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TK, Power ? :blink: :huh:

 

Singapore Air Profit Falls 21 Percent

 

May 13, 2008

Singapore Airlines (SIA), the world's second-biggest airline by market value, on Tuesday saw quarterly profit fall 21 percent and warned of slower demand amid record fuel costs.

 

SIA, which relies on premium and business travellers for about half its revenues, cautioned the current turmoil in global financial markets has clouded the outlook for air travel.

 

"The results blew the consensus away. It seems their fuel hedging has been done pretty well which contributed to higher operating profit," said Morgan Stanley analyst Chin Lim.

 

The lower profit was mostly due to a one-off tax gain a year ago. Analysts say SIA could still be hurt by a drop in business travel due to the ongoing US credit crisis, after the carrier reported four consecutive months of lower passenger traffic from North America since December due to slowing demand.

 

In April, the International Air Transport Association (IATA) reduced its 2008 profit forecast for the airline industry for the second time in four months, to reflect a deepening global economic gloom and record high fuel costs.

 

Benchmark Asian jet fuel prices hit a new record over USD$159 per barrel on Tuesday and are up about 44 percent since the start of the year, reflecting the rise in global oil prices.

 

"The combination of a global economic slowdown and record high fuel prices will make this a more challenging year for airlines," Singapore Air said in a statement.

 

SIA, which at USD$13.4 billion ranks behind Air China, said January-March net profit was SGD$527.5 million (USD$386.2 million) compared with SGD$671 million a year ago.

 

The year ago period was boosted by a gain of SGD$247 million due to a tax write-back that followed a cut in Singapore's corporate tax rate.

 

Operating profit for Singapore Air, 55 percent owned by state investment firm Temasek, was SGD$468.1 million, compared with SGD$333.5 million a year ago.

 

The carrier recommended a final dividend of 80 Singapore cents per share to be paid in August, bringing its total dividend for the last financial year to 100 cents per share.

 

Singapore Air, which with parent Temasek in February failed in a bid to take a combined 24 percent stake in China Eastern Airlines for USD$920 million, is expected to make a second bid for the Chinese carrier in order to break into the world's fastest-growing aviation market.

 

Singapore Air shares fell 10 percent in the first three months of 2008, slightly outperforming the benchmark Straits Times index's 13 percent fall and regional rivals Qantas, which fell 28 percent, and Cathay Pacific, which dropped 25 percent.

 

(Reuters)

 

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Austrian Air Calls In Lawyers Over Jaber Deal

 

May 13, 2008

Austrian Airlines said on Tuesday it had called in its lawyers over a troubled plan for investor Sheikh Mohamed Bin Issa al Jaber to take a 20 percent stake.

 

The airline had extended to May 21 a deadline that expired on Monday for the sheikh to provide a bank guarantee for his plan.

 

In a deal announced in March, the Saudi-Austrian investor was to take a 20 percent stake in the airline via a capital increase at 7.10 euros for about EUR150 million euros (USD$232 million).

 

The airline wanted the funds to help it expand in the Middle East and elsewhere.

 

Chief Executive Alfred Oetsch, asked in a radio interview on Tuesday what happens to the contract now, said: "We will hand the subject over to our lawyers. I cannot say now whether we are demanding that the contract be fulfilled or (seeking) damages."

 

On the extension of the deadline, he said: "It was only fair to give him a chance to fulfill the contract."

 

The airline and its main stakeholder, state holding company OeIAG, said the contract with al Jaber was watertight and binding.

 

OeIAG, in a statement, for the first time gave details of al Jaber's additional demands.

 

It said he wanted further shares for up to EUR50 million at about 4 euros each, and greater influence on the management board, the supervisory board and the steering committee.

 

A spokesman at al Jaber's office in Vienna was not available.

 

OeIAG said: "In order to ensure control of Austrian Airlines by OeIAG and its syndicate partners, and the economic interests of society and the Austrian republic, it was inconceivable to meet the additional demands of Sheikh al Jaber."

 

Tuesday's statement from the airline extending the bank guarantee deadline said al Jaber claimed to have been deliberately misled. It rejected the allegations.

 

Al Jaber threatened to pull out after the airline posted a first-quarter EBIT loss of EUR50.1 million in April, much worse than expected, sending the shares sliding. The airline says this is typically the worst quarter in the sector.

 

(Reuters)

 

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TK, Power ? :blink: :huh:

But they are still making billion of dollars. Many other airlines with similar operating cost as SIA or lower than SIA still fail to make a profit.

 

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Time will soon tell if I need to punch in Cost Index 0 during preflight FMC work. Time to tighten belt for staff.

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Time will soon tell if I need to punch in Cost Index 0 during preflight FMC work. Time to tighten belt for staff.

Eh... before that happens, look forward to your bonus first! :clapping:

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Time will soon tell if I need to punch in Cost Index 0 during preflight FMC work. Time to tighten belt for staff.

 

Cost index 0 , thats quite a delay for LRC ...

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Bonus?? No comment. Rainy days ahead. Soon all SQ planes will have new livery. All in Silver Bullet style. Further cost reduction. MPB and MPD has led the way.

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United's Tilton To Give Parker A Shot At Top Job

 

May 15, 2008

United Airlines' chief executive Glenn Tilton has offered to make US Airways CEO Doug Parker a top candidate to succeed him if the airlines agree to merge, the Financial Times said on Thursday, citing people familiar with the matter.

 

Parker does not have any firm contracts on succession but Tilton offered him a senior operating role and to put him on the potential chief executive candidates list if he meets certain performance goals, the report said.

 

The report added that it was unclear if Parker is willing to be Tilton's apprentice.

 

United's board is to meet on Thursday to hear about its strategic options from officials, including the US Airways merger and a marketing alliance with Continental Airlines, the FT said.

 

(Reuters)

 

 

Singapore Air Seeks Bids For Virgin Atlantic Stake

 

May 15, 2008

Singapore Airlines on Wednesday invited offers for its 49 percent stake in Richard Branson's trans-Atlantic airline Virgin Atlantic because the nine-year old investment was giving it poor returns.

 

Singapore Air, the world's second-biggest airline by market value, bought the stake from British billionaire Branson in 1999 for GBP800 million pounds (USD$1.6 billion).

 

"It's not a secret that we regard it as an underperforming investment. We are still reviewing our plans and are open to all reasonable offers," Singapore Airlines Chief Executive Chew Choon Seng told a results briefing.

 

"But as they say in classified ads: No time-wasters, please."

 

State-controlled Singapore Airlines had hoped that the investment would provide it with both a financial return and better access to routes. It is not losing money on the stake.

 

Branson, a master of the publicity stunt, said last August that Virgin Group, his airlines-to-music group, may buy back the stake held by Singapore Air. The conglomerate has a right of first refusal and would be willing to match any offers for it, Branson had said.

 

Chew said Singapore Airlines faced no shareholder pressure to cut its stakes in aircraft maintenance firm SIA Engineering and ground-handling firm Singapore Airport Terminal Services but was reviewing those holdings at regular intervals.

 

"Both are still profitable, sustainable businesses and are adding value to the group. And therefore there is no pressure on us to reduce our holdings."

 

The carrier on Tuesday unveiled a smaller-than-expected 21 percent fall in quarterly profit and warned of slower demand due to the ongoing global market turmoil amid record fuel costs.

 

Chew said its forward bookings were still firm in spite of economic uncertainty. The group, which was the first airline to put the Airbus A380 superjumbo into commercial service last year, relies on business travel for about 40 percent of its revenues.

 

"We have seen some softening for discretionary travel out of the US but not for the corporate sector as yet," he said. "Forward bookings are still firm but these are subject to changes in corporate travel policy."

 

Analysts say the airline could be hurt by a drop in business travel due to the ongoing US credit crisis, after the carrier reported four consecutive months of lower passenger traffic from North America since December due to slowing demand.

 

In April, the International Air Transport Association cut its 2008 profit forecast for the airline industry for the second time in four months, to reflect a deepening global economic gloom and record high fuel costs.

 

Singapore Air will launch on Thursday its first all-business class product, a non-stop 18 hour flight between Singapore and New York, in a bid to capture the higher-yielding business traffic.

 

(Reuters)

 

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United is surely gonna merge, but with who ?

...talking to US as well as CO :blink:

 

United In Alliance Talks With Continental

 

May 16, 2008

United Airlines has begun talks with Continental Airlines for a possible alliance even as its merger talks with US Airways continue to advance, sources briefed on the matter said.

 

United will make a decision on whether to merge with US Airways soon, two people said, adding that a deal with US Airways is likely, but not imminent. The sources declined to be identified because of the confidential nature of the talks.

 

Although United's board of directors had a meeting on Thursday, no decision is expected, the people said.

 

Continental Airlines, which called off merger talks with United in late April, is also in advanced alliance talks with American Airlines and British Airways, sources have previously said.

 

The wave of talks come after Delta Air Lines and Northwest Airlines said in April they planned to merge and become the world's largest airline, seeking to counter high fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

 

After racking up USD$35 billion in losses and finally emerging from a five year slump in 2006, US airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

 

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

 

Continental, American and British are looking at forming alliances and then seeking antitrust immunity. United would also seek immunity if it were to form an alliance with Continental, one of the sources said.

 

Airline alliances allow partners to streamline costs while sharing revenues. Without antitrust immunity, the data and revenue shared on the routes would normally be considered collusive.

 

Earlier this month, the US Department of Transportation granted tentative antitrust immunity to the SkyTeam alliance involving Delta, Northwest, Air France-KLM and Alitalia.

 

Continental, which has a marketing alliance with SkyTeam but was not part of the group that received antitrust immunity, has said it would review its participation in that alliance.

 

Analysts have said a United-US Airways merger would not be very complex as wages at the two carriers are closely aligned and their fleets mesh well. The two are also part of the same global marketing alliance.

 

UAL's market value stands at USD$1.8 billion, while US Airways is valued at USD$657 million, one of the lowest among major carriers.

 

A United-US Airways deal foundered in 2001 on antitrust concerns. But consolidation proponents say the industry and the two carriers have changed dramatically.

 

Both have restructured hubs and routes during long stays in bankruptcy, and United has cut domestic capacity to focus more on international routes.

 

(Reuters)

 

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After Swiss, will Lufthansa 'take' Austrian too ? :huh:

 

Austrian Air CEO Open To Majority Takeover

 

May 18, 2008

The chief executive of Austrian Airlines was quoted on Saturday as saying he would be open to a majority takeover of Austria's national carrier if that were needed for it to prosper amid high fuel costs.

 

In March Austrian announced a return to profit in 2007 but in April it posted a first-quarter loss in earnings before interest and tax (EBIT) of EUR50.1 million euros (USD$78 million), much worse than expected, and a potential Saudi-Austrian investor has backed out.

 

Asked in a newspaper interview whether the airline would consider retaining just a minority stake if it departed from stand-alone ownership, chief executive Alfred Oetsch said: "If so, I am for a clear solution, that is, a majority sale."

 

He was quoted by Der Standard daily as saying he had a "neutral" approach to such scenarios. Airline management would propose to the supervisory board in the autumn "whether, and with whom, a partnership would be good".

 

Austrian Finance Minister Wolfgang Molterer told national ORF television on Saturday that Austrian Airlines' future should be resolved by the end of this year.

 

He said he did not consider the airline to be a candidate for privatization but could envisage a strategic partner.

 

Oetsch told Der Standard that Austrian had removed major sources of losses and was effectively restructured to be financially stable with EUR300 million in liquid assets and an equity-to-assets ratio of 25 percent.

 

But he said sharply rising fuel prices had put the national carrier back under pressure again recently.

 

"I was deeply convinced before the extreme oil price rise that we could balance AUA (Austrian Airlines) positively in an enduring (way). Now I am no longer so certain," he said.

 

"Stand-alone was my mandate when I was appointed (in 2006). We aimed for that with all our strength. But general conditions have changed, now everything is different, and we would anyway (need) to explore stand-alone or partnership options."

 

An airline spokeswoman told national news agency APA that a majority sale would be considered only if the carrier were no longer in a position to be profitable on its own.

 

"We will explore all possible options... The outcome of this undertaking remains totally open," she said.

 

Last Tuesday, Austrian Airlines said it had called in its lawyers over investor Sheikh Mohamed Bin Issa al Jaber's withdrawal from a plan to take a 20 percent stake.

 

Al Jaber said he was pulling out because he was deliberately misled about the airline's results, something it denied.

 

Austrian Airlines wanted his funds to help it expand in the Middle East and elsewhere.

 

(Reuters)

 

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SAS Flies Slower To Save Costs And Emissions :good:

 

May 20, 2008

Scandinavian airline SAS is flying slower to save on fuel costs and curb emissions of carbon dioxide in a new push to green up its image.

 

SAS said on Tuesday it has reduced the cruising speed of its passenger jets to about 780 kilometres (485 miles) per hour from 860 kph. The test project, run by SAS's Norwegian unit, has saved it an estimated USD$12 million in fuel since early 2006.

 

"Our experience is that we were able to save a lot by slowing down," said Thomas Midteide, a spokesman for SAS Norge.

 

"After the test project... we implemented this strategy in the (SAS) group on an everyday basis," he added.

 

The move comes amidst calls by lawmakers around Europe to boost taxes on air travel as a way of combating emissions of greenhouse gasses that contribute to global warming.

 

A 360 km flight between Oslo and Bergen, Norway's two largest cities, at "economy speed" saved 130 kg (287 pounds) of fuel and 420 kg of carbon emissions. The entire journey lasts only three minutes longer, Midteide said.

 

A slightly longer flight between Oslo and Paris or London takes about 10 minutes longer than before.

 

Attempting to "offset" the extra time spent in the air, SAS started early departures if all passengers were in place and on board its aircraft before the scheduled takeoff time.

 

Like many national flag carriers, SAS has been struggling with competitive pressure from cut-price rivals, overcapacity and, most recently, a huge rise in fuel costs.

 

Half owned by the governments of Sweden, Denmark and Norway, SAS was also one of the first airlines to allow passengers to pay for the carbon dioxide their plane produced.

 

The Oslo-Bergen flight produces some 54 kg of CO2 per passenger, which could be offset with an additional cost of 0.63 euros (USD$0.981) added to the ticket price, SAS's internet booking page shows. Paying for one passenger's share of carbon emissions on a longer flight between Oslo and San Francisco costs 7 euros.

 

Last month SAS said it planned to cut CO2 emissions by 20 percent by 2020 by improving energy efficiency and mixing jet fuel with renewable sources. The goal assumes 4 percent per year growth in passenger numbers for SAS during 2007-2020.

 

To save more fuel, SAS taxies its planes to gates on one engine, turning off the other engines after landing, Midteide said. The same tactic is planned for taxiing before take-off.

 

(Reuters)

 

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Al Jaber said he was pulling out because he was deliberately misled about the airline's results

 

Al Jaber Says No Austrian Airlines Bank Guarantee

 

May 21, 2008

Investor Sheikh Mohamed Bin Issa al Jaber will not meet a Wednesday deadline to provide a bank guarantee for his plan to invest EUR150 million euros (USD$234.8 million) in Austrian Airlines, a spokeswoman for the sheikh said.

 

"Al Jaber withdrew his obligation to take part in the capital increase on April 30... so he sees no need to provide the bank guarantee," the spokeswoman said.

 

In a deal announced in March, the Saudi-Austrian investor was to take a 20 percent stake in Austrian Airlines via a capital increase at 7.10 euros for about EUR150 million (USD$232 million).

 

The airline posted a first-quarter loss of earnings before interest and tax (EBIT) of EUR50.1 million in April, much worse than expected, sending the shares sliding.

 

Jaber pulled out because, he said, he had been deliberately misled about the airline's results and the airline last week said it had already put the issue in the hands of its lawyers.

 

The airline denies it misled him and extended the deadline for the bank guarantee to Wednesday to give him another chance.

 

The airline's chief executive, Alfred Oetsch, says the burden of high fuel prices means the sale of a majority stake to another airline is possible and has mentioned Lufthansa but the government wants the airline to remain Austrian.

 

(Reuters)

 

 

 

After Swiss, will Lufthansa 'take' Austrian too ? :huh:

 

Lufthansa Willing To Look At Austrian Airlines

 

May 21, 2008

Lufthansa is interested in Austrian Airlines, but said it needed to be approached by the Austrian carrier first, Lufthansa's head said on Wednesday.

 

"We are willing to look at it," Chief Executive Wolfgang Mayrhuber told a news conference in London, adding that so far Lufthansa had not issued an offer.

 

Media reports said last week that Austrian Airlines was open for a majority takeover after investor Sheikh Mohamed Bin Issa al Jaber withdrew from a plan to take a 20 percent stake. The Austrian state owns about 43 percent of the carrier.

 

Mayrhuber said bookings for July and August were "extremely up" and he was expecting to grow capacity by 7 percent this summer.

 

He confirmed Lufthansa's outlook, expecting 2008 operating profit at least at last year's level.

 

"We aim for the same results as last year and we have ambitions to do more," he said.

 

(Reuters)

 

Austrian Airlines Says No Bank Guarantee Received

 

May 22, 2008

Sheikh Mohamed Bin Issa al Jaber, who was to have taken a 20 percent stake in Austrian Airlines, did not provide a bank guarantee within the extended deadline, the airline said on Thursday.

 

The guarantee had been due by the end of Wednesday.

 

In a deal announced in March, the Saudi-Austrian investor had agreed to take the stake via a capital increase for about EUR150 million euros (USD$236.4 million).

 

Jaber has pulled out because, he said, he had been misled about the airline's results, and the airline last week said it had already put the issue in the hands of its lawyers.

 

Austrian Airlines wanted his funds to help it expand in the Middle East and elsewhere.

 

The airline's chief executive, Alfred Oetsch, said in a media report last week the burden of high fuel prices meant the sale of a majority stake to another airline was possible and has mentioned Lufthansa, but the government wants the airline to remain Austrian.

 

The Austrian government holds roughly 43 percent of the carrier.

 

On Wednesday, Lufthansa Chief Executive Wolfgang Mayrhuber told a news conference in London that he was willing to look at Austrian Airlines, if approached by the airline.

 

(Reuters)

 

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United, US Airways Merger Talks Slow

 

May 28, 2008

Merger talks between United Airlines and US Airways have slowed and a deal is not expected in time for review by the Bush administration, sources said late on Tuesday.

 

The sources said the talks have not ended, but that United is continuing its alliance talks with Continental Airlines.

 

Both United and US Airways declined to comment.

 

In a report on its web site, the New York Times cited unnamed people with knowledge of the discussions, saying the talks might be revived at some point but that in recent days there had been little to no contact between the companies.

 

Citing one person involved in the talks, the newspaper said that internal teams of senior executives at both companies and external bankers and lawyers involved in the project, had put it on "permanent hold."

 

Even as its talks with US Airways were continuing, United had begun talks with Continental for a possible alliance, sources briefed on the matter said earlier this month.

 

Continental, which called off merger talks with United in late April, is also in advanced alliance talks with American Airlines and British Airways sources have previously said.

 

The wave of talks come after Delta Air Lines and Northwest Airlines said in April they planned to merge and become the world's largest airline, seeking to counter skyrocketing fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

 

After racking up USD$35 billion in losses and finally emerging from a five year slump in 2006, US airlines are hoping mergers could give them greater market power to reduce flights and raise fares.

 

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

 

(Reuters)

 

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United, US Airways CEOs To Discuss Merger

 

May 29, 2008

The chief executives of United Airlines and US Airways plan to meet on Thursday to discuss progress in merger talks and address key issues, a source familiar with the matter said on Wednesday.

 

The two carriers have been in talks about a possible alliance, but the pace had slowed lately over concern about how they could raise capital to fund the integration of the two carriers, the source said.

 

The carriers were also concerned about opposition from the pilots union at United Airlines. The issues will be discussed on Thursday, the source said.

 

United and US Airways have not agreed on any major points toward a deal, including who would run the company and the location of a headquarters, the source said.

 

United Airlines and US Airways declined comment.

 

United is also in talks over a possible alliance with Continental Airlines, which had called off full-merger talks with United in late April.

 

After Continental pulled away, United's talks with US Airways heated up, according to sources.

 

UAL's market value stands at USD$1.8 billion, while US Airways is valued at USD$657 million, one of the lowest among major carriers.

 

A United-US Airways deal foundered in 2001 on antitrust concerns. But consolidation proponents say the industry and the two carriers have changed dramatically.

 

Both have restructured hubs and routes during long periods in bankruptcy, and United has reduced domestic capacity to focus more on international routes.

 

US Airways closed down 36 cents to USD$4.08 on the New York Stock Exchange, while UAL ended down 27 cents to USD$7.91 on Nasdaq.

 

(Reuters)

 

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US Airways' Ratings Cut, United's Outlook Negative

 

May 29, 2008

Fitch Ratings on Thursday cut US Airways deeper into junk, citing the growing likelihood of a cash shortfall later this year or in early 2009 due to rising crude and jet fuel prices.

 

Fitch also said it revised its outlook on United Airlines to negative from stable, which means the likely direction for its rating over the next one or two years is down.

 

Both actions have been driven by deteriorating operating margins as US airlines struggle to cut costs after fuel prices have more than doubled since the start of 2007.

 

Fitch cut US Airways rating to "CCC," the eighth lowest junk rating, from "B-minus." The outlook is negative.

 

"Given the dramatic rise in energy prices and limits on the amount of additional domestic capacity that the airline can remove to respond to the fuel challenge, Fitch believes that the potential for a liquidity squeeze in late 2008 or early 2009 has increased significantly," the agency said.

 

The downgrade also reflects US Airways' limited flexibility in raising additional cash through asset sales or new financings, it added.

 

Rising crude oil and jet fuel prices will also put increasing pressure on United's profit margins and its ability to generate cash this year, potentially forcing the carrier to consider asset sales or new financing to shore up liquidity.

 

Fitch said each 10 cent increase in the average price of jet fuel increases US Airways' annual mainline operating costs by USD$120 million, and its cash position will erode by the first quarter unless fuel prices decline.

 

Fitch said US Airways had USD$2.1 billion of unrestricted cash and investments at the end of the first quarter. It also has a USD$1.6 billion secured term loan with a minimum liquidity covenant of USD$1.25 billion.

 

The rating agency said it could further downgrade US Airways in the coming months if a continuation of adverse fuel price trends and weak unit revenue growth increases the likelihood that the airline will breach its term loan liquidity covenant.

 

The chief executives of both carriers were expected to meet on Thursday to discuss progress in merger talks and address key issues, a source familiar with the matter said on Wednesday.

 

(Reuters)

 

United-US Airways Merger Talks Suspended

 

May 30, 2008

United Airlines and US Airways have suspended merger talks due to concerns about union opposition and integration costs, while United draws closer to an alliance with Continental Airlines, a source close to the talks said late on Thursday.

 

United Airlines Chief Executive Glenn Tilton told his counterpart at US Airways, Doug Parker, at a meeting on Thursday that it was best not to pursue a merger at the moment. But he left open future possibilities between the airlines, the source said.

 

Both United and US Airways declined to comment.

 

The two carriers have been in talks about a possible merger for a few months, while United was also in talks with Continental Airlines for a full merger.

 

But United's merger talks with US Airways picked up steam in late April, after Continental called off full-merger talks with United.

 

The wave of talks come after Delta Air Lines and Northwest Airlines said in April they planned to merge and become the world's largest airline, seeking to counter high fuel prices, a weak economy and growing competition from European carriers as trade barriers fall on trans-Atlantic travel.

 

After racking up USD$35 billion in losses and finally emerging from a five year slump in 2006, US airlines are hoping mergers or alliances could give them greater market power to reduce flights and raise fares.

 

The airlines also face a renewed sense of urgency to cut costs as jet fuel prices have more than doubled since the start of last year.

 

Both Tilton and Parker have been proponents of industry consolidation but the pace of merger talks between United and US Airways had slowed lately over concern about how they could raise capital to fund the integration of the two carriers, the source said.

 

At Thursday's meeting, Tilton also expressed concern about United's pilots' opposition to the merger, the source said.

 

United's unions had said they would oppose a merger with US Airways. Pilots at US Airways were also wary of a potential deal with United, and has said United's "financial health is a major concern."

 

UAL lost USD$537 million in the first quarter. Analysts are concerned it might not be able to comply with bank covenant and loan agreements, though the carrier has said it faces no such problems.

 

Airline mergers and the integration of fleets, staff and infrastructure can be very expensive and time-consuming.

 

Integrating two work forces could take years unless the two unions agree to terms before a merger is announced.

 

US Airways, which merged with America West in 2005, still operates its staff with two separate contracts and has had trouble integrating its customer reservation systems.

 

United's Tilton told Parker on Thursday the carrier is close to forming an alliance with Continental Airlines with plans to seek antitrust immunity.

 

Continental, meanwhile, is also having similar talks with American Airlines and British Airways, other sources have said.

 

Airline alliances allow partners to streamline costs while sharing revenues. Without antitrust immunity, the data and revenue shared on the routes would normally be considered collusive.

 

(Reuters)

 

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United, US Airways Will Not Merge Now

 

May 30, 2008

United Airlines and US Airways said on Friday they would not merge, a decision that experts said effectively kills the chances of further US airline consolidation this year.

 

The two carriers, the second and sixth largest in the United States, declined to say exactly why they ended the talks that heated up last month after Delta Air Lines and Northwest Airlines said they would combine to create the world's largest airline.

 

After racking up USD$35 billion in losses and finally emerging from a five-year slump in 2006, record high fuel costs have plunged US airlines into a new crisis. Some industry leaders had hoped consolidation would lead to capacity cuts and fare increases as a way to offset fuel costs.

 

US Airways Chief Executive Doug Parker and UAL CEO Glenn Tilton announced their decision in separate messages to employees.

 

"After a considered review by our board of directors, United has determined that it will not be pursuing a merger at this time due to issues that could significantly dilute benefits from a transaction," Tilton said in the message.

 

Sources have said union opposition and integration costs torpedoed the deal. Others say UAL shied away from a merger because US Airways lacks a strong international presence.

 

"It just wasn't the scale of a deal that really solves the problems," airline consultant Robert Mann said, referring to excess capacity in the industry and the dire need for cost cuts and new revenue streams.

 

Despite mounting pressure to overhaul the industry, carriers are increasingly unlikely to attempt mergers ahead of a US presidential election for fear a new administration could get tougher on antitrust questions and reject some deals that might have got the blessing of the current government.

 

The whole process would also likely be slowed by related turnover in senior officials at the Department of Justice as they got to grips with the subject matter.

 

United, however, remains in the spotlight as speculation brews that it soon will announce a comprehensive alliance with Continental Airlines.

 

Tilton said on Friday that UAL is evaluating other options and would take steps to "size the business appropriately, leverage our capacity discipline to pass on commodity costs to customers and accelerate development of new revenue sources."

 

Tilton and Parker -- both vocal advocates for consolidation -- left the door open to future deals, but their decision not to proceed seems to erode the chances of broad industry consolidation in the near term.

 

"It is simply unlikely that anything will happen in 2008 as our industry continues to struggle with how to function in a world with USD$130 a barrel oil prices," Parker said.

 

Merger speculation has been rampant since Delta and Northwest announced their deal in April. Nearly every possible combination of major airlines was discussed, but United remained front and center on reports that it sought a deal with Continental.

 

Attention shifted to US Airways as United's most likely merger partner, after Continental said it would not merge with United. Some experts believed a United/US Airways merger would prompt other mergers among the biggest airlines, although the only other two major airlines - American Airlines and Continental -- appear less inclined to merge than their rivals.

 

"If no one's going to initiate and push, then it's not going to happen," Mann said. "It appears that Parker is pushing, but it's like pushing rope. You have to have a partner that will pull."

 

(Reuters)

 

Think, Keith T is a happy man now... :p

 

Further, some really good news from Turkey :pardon:

 

Turkish Airlines Q1 Profit Up 207 Percent

 

May 30, 2008

THY Turkish Airlines, one of the fastest-growing airlines in Europe, said on Friday net profit rose 207 percent year-on-year to TRY125 million lira (USD$102.75 million).

 

The Turkish flag carrier said in a statement January-March revenue rose 13 percent year-on-year to TRY1.09 billion.

 

(Reuters)

 

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Fuel Not A Deal-breaker As United/USAir Talks Founder

 

May 31, 2008

The challenge of skyrocketing fuel costs was not a deal-breaker in failed merger talks between United Airlines parent UAL and US Airways, and in fact had been a force pushing them together.

 

The two airlines gave no specific reasons for ending their discussions on Friday, but sources have said staff integration costs and other expenses associated with consolidation played a large role in the outcome.

 

"The price of oil was not a stumbling block in this," said one person familiar with the ill-fated discussions. "That was a motivating factor."

 

United Chief Executive Glenn Tilton told employees the talks would not yield a proposal due to "issues" that could "significantly dilute" the financial benefits of a tie-up.

 

United and US Airways officials would not comment beyond separate statements from Tilton and his US Airways counterpart, Doug Parker.

 

But people familiar with the talks over the past month and industry experts painted a fuller picture of challenges faced by the two companies had they decided on a common future.

 

"These mergers take cash. There's always alleged synergies down the road but they need cash now for severance payments, to get out of leases," said Roger King, an analyst with CreditSights. "No one can afford to make the investments in those things now."

 

For instance, a source with knowledge of the negotiations said the contract for a majority of US Airways pilots would get much more expensive in a merger. In addition, there would be extra costs associated with aircraft orders at US Airways, not all of them financed.

 

For United, the company could have faced significant costs, including those related to credit agreements with lenders, if a merger were to occur.

 

"These were large issues," the source said.

 

Another source said the two sides were never on the verge of reaching an agreement, although the talks at one stage were described as very advanced.

 

While sources said fuel prices did not scuttle the talks, King guessed the two would have merged had crude prices been where they were four months ago -- USD$90.

 

Tilton and Parker were under pressure to decide by early June to ensure a Bush administration review of any merger by Justice Department antitrust enforcers. The administration, considered business friendly, leaves office in January.

 

Both CEOs have been strong proponents of consolidation as a remedy for crippling industry-wide cost pressures caused by crude oil prices hovering around USD$130 a barrel. Some analysts have begun to warn of possible airline bankruptcies in 2009.

 

Shares of US Airways and United have plummeted in the past year and the two lost more than USD$750 million combined in the first quarter.

 

On Thursday, Fitch Ratings cut US Airways bond ratings further into junk and downgraded United debt. Fitch constructed a bleak scenario for the industry but said United had some room to maneuver in any "deep industry downturn" while US Airways has "limited flexibility" to raise additional cash.

 

Fitch analysts believe mergers could "lay the groundwork" for "more rational" decision making on the capacity cuts industry experts believe are necessary to overcome high fuel prices and cash flow problems.

 

While United pilots sit on the company's board and opposed a US Airways deal, sources said management believed the challenge with the union was not insurmountable. The same opinion held for US Airways pilots.

 

Jay Heppner, a spokesman for the United chapter of the Air Line Pilots Association (ALPA), said in an interview the pilots were satisfied with Tilton's decision.

 

"We're confident United has the ability and resources to go it alone," Heppner said. "We looked at the financials and we didn't see it being a good mix. We just assume they saw the same risk," Heppner said of United management and the board.

 

(Reuters)

 

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United To Announce More Fleet, Job Cuts

 

June 4, 2008

United Airlines plans to reduce its mainline fleet by another 70 aircraft by the end of 2009 and announce further job cuts, the Wall Street Journal said on Wednesday.

 

The airline is expected to announce the planned cuts to its fleet of 460 aircraft later on Wednesday, the paper reported, citing people familiar with the matter.

 

The airline will drop 64 Boeing 737s by the end of next year, and also remove six 747s, the paper said.

 

UAL will also announce additional cuts of salaried and management workers, with cuts of unionized positions to follow later, the paper said.

 

UAL said in April it would cut 500 salaried and management workers and eliminate 600 union jobs by the end of 2008. It had also said it would cut 30 aircraft.

 

The newspaper said while the move would help the Chicago-based airline to deal with surging fuel costs, it would result in furloughs of unionized workers and a major reduction in routes that may be less profitable.

 

The company is also expected to ditch its domestic leisure service Ted, which has 56 Airbus A320 aircraft, and restore first-class cabins in some of those planes, the WSJ said.

 

United and rival US Airways ended merger talks last month.

 

(Reuters)

 

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Lufthansa Used Flight Data To Plug Board Leak

 

June 8, 2008

Lufthansa said on Saturday it used passenger travel records to find out who in the company was leaking information to the media :blink: :blink: , but added it had done nothing illegal.

 

Confirming a report to appear in Der Spiegel news magazine, Lufthansa said it did an analysis of passenger movements in 1999 and 2000 to try to identify who on its 20-member supervisory board was regularly leaking information to a business newspaper.

 

But a Lufthansa spokesman said examining flight records was legal and only served as a starting point for the company's internal investigation. He said the leaks violated the German Stock Companies Act and there was an obligation to act.

 

"We were preparing a criminal complaint but that was dropped when the director accepted the consequences and stepped down," said Lufthansa spokesman Andreas Bartels, adding there had been no espionage, eavesdropping nor any surveillance activities.

 

"Looking at our own flight records of board members to try to find out the source of the leak was legally unobjectionable," Bartels said. "The concrete evidence was later found elsewhere."

 

The report comes amid a spate of snooping scandals involving Deutsche Telekom and some of Germany's biggest corporations, rattling Germans who have not forgotten the dark Cold War era.

 

Deutsche Telekom, Europe's biggest telecommunications firm, said it had illegally monitored phone records, reviving chilling memories of communist East Germany's Stasi secret police and even Hitler's Gestapo.

 

The Telekom scandal is based on a report the firm spied on journalists and directors to find out a leak to the press.

 

Discount retailer Lidl was also investigated after accusations it monitored staff activity. Rail operator Deutsche Bahn last week denied illegal snooping despite using the same firm as Telekom.

 

Der Spiegel said that the journalist had met the supervisory board member in a Lufthansa frequent flier lounge at an airport in Hamburg, where the Financial Times Deutschland newspaper that regularly reported supervisory board secrets is based. The report is to appear in Monday's edition of Der Spiegel.

 

Lufthansa did not confirm those details. But the spokesman said it had not spied on the journalist, although the airline did have the reporter's flight records.

 

"We didn't investigate the journalist," Bartels said. "We were interested in finding out who was leaking the information from inside the company."

 

Bartels said it was the leaks that were illegal under German law. He said they had the potential to cause financial damage to the airline and harm shareholders' interests. The leaks stopped after the director stepped down.

 

"A company has to act to prevent damage," he said. "We had access to the flight data and there was nothing illegal about examining our own flight records." :finger:

 

(Reuters)

 

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Strategic Partner Likely For Austrian Airlines

 

June 10, 2008

Austria is open to all options for Austrian Airlines but a strategic partner taking a stake in the national carrier was the most likely scenario, Austria's finance minister said on Tuesday.

 

Wilhelm Molterer said the state, which holds around 43 percent of Austrian Airlines through its investment arm OeIAG, could reduce its stake, though it was unlikely to go below 25 percent under the current government -- a coalition between social democrats and conservatives.

 

"Given current economic conditions, the competitive situation and the high oil price I think a stand-alone solution is the most unlikely scenario and a strategic partnership the most likely one," Molterer told journalists.

 

Airlines worldwide are under mounting pressure to consolidate or cut back unprofitable routes to cope with unprecedented oil prices which have caused a slew of bankruptcies in the sector.

 

Austrian Airlines said late on Monday it would launch an evaluation for a potential strategic partner and also warned it would make a net loss this year due to high fuel prices.

 

The government said previously the national carrier's tail fin should stay in Austria's red and white.

 

Yet Chief Executive Alfred Oetsch has not ruled out the sale of a majority stake if plans for the airline do not go as planned.

 

Two years ago OeIAG asked consultancy Roland Berger to evaluate Austrian Airlines' strategic options, although it never published the results.

 

This time, the airline's management, with Boston Consulting Group, will examine the potential of a strategic partnership and what course of action the owners ought to take, Austrian Airlines said in a statement late on Monday.

 

Initial results of this were expected at the end of July and a detailed recommendation by the end of September.

 

Germany's Lufthansa, which many analysts see as the most natural fit for Austrian Airlines, has said previously any move should be a friendly one, and reiterated on Tuesday it would look at Austrian Airlines if it was approached by the owners.

 

Lufthansa has said it is only interested in buying a majority stake in rivals and has cited its takeover of Swiss, which launched a major restructuring before it was bought, as a model for future acquisitions.

 

The German airline said it wants to be active in European airline consolidation, though has said it is not under pressure to make acquisitions and would seek to avoid hanging a financial millstone around its neck.

 

Russian flag carrier Aeroflot said on Saturday it was ready to discuss buying into Austrian Airlines and was waiting for the government's offer to start talks.

 

Last week, Air France-KLM Chief Executive Jean-Cyril Spinetta was quoted by an Austrian weekly as saying the airline was observing the situation at Austrian Airlines, though took priority.

 

Speculation that Austrian Airlines might have to find a partner intensified after investor Sheikh Mohamed Bin Issa al Jaber last month cancelled his plan to take a 20 percent stake, saying he had been deliberately misled about the results.

 

In April, the airline posted a first-quarter loss of earnings before interest and tax (EBIT) of EUR50.1 million euros, much worse than expected, sending its shares lower.

 

The airline said on Monday that due to high jet fuel prices it expected a full-year net loss of between EUR70 million (USD$108.9 million) and EUR90 million and its outlook for 2009 would strongly depend on price developments.

 

(Reuters)

 

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A friend works for a lobbying firm in Vienna acting for LH in relation to the OS deal. He said that LH-OS is pretty much a done deal. I responded that in the airline industry anything can happen (and facts are often mixed in with a whole lot of rumour and fantasy anyway), but he was quite confident about it and apparently they'd covered all possible bases (OS itself, parliament etc) that precludes anything but a deal with LH.

Edited by Keith T

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