to Riyadh and Jeddah. Running 777s in 4 classes to the Capital and 767's in 3 classes to the Western part of the country. The carrier will fly five times a week from London Heathrow to both Jeddah and Riyadh when the service starts on March 29.

When BA abandoned the route in 2005 - it was seen as odd. However there was a lot of tension in the Kingdom at that time and a sense that foreigners were being targeted. BA's own cabin staff became nervous and hated the overnight stop.

So BA has rescheduled the times to address this. I sense that there will be few crew who want to overnight so they will have to run extra crews deadheading. BMI on the other hand seems to have done quite nicely and had no reported issues. Now of course they will be seen to be at a disadvantage having no first class (the A330s dont have first class) and being night flights.

I am sure that new owner LH will have something to say about that.

Cheers

BMI to end Long Haul from Manchester

BMI's efforts to get a toe hold on the Transatlantic market seem to be at an end.

As a result their new sugar Daddy Lufthansa will likely beef up some connections to retain the business.

Look for LH to announce some time soon that Las Vegas joins their other service spots in the USA.

Cheers

Its Over – The Germans Own The British. A German Virgin next?

So with a whimper BMI falls to LH. Sir Michael decided in the end not to fight it and exercised his option to sell his 50% share to LH who already owned 20%. I wanted to get this story out when I got wind of it over the weekend but sadly – no access to my blog. Oh well. He cashed out his chips

So while the other suitors have been banished – BMI has now fallen. This changes the landscape and allows the cards to fall one particular way. Lets deal with this in 2 parts. First the bigger picture.

So Star now looks like a German network. The chances are that SK’s sale to LH of its BD shares will buy it sometime but SK is looking very shaky at the moment. Look for even closer ties and a potential sale of the Scandinavians to the Germans. Should this happen – the Austrian Government would have no option other than to submit to LH’s outrageous 1 cent a share offer. This would make AZ have to go to AF/KL and BA’s IB+AA deal go through. The only dance cards with no players – Aer Lingus and TAP. But wait there is more. And what of the USA? Given United’s weak position now a 3rd US based Star member (Continental) and LH’s relationship with JetBlue – could that be a sign as well? Will Star actually dump UAL as its second dumpee (remember it dumped Varig).

So let’s go back to Bishop’s soon to be former Baby. Virgin stepped into the fray and said that VS would like to consider a tie up now that the LH-BD deal is done. Logical. They wanted to combine BD and VS but now the issue is moot. The logic of the relationship is still there so VS called a spade and spade and said how about a mega tie up between the brand king and the German Dreadnought.

Hello is anyone awake in Brussels?

Whither BMI

Another lively podcast moderated by Addison:

http://iagblog.podOmatic.com/entry/eg/2008-05-02T14_32_19-07_00

Couple of points to note.

I am a firm believer that Sir Michael Bishop has a few cards yet to play. If LH thinks this is a done deal then they are sadly mistaken. In the podcast we debate the possibilities. I encourage you to listen. If you wish to comment please feel free.

Regards

Timothy

UK's Airlines will lose under new Taxation Scheme

The old adage in the UK travel industry used to be - "Punters will walk across the street for a quid". For lay or not Brit-speak folks - a Consumer would rather save a pound and walk to another high street travel agency.

Well it seems that the UK's Chancellor of the Exchequer despite having been previously the Minister of Transport had not heard that saying.

Alistair Darling (like his leader a rather dour Scotsman), has significantly elevated the UK Air Duty. Much to the outcry of the industry, the new duty penalizes long haul. Ostensibly for reasons of applying a green tax. However he may come to regret his format.

The tax can only be imposed on the first sector. Therefore the departure tax for a flight connection into Europe could easily save a UK family of 4 up to GBP200 per trip. Thus for example a BA based holiday for 4 to Australia will be 200 pounds more expensive than for the same flight booked via Air France or Lufthansa.

Talk about pound foolish!

At a time when BA's whole business model is under threat because of the appalling infrastructure issues at its main base LHR (on which we have commented frequently). This will just add to BA's woes. It will however badly impact also BMI and Virgin.

Clearly the UK government has no clue about how the airline business works.

Have a nice day.