On - Off - Now On Again. LH and SK

What happened today... did the whole world just wake up?

Well LH and SK are back in talks. SK's really only viable option is to join the Star Alliance Heavyweight.

However with LO bailing and moving (likely) to Oneworld and into BA's loving arms - there is actually an alternative that no one seems to be thinking about.

SK+FI merge and then become part of the Baaabi Alliance. That would really shake things up in the Alliance world.

Nah - that will never happen...

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

More European Musical Chairs or Not

AF/KLM Group has agreed to acquire the remaining shares in Martinair that it doesn’t hold. They are assuming that the tough times will allow it to proceed to consolidate its ownership. I am not so sure that the competition authorities will be quite so happy. But they have EC approval so I guess its ok. Really I do think the EU commission does tend to work on a double standard with some of these decisions. Hmmm

The Latvian Government has reversed itself and decided not to proceed with acquiring the balance of Air Baltic its JV with struggling SAS. The latter is back in talks with LH. (Are you keeping up???)

LH is making a play for AZ offering to retain both hubs at MXP and FCO – presumably offering to ax its planned LH Italia sub who will operate out of the northern Italian hub.

Etc etc

Cheers

Eurosharks - and when the smoke cleared there were 4

For Austrian Airlines - not surprising to some - but perhaps a shock to others - the game of musical ownership shares/chairs now looks like this:

There are 4 declared short listed bidders for Austrian Airlines' publicly held shares. They are (drum roll please):
BA, AF/KL and LH plus a dark horse bid from S7.

This sets up the battle for the big boys to buy something. So the battle lines are drawn and everyone is going to battle for each and every one of the little/poorly guys. And dont count out the rich chaps. Austrian has no value to someone like Ryanair or Easyjet but dont expect them to sit on the sidelines when Sabena (excuse me I mean Brussels Airlines) comes on the block more formally.

Interestingly I was doing some filing over the weekend and came across an old copy of Air Transport World April 2008 entitled "SAS Alone" which was the cover story. Judging by the recent frenzy the task to reform SAS just got a WHOLE LOT harder.

All airlines are now keeping their heads down. I hear that many airlines are canceling participation in conferences. Now why do you think that? it can't just be that they dont want people to travel does it?

Do we hear any fat ladies warming up? I think I hear quite a few. Certainly the dogs around me are howling in anticipation of the final chorus

Euro Shark Tail - Episode 3, SAS Flounders, LH Circles

SAS Shares were suspended in afternoon trading as a sharp run up in the stock price after a rumour started circulating that LH was interested and discussing a tie up.

Wow! the corporate development department must be burning the midnight oil in Frankfurt over the past few weeks.

To recap... they have expressed interests in:

Austrian
Alitalia and/or AirOne
Brussels Airlines
SAS (which would also give them a foot print in Spain through the ailing Spanair).
TUI or Thomas Cook vs various tie up options with their investment in German Wings

SAS has been back on the ropes this past year. Again failing to capitalize on the strength of their business over the last boomlet, they have been hard hit with high costs of fuel and labour. They have failed to shed the loss making Spanair. At the same time they will need to focus on their core business. Norwegian Air Shuttle has been eating SK's lunch in Norway that has spread its reach across some of the most profitable commuter routes in the world.

It seems ironic that after all the attention on US based consolidation at the beginning of this year, we now see the focus on European consolidation.

Again I will ask - is anyone in Brussels paying attention?

DOJ nabs guilt pleas from 5 more airlines nets $504 million

Nearly doubling the fines it had levied on bad airline behaviour in coluding on cargo rates earlier this decade, the US DOJ announced that 5 more airlines have now copped a plea.

In this latest round AF-KL Group comes out as the bad guys. Of the 5 airlines named and shamed (and fined) they paid the lion's share of the fines $350 Million for Air France, KLM and Martinair. The balance of the fines came from 2 other airlines - Cathay Pacific and SAS.

The airlines also agreed to cooperate with the DoJ which would indicate that there are more guilty parties waiting to be caught and fined. Whether one of them will end up in jail like the Qantas man remains to be seen. For sure there is likely to be some civil suits filed once the criminal cases are all done.

So the US Government was funding part of today's fight in Iraq courtesy of some foreign airlines. I am sure there is a moral in here somewhere.

Cheers

Timothy

EU Traffic powers ahead driven by LCCs and mega carriers

While BA's traffic continues to show declines – albeit at a lesser pace – the big 3 LCCs are powering ahead. So too are the other strong legacy carriers in particular LH and AF+KL. All 3 big LCCs report strong traffic gains – FR +22%, Easyjet +16%, Air Berlin +28%. The model still works. But Air Berlin should be looking for better solutions. It has essentially dumped the long haul scheduled business and is now looking to cut elsewhere.

Even those carriers who are most vulnerable in the second Tier EU legacy carriers (SK, IB etc) are appearing quite strong. But this is going to be short term. We believe that the top tier big 3 EU carriers have the ability to easily weather the economic climate. Similarly the 2 British Isles based LCCs. Everyone else without exception is vulnerable.

They are falling like flies.... for Amadeus

SAS is falling for Amadeus. After pronouncing words in private that sounded like hell would freeze over before they would let themselves fall into the Amadeus camp, Robin Kamark has indeed signed a deal with Amadeus.

So another one bites the dust. Now will Amadeus finally step up to the plate and bring on more resources to accommodate all these airlines?

Let's hope so for the customers sake.

Cheers

Timothy


Here is part of the PR.

The SAS Group has signed a letter of intent with Amadeus, one of the leading suppliers of global distribution systems and IT solutions in the airline industry.

The letter of intent means that parts of the SAS commercial IT platform will be replaced. These include sales, booking, ticketing, check-in and load-control. The new and modern systems are standardized and easier to use, in addition travel agencies will be able to access the lowest fares with SAS through Amadeus.

"This letter of intent provides the SAS Group the possibility to offer our customers innovative solutions during the years ahead. It will be easy to find a good-value alternative. In addition, the agreement will include considerably reduced distribution costs," said Robin Kamark, Senior Vice President, Airline Commercial, SAS Group.

"This has been a long process and we are now looking forward to the next step in this expanded cooperation."

SAS vs Bombardier Kiss and Make up… and MORE Q400s

So SK and Bombardier have resolved their nasty spat over collapsing undercarts on its fleet of Bambardier DHC8-400Qs by giving a big credit and SK taking on a bunch of CRJs and (Drum Roll) please brand new Q400s. It doesn’t seem logical but well this seems to be the OK answer to the nasty fight.