Star Alliance News

[Pieter C. 5]

Lufthansa CEO Sees Merger Talk Readiness

 

September 25, 2008

Lufthansa chief executive Wolfgang Mayrhuber said there is great willingness to discuss mergers in the airline industry as carriers seek to cut costs, a German magazine reported.

 

"The fragmented European industry can hardly survive long-term in its current form," Mayrhuber told German tourism and business travel magazine FVW in an interview published in its Thursday edition.

 

"We need a European solution for the global challenge -- and this can above all consist of faster consolidation in our industry," he said.

 

Every step in the process had to make economic sense as it was not possible to finance deals at too high prices in an industry with weak margins, the CEO added.

 

Many European airlines are battling to eke out profits in the face of high fuel costs and waning economies. Among the European carriers up for sale are Italy's Alitalia and Austrian Airlines.

 

The Italian government is trying to salvage a takeover of its loss-making flag carrier by an investor group from the country. "If they succeed in sorting things out, a 'new Alitalia' would have good chances," Mayrhuber told the magazine.

 

Lufthansa, which has said Alitalia is of interest provided the conditions are right, is also in talks about buying Scandinavian carrier SAS, people with knowledge of the matter have said.

 

Lufthansa has also been shortlisted to buy a stake in Austrian Airlines, sources close to the deal have said, and recently agreed to buy a 45 percent stake in the parent of Brussels Airlines, with a plan to take full control later.

 

(Reuters)

 

 

Lufthansa Meets Unions At Struggling Alitalia

 

September 26, 2008

Lufthansa met Alitalia's unions on Friday to discuss a possible stake in the bankrupt airline as Italy pushed to wrap up talks to seal an investor bailout.

 

Lufthansa and Air France-KLM hope to boost their role in the Italian market through a minority shareholding with Alitalia, should its proposed relaunch by the CAI consortium of Italian investors succeed.

 

The investor deal collapsed last week but lurched back to life on Thursday after winning the support of four major unions, including Italy's biggest. The Anpav flight assistants' union on Friday also agreed to get on board, and talks continued to try and win over the remaining pilot and flight staff unions.

 

"They will be trying to find ways to give the unions some ability to save face while not impacting the economics (of the offer)," said a source closely monitoring the talks.

 

Italy's employment minister had hoped to clinch support from the remaining unions by a 1300 Friday deadline, but it passed without having any impact on the talks, which continued. He said CAI, which has now said its offer will expire on October 15, planned to press ahead with its bid even without their backing.

 

The four major unions backing the bailout met Lufthansa chief executive Wolfgang Mayrhuber on Friday and they said he conveyed the German carrier's interest in Alitalia.

 

Lufthansa declined to comment specifically on its interest in Alitalia but said Mayrhuber was in Rome at the Italian government's request, to discuss the stricken Italian carrier.

 

Lufthansa, which has become an active player in European airline consolidation, has long had its eye on the Italian market but the latest meeting is its clearest demonstration yet of interest in striking an alliance with Alitalia.

 

"It's evident that (the Germans) are interested, just as our interest in them has been obvious," said Raffaele Bonnani, the head of Alitalia's second-biggest union, Cisl.

 

Sources with knowledge of the matter said Lufthansa is mulling whether to bid for a 20 percent stake in Alitalia to become its foreign partner. A separate union source said the German airline was interested in an even bigger stake.

 

Rival Air France-KLM, whose deal to buy Alitalia collapsed this year over union opposition, is also eyeing a stake of up to 25 percent in the CAI consortium taking over Alitalia, sources familiar with the matter have said.

 

But it could face an uphill climb, with major Alitalia unions openly supporting Lufthansa and signs that Prime Minister Silvio Berlusconi would also support a tie-up with the German carrier after opposing Air France-KLM's deal in the past.

 

"It's not a question of liking one particular nationality, it's about the national interest," Bonanni said. "(Lufthansa) has a multi-hub system that works well with our need to favor two Italian hubs, Milan and Rome."

 

Berlusconi has repeatedly stressed an eventual foreign partner for Alitalia will only be allowed a minority stake.

 

Air France-KLM already holds a symbolic 2 percent stake in Alitalia and the two have been long-time commercial partners in the SkyTeam Alliance, while Lufthansa has a sales and technical alliance with Alitalia's biggest domestic rival Air One.

 

Alitalia has been on the brink of collapse for years thanks to a mixture of political interference, union unrest, inefficient strategies and high fuel prices.

 

Sealing the carrier's latest rescue would be a political triumph for Berlusconi, who made an election vow to save the airline and keep it Italian. His senior aide and key ministers have been presiding over union talks that continue.

 

(Reuters)

 

[Pieter C. 5]

TAP Swings To Big Loss On Fuel Prices

 

October 1, 2008

Portugal's flagship carrier, state-run TAP, on Wednesday posted a net loss of EUR133 million euros (USD$188 million) for the first eight months of the year, turning around from a profit a year earlier on high fuel prices.

 

Earnings before interest, taxes, depreciation and amortization in the period slumped 75 percent to EUR35 million, even though operating revenues rose to EUR1.4 billion from around EUR1.2 billion.

 

TAP announced eight-month results in order to include the busy summer months. The Socialist government has said it may privatize part of TAP.

 

"The net result (loss) had an impact of EUR128 million from fuel prices and EUR10 million for our participation in Groundforce, whose results worsened," said TAP chief financial officer, Michael Conolly.

 

Groundforce is a service provider for most airlines flying to Portugal. TAP controls the company, which has been plagued by union disputes and strikes, through its 49.9 percent.

 

Conolly said it was impossible to make full-year earnings forecasts as everything depended on oil and aviation fuel prices.

 

TAP's loss comes after two years of profits in 2006 and 2007, which puts the airline in a different league from troubled national carriers such as Alitalia.

 

Alitalia has not had a profit since 1999 and is now being rescued in a painful government-coordinated process after filing for bankruptcy protection in late August.

 

By contrast, last year's TAP profit was a record EUR32.8 million.

 

(Reuters)

 

[Pieter C. 5]

United Airlines To Lay Off 414 Mechanics

 

October 8, 2008

United Airlines said on Wednesday it would lay off 414 mechanics as part of a previously announced plan to cut 7,000 jobs company-wide.

 

A company spokeswoman said United notified the International Brotherhood of Teamsters, the union representing the workers, of the layoffs on September 29. The layoffs would be final on December 7, she said.

 

United, which aims to cut domestic capacity 14 percent in the fourth quarter, has said it would reduce its work force by 7,000 employees. Many have been offered buyouts, but that offer has already expired for the mechanics.

 

The airline industry has been severely battered by fuel costs and a weak economy. Those factors contributed to decisions by United and its rivals to downsize.

 

(Reuters)

 

Thai Airways To Cut Flights To Asian Countries

 

October 8, 2008

Thai Airways said on Wednesday it would cut flights to Asian countries from next week due to a fall in passenger numbers because of political unrest in Thailand and the global financial crisis.

 

The airline would also delay remaining investment under a THB3 billion baht (USD$87 million) plan covering the second half of this year, President Apinan Sumanaseni told reporters.

 

"The global financial crisis has caused passenger numbers to fall below our target. In this period, cabin factors normally are around 70-80 percent, but currently it is only 50-60 percent," Apinan said, referring to the percentage of seats sold.

 

The airline is cutting flights to China, India, South Korea and Japan from next week and would review plans later this month, the airline chief said.

 

Apinan said passengers from those countries had dropped by 10 percent since early September, when several states issued travel warnings after the Thai government imposed emergency rule in Bangkok because of political unrest.

 

After a period of calm, violence flared up again on Tuesday. Two people died and over 400 were injured in clashes between police and anti-government protesters.

 

"It is hard to give a projection on whether we will have a loss or profit for this year as a decline in world oil prices helped reduce fuel costs, but the global economic slowdown might hit tourism," Apinan said.

 

The airline, which had expected a net loss in the third quarter of this year, still hoped to report a net profit in the fourth quarter when it was the high season for the airline industry, he added.

 

It made a net loss of THB7.04 billion in the first six months, due in part to a foreign exchange loss.

 

The airline has said it expected revenue to drop this year from the THB174 billion it earned last year due to the political situation.

 

(Reuters)

 

[Pieter C. 5]

Drunk Sparks Hijack Alert On Turkish Flight

 

October 15, 2008

A drunk man sparked a hijack alert on a Turkish Airlines plane on Wednesday after passing a note to the pilot saying he had a bomb, the airline said.

 

Turkish Airlines chief executive Temel Kotil told a news conference the passenger was drunk and had been swiftly brought under control.

 

Passengers on the aircraft, which had taken off from the Turkish resort of Antalya bound for St Petersburg in Russia, disarmed the man, a spokeswoman for Turkey's main airport operator TAV said. No bomb or weapon was found on him.

 

The Turkish Airlines plane, carrying 164 passengers -- mostly Russian tourists -- and 7 crew, landed safely in St Petersburg.

 

"The hijacker gave a note to the head steward saying he had a bomb. After that the captain and crew acted in accordance with civil aviation procedure," Kotil said.

 

"Nobody was injured and the hijacker was taken into custody," he added.

 

The head of Turkey's civil aviation authority, Ali Ariduru, said the would-be hijacker was believed to be of Uzbek origin, but this had not been confirmed.

 

"It is said that he was drunk and that he had carried out this act under the influence of alcohol," Ariduru was quoted as saying by state-run Anatolian news agency.

 

Russia's RIA news agency, citing the press office of transport police in the St Petersburg region, also said that their initial information was that he was from Uzbekistan.

 

Hijackings are common in Turkey, where a number of radical groups ranging from Kurdish separatists to far-left militants operate, and several incidents in the past two years have ended without casualties.

 

Late last year two men hijacked a Turkish airliner heading for Istanbul from northern Cyprus, but gave themselves up and released their hostages after forcing the plane to land in southern Turkey.

 

(Reuters)

 

 

Pilots Union Signs Job Cut Deal With Spanair

 

October 16, 2008

Spanish pilot union Sepla said on Wednesday it had signed a deal with Spanair to make 90 pilots redundant and close six bases.

 

In a statement, Sepla said it hoped the job cuts and the closure of bases in Las Palmas in Gran Canaria, Tenerife, Alicante, Palma in Majorca, Bilbao and Malaga would "help guarantee the survival of the company and contribute to the future viability of the company and jobs."

 

Scandinavian airline SAS, which owns Spanair, has said it will shed more than 1,000 jobs at the loss-making Spanish airline, and 25 percent of capacity.

 

SAS put Spanair up for sale in 2007, but, beset by high fuel costs, falling demand and overcapacity in the Spanish market, both Iberia and former owners, Spanish travel company Marsans, pulled out of the bidding.

 

Spanair remains the main drag on SAS, losing SEK515 million Swedish Kronor (USD$71.7 million) in the first half of 2008.

 

(Reuters)

 

[Pieter C. 5]

Austrian Air Cuts 2008 View Amid Booking Slump

 

October 16, 2008

Austrian Airlines cut its 2008 forecast on Thursday and said it was now expecting a net loss before special items of EUR100 million to EUR150 million euros (USD$135 million to USD$202 million) due to a decline in bookings.

 

In June, the carrier scrapped its 2009 forecast and said it was expecting a loss of EUR70 million to EUR90 million this year because of rising oil prices.

 

"Noticeable consequences for the aviation industry due to the general financial and economic crisis are also expected for the coming months," the airline said in a statement.

 

A new revenue forecast based on the decline in bookings at the start of the fourth quarter and an expected continued decline in bookings indicated the previous forecast could no longer be upheld, it added.

 

Lower fuel costs were not able to compensate expected sales-related revenue losses, Austrian Airlines said.

 

Austrian's main shareholder, government holding company OeIAG, has started an auction of its 43 percent stake in Austrian.

 

The airline said on Monday its planned privatization should not be postponed as a delay would destroy value.

 

(Reuters)

 

Austrian Air Sale At Risk As Bidders Ask For Time

 

October 21, 2008

The sale of a stake in loss-making Austrian Airlines appeared to hang in the balance on Tuesday as one bidder said it did not make an offer and two others asked for more time.

 

As Austrian Airlines warned last week its loss would be even higher than previously thought due to a rapidly deteriorating economic environment, the prospect of a postponed sale could further depress the price.

 

Air France-KLM said on Tuesday the "current financial and economic climate" did not allow it to make an offer by Tuesday's deadline, adding it was still interested in continuing talks.

 

A source close to Russian airline S7 said it would submit a "serious" bid on Tuesday but that it would be tied to conditions and that the carrier was asking for more time. The source declined to specify the conditions. S7 declined comment.

 

Austrian newspaper Die Presse reported in its online edition that Lufthansa was asking for two more months to get a realistic picture of Austrian's economic situation. Lufthansa also declined to comment.

 

Austria's government holding company OeIAG declined to say who had submitted bids on Tuesday. A spokeswoman said however that there were no plans to delay the sale.

 

Austria's government holding agency OeIAG is offering its stake of 42 percent in Austrian Airlines in one of the many airline sales happening simultaneously in Europe as the sector is battered by high fuel prices and an economic downturn.

 

Lufthansa and Air France are both chasing a stake in ailing carrier Alitalia, Lufthansa agreed to buy Belgium's Brussels Airways last month, and people with knowledge of the matter have said it is also pursuing Sweden's SAS.

 

On a day of confusion and speculation, another source close to the matter said earlier on Tuesday that all three bidders had filed binding bids for the government-owned stake in Austrian Airlines.

 

Following Tuesday's deadline for strategic concepts for Austrian's future and proposed deal structures, bidders were due on Friday to follow up by saying how much they are ready to pay for Austrian Airlines.

 

Austrian last week issued its second profit warning in three months, saying that its 2008 loss would be as much as EUR150 million euros and could get even higher than that if depreciation of its aircraft fleet were taken into account.

 

Hopes that a sale could bring in 7.10 euros per share -- the price at which Austrian sold new shares in a rights issue two years ago -- are now fading.

 

The stock closed down 13 percent at 4.08 euros on Tuesday, down some 40 percent from a peak of 7.25 euros hit last month, giving the airline a total market capitalization of EUR360 million (USD$474.8 million).

 

An Air France spokesman said on Tuesday the airline still believed that the two airlines' networks are complementary and that there is room for synergies between the two companies.

 

"But the economic and financial climate coupled with the proposed scheme did not allow us to make a binding offer," the spokesman for Air France said. He added that Air France was still ready to continue talks.

 

(Reuters)

 

Austrian Airlines Stock Plunges, Sale In Doubt

 

October 22, 2008

Shares in Austrian Airlines slumped by 39 percent on Wednesday as the sale of the loss-making, indebted carrier was thrown into doubt when bidders pulled out and asked for concessions.

 

Several sources close to the deal said Lufthansa was the only airline to have submitted a proper offer for Austrian and was now the only serious contender.

 

"Lufthansa has filed an offer as expected," one of the sources said. "It is now all going in their direction."

 

Lufthansa declined to comment.

 

Air France-KLM said on Tuesday an offer was not feasible in the current situation. Russia's S7 said it had sent a letter on Tuesday, but sources said this letter did not contain the binding, unconditional bid which was asked for.

 

With no competition, Lufthansa could now start tough talks about price and about how to handle Austrian's EUR900 million euro (USD$1.2 billion) debt pile. It is due to say what it is ready to pay for Austrian on Friday in the staggered sale process.

 

Austrian warned last week its loss would be even higher this year than previously thought due to the rapidly deteriorating economic environment. The prospect of a delay or a fire sale to a single bidder could now further depress the price.

 

Austrian government holding firm OeIAG said it would proceed with the sale and would make a decision on Monday as planned. It declined to give more detail.

 

Air France coupled its no-bid on Tuesday with a comment that it was open to further talks, and Russia's S7 also asked for more time to discuss the findings of due diligence.

 

Austrian newspaper Die Presse reported that Lufthansa, too, has asked for more time to see additional documents to which it was not given access during due diligence.

 

OeIAG is offering its stake of 42 percent in Austrian Airlines in one of the many airline sales happening in Europe as the sector is battered by high fuel prices and an economic downturn.

 

Lufthansa and Air France are both chasing a stake in ailing carrier Alitalia, Lufthansa agreed to buy Belgium's Brussels Airways last month, and people with knowledge of the matter have said it is also pursuing Sweden's SAS.

 

Austrian last week issued its second profit warning in three months, saying that its 2008 loss was going to be around EUR150 million and could go even higher if depreciation of its aircraft fleet were taken into account.

 

(Reuters)

 

[Pieter C. 5]

Pilot Arrested After Failing Breath Test

 

October 20, 2008

A United Airlines pilot has been arrested on a passenger plane at London's Heathrow Airport on suspicion of being above the legal alcohol limit, police said on Monday.

 

Officers boarded a United Airlines plane at Terminal 1 before it was due to take off on Sunday and arrested the 44-year-old under transport safety laws. The pilot, who has not been named, was given police bail to January 16 next year, pending further inquiries.

 

A United Airlines spokeswoman said he has been suspended from duties, but declined to name the flight or give further details of the incident.

 

In a statement, the airline said: "United Airlines' alcohol policy is among the strictest in the industry and we have absolutely no tolerance for abuse or violation of this well-established policy.

 

"Safety is our number one priority and the pilot has been removed from service while we are co-operating with the authorities and conducting a full investigation.

 

(Reuters)

 

United Posts Smaller Than Expected Loss

 

October 21, 2008

United Airlines parent UAL posted a quarterly loss due to July's record-high energy prices and a drop in the value of its fuel hedges as the price of oil later dropped, but the results were not as bad as expected, and the company's shares rose more than 10 percent.

 

The carrier suffered an additional non-cash loss of USD$519 million, however, as its hedges -- designed to blunt the impact of rising fuel -- lost book value as oil began a rapid descent.

 

"While oil prices are lower in recent weeks, they continue to be volatile," UAL chief executive Glenn Tilton said in an email to employees.

 

"That said, the convergence of falling oil prices with our capacity flexibility, strong improvement on costs and competitive revenue put us in a position to make our margin and return United to profitability," Tilton said.

 

The airline industry has been battered by high fuel costs, which peaked alongside crude oil as it notched a record high in July. Oil has fallen about 50 percent since it touched its high.

 

Nevertheless, airlines are rapidly downsizing to offset fuel bills. UAL, which intends to reduce its domestic capacity by 14 percent in the fourth quarter, is cutting 7,000 jobs from its work force of 55,000.

 

Capacity cuts and falling fuel prices have blunted the impact of a weakening economy on airlines. Some experts have warned that travel demand could weaken further as travel budgets shrink.

 

UAL said its third-quarter net loss amounted to USD$779 million, compared with a year-earlier profit of USD$334 million.

 

Calyon Securities analyst Ray Neidl said it was difficult to forecast UAL's results for the quarter because capacity cuts began to impact the revenue the airline earned on each seat flown.

 

UAL said its hedge-related loss amounted to USD$519 million, but noted that it saw a cash gain of USD$17 million on contracts that settled during the third quarter.

 

Other airlines also have reported book losses on hedge portfolios. Last week, Southwest Airlines, well-known as the best-hedged US airline, wrote down USD$247 million in mark-to-market losses on the value of its fuel hedges.

 

"Airlines would love to take those types of charges in exchange for cheaper fuel," Neidl said.

 

UAL said its operating revenue rose 0.7 percent to USD$5.57 billion from a year earlier. Its fuel bill rose 64.8 percent.

 

The company ended the quarter with an unrestricted cash balance of USD$2.9 billion.

 

(Reuters)

 

[Pieter C. 5]

Vienna Bourse Suspends Trade In Austrian Airlines

 

October 23, 2008

Shares in Austrian Airlines were suspended from trading until further notice on Thursday pending an "important statement", the Vienna Stock Exchange said in a statement.

 

The suspension comes after the sale of a government stake in the airline was thrown in doubt this week when shortlisted bidders pulled out or asked for an extension of the bidding process.

 

The stock dropped 30 percent on Wednesday, closing at 2.85 euros.

 

Austrian Airlines and government holding company OeIAG, which is offering its 42 percent stake, both said they were not planning to issue a statement. The Vienna bourse declined to comment about the statement.

 

Germany's Lufthansa, Air France-KLM and Russia's S7 had been shortlisted by OeIAG in the sale of the Austrian Airlines stake.

 

According to several sources close to the deal, only Lufthansa has actually submitted an offer for the stake.

 

Air France said it had not submitted one by OeIAG's Tuesday deadline but was interested in further talks. S7 said it had sent a letter but several sources close to the deal have said the letter did not contain the binding bid OeIAG had asked for.

 

(Reuters)

 

[Pieter C. 5]

Lufthansa Mulls Austrian Air Buyout Offer

 

October 23, 2008

Lufthansa is considering a buyout offer to Austrian Airlines' free float shareholders in its bid for the loss-making carrier, Austria's Takeover Commission said on Thursday.

 

The commission said such an offer was contingent on Lufthansa winning the ongoing tender of Austrian Airlines by state holding company OeIAG and other conditions, but that it would conform to Austria's takeover code.

 

The code requires a mandatory offer to outstanding shareholders if a buyer acquires control of a company. Under the rules, the offer must not be less than the average share price of the target company in the six months preceding the offer.

 

Austrian's average share price in the six months since April 23 is around 4.30 euros. At this price, the shares in the free float -- 48 percent of the share capital -- are worth EUR182 million euros (USD$234 million).

 

"Lufthansa is considering making a public offer to free float shareholders that conforms to the takeover code, should (its) final offer in this structured sales process be successful," the Takeover Commission said.

 

"Those considerations were discussed in informal talks with the Takeover Commission," it added.

 

The commission said its opinion was that after Wednesday's drop in Austrian Airlines' shares, Lufthansa had been obliged to disclose those considerations itself, and that it decided to publish its information because Lufthansa did not.

 

Austrian Airlines shares dropped 30 percent on Wednesday, closing at 2.85 euros. They were suspended on Thursday ahead of the commission's statement 21 percent to trade at 3.45 euros later in the afternoon.

 

Lufthansa declined to comment after the commission's statement was sent out.

 

The sale of a government stake in the airline was thrown into doubt this week when shortlisted bidders pulled out or asked for an extension of the process, leaving Lufthansa as the only serious contender, according to sources close to the deal.

 

Lufthansa, Air France-KLM and Russia's S7 were shortlisted by OeIAG in the sale of the Austrian Airlines stake.

 

Air France said it had not submitted an offer by OeIAG's Tuesday deadline but was interested in further talks. S7 said it had sent a letter but several sources close to the deal have said the letter did not contain the binding bid OeIAG had asked for.

 

According to those sources, only Lufthansa has actually made a proper offer. Austrian media reports said that Lufthansa too was asking to postpone the process by two months, or was demanding Austrian's debt be cut off.

 

The commission said that the Lufthansa and OeIAG positions in the sale process were so different that it could not rule out the deal never coming to fruition.

 

"Against the backdrop of Austrian Airlines' economic development and apparently diverging positions in the negotiations, it is currently uncertain whether a deal will materialize," it said in its statement.

 

(Reuters)

 

 

US Airways Posts Net Loss On Fuel Spike, Hedges

 

October 23, 2008

US Airways posted a third-quarter net loss on Thursday, hurt by a spike in fuel prices in July and then a rapid decline that eroded the value of its fuel hedges.

 

The airline reported a loss of USD$865 million, compared with a profit of USD$177 million a year earlier.

 

Excluding a US488 million write down related to the hedges, and other one-time items, the airline said its loss was USD$242 million.

 

The airline industry has been battered this year by soaring fuel costs, which rose to a record high in July alongside crude oil prices.

 

The price of a barrel of oil has fallen about 50 percent since July, causing many airlines to record millions in non-cash losses as their fuel hedges become less valuable.

 

US Airways said third-quarter revenue was USD$3.3 billion, up 7.4 percent over the comparable period in 2007.

 

The company ended the third quarter with USD$2.3 billion in total cash and investments. Separately, it said it had raised USD$950 million in financing and near-term liquidity commitments.

 

(Reuters)

 

[Pieter C. 5]

Austria Extends Airline Sale For Debt Talks

 

October 28, 2008

Austria is extending the tender for Austrian Airlines for two months as the bidders for the money-losing airline require the government take on some of its debt, the state holding company said on Monday.

 

The ill-fated sale of the government-controlled carrier will now continue until December 31, covering a period when airline sales and earnings are expected to decline further as the global economic slowdown weighs on business and leisure travel.

 

State holding company OeIAG will discuss with government, European Union and the two remaining bidders -- Germany's Lufthansa and Russia's S7 -- how to structure the deal on AUA's EIUR00 million euro (USD$1.1 billion) debt pile.

 

Lufthansa has demanded that OeIAG assumes around half of AUA's debt, and offered only a nominal amount for OeIAG's equity stake, a supervisory board member of OeIAG said on Sunday.

 

"The bids contain the demand for a subsidy to strengthen AUA's financial basis, which OeIAG cannot fulfill for lack of a legal basis," OeIAG said in a statement.

 

"OeIAG's supervisory board therefore asks the Austrian government to extend the privatization mandate to create the necessary legal framework."

 

The Finance Ministry said the two governing parties agreed to the extension. OeIAG's mandate to sell its 42 percent stake in Austrian Airlines (AUA) had been due to expire on Tuesday.

 

The mandate allows OeIAG to sell its entire holding, provided that an Austrian key shareholder keeps a 25 percent stake, and that AUA's brand, headquarters and its Vienna hub remain and jobs secured as far as possible.

 

OeIAG Chief Executive Peter Michaelis said he aimed to conclude the deal as soon as possible. "The economic situation is not such that we can assume it to improve," he told reporters at a hastily arranged news conference.

 

Michaelis, who earlier on Monday declined to identify the second bidder still in the running with Lufthansa, in a later interview with Austrian state TV said that it was Russia's S7.

 

Air France-KLM last week dropped out of the race, only a few days before it warned that it would be "very difficult" to reach its profit target this year.

 

Michaelis also said that AUA would only continue talks with those still in the race, because the tender was only extended, not restarted from scratch.

 

Lufthansa said its bid was valid until the end of the year. S7 declined to comment.

 

The European Commission, the EU executive body which oversees competition issues in the 27 nation bloc, said on Monday it would review whether the planned deal on AUA's debt amounted to state aid, a spokesman for the Commission said.

 

In principle, the Commission has to test whether the government behaves in the same way a private investor would.

 

(Reuters)

 

[KK Lee 5]

BMI being taken over by Lufthansa

 

 

UK airline BMI is being taken over by Germany's Lufthansa.

 

Lufthansa is buying the 50% of firm owned by BMI chairman Sir Michael Bishop, who forced the purchase under a long-standing agreement.

 

The German carrier was already BMI's second-largest shareholder, with a stake of 30% minus one share.

 

The deal will give Lufthansa control of more flights from London Heathrow airport than any other airline except British Airways.

 

Lufthansa accepted that the deal would have an impact on competition at the UK's largest airport, but said it was for competition authorities to make a decision on whether to approve the deal.

 

The deal is set to be completed by 16 January - but the German firm would not confirm what it was paying for Sir Michael's stake. Reports suggest it is about £318m.

 

BA competition

 

The German airline signed an agreement with Sir Michael in 1999 that if he ever wanted to sell his BMI stake, it would make the purchase.

 

There had been growing speculation in recent months that Sir Michael was keen to sell his share in the business.

 

Lufthansa, which on Tuesday announced its third-quarter net profit had fallen by 75%, said it would "have to deal with" Sir Michael's decision, which vice president for Europe, Karsten Benz, told the BBC "was not a surprise".

 

http://news.bbc.co.uk/2/hi/business/7697261.stm

 

 

[Pieter C. 5]

Lufthansa Cuts '08 Profit Goal, Cites Global Crisis

October 29, 2008

Lufthansa cut its full-year operating profit target on Tuesday, citing high fuel prices and the impact of the global financial crisis.

 

The German flagship airline said it now expected operating profit of about EUR1.1 billion euros (USD$1.38 billion) compared with a previous estimate of around last year's level of EUR1.38 billion.

 

Sluggish consumer spending has chipped away airlines' profitability, although easing oil prices promise to take pressure off their massive fuel bills.

 

Rivals Air France-KLM and Austrian Airlines have both issued profit warning in the past two weeks.

 

In the first nine months of this year, Lufthansa's revenue grew 13.6 percent from a year earlier, but surging fuel costs pushed down operating profit by 9.3 percent to EUR984 million.

 

Nine-month net profit fell to EUR551 million from last year's EUR1.6 billion, which had been boosted by book gains from asset sales and a one-off tax effect.

 

Lufthansa is due to publish full nine-month and third-quarter results on Wednesday.

 

Lufthansa's stock trades at about 7.9 times estimated 2009 earnings, at a premium to rivals Air France-KLM and British Airways as investors hope the company's cash will help carry it through the crisis.

 

(Reuters)

 

Lufthansa Fuel Hedging Hit By Lehman Crisis

 

October 29, 2008

Lufthansa's fuel hedging for the rest of this year fell after the company lost contracts with Lehman Brothers, which filed for bankruptcy protection in September, the airline said on Wednesday.

 

Lufthansa said current sentiment in the aviation industry was characterised by uncertainty relating to the financial market crisis and its impact on the real economy.

 

The German flagship airline said it expected demand for passenger air travel to be subdued for the rest of the year. To help offset the impact of falling passenger numbers, the airline said it would further reduce the number of flights it offers.

 

Full-year revenue would nonetheless rise from last year's level.

 

Lufthansa's hedging rate for the rest of the year stood at 72 percent, compared with a previous rate of 85 percent, the company said in a statement.

 

Airlines use hedging to protect themselves against sharp rises in jet fuel costs, one of their biggest expenses. Lufthansa's fuel costs in the first nine months rose 48.9 percent from the year-earlier period.

 

Lufthansa cut its full-year operating profit target on Tuesday, citing high fuel prices and the impact of the global financial crisis. It said it now expected operating profit of about EUR1.1 billion euros compared with a previous estimate of around last year's level of EUR1.38 billion.

 

Sluggish consumer spending has chipped away airlines' profitability, although easing oil prices promise to take pressure off their massive fuel bills.

 

Rivals Air France-KLM and Austrian Airlines have both issued profit warning in the past two weeks.

 

(Reuters)

 

[Keith T 2]

http://news.bbc.co.uk/2/hi/business/7697261.stm

 

 

UK airline BMI is being taken over by Germany's Lufthansa.

Lufthansa, which already owns a 30% stake in BMI minus one share, is buying the 50% of the company owned by BMI chairman Sir Michael Bishop.

 

...

 

Lufthansa said it intended to complete the deal by 16 January. It has not said how much it is paying for the 50% stake.

 

Time to start working through those miles before diamond club gets absorbed into Miles & Less and becomes dramatically decreased in value...

 

edit: those with BD*G status now may just get 2 more years as *G as LH Senators if history was anything to go by (cue Swiss Travel Club).

[Pieter C. 5]

Time to start working through those miles before diamond club gets absorbed into Miles & Less and becomes dramatically decreased in value...

 

Will see if I can redeem them on NZ for our next planned holiday to AU/NZ

Otherwise, will try QR

[Pieter C. 5]

Lufthansa Takes Lead In Airline Takeover Race

 

October 29, 2008

European airlines took another step down the consolidation path on Wednesday with Lufthansa apparently leading the pack.

 

The German flag carrier made a move on Britain's bmi and gained headway in the bidding for Austrian Airlines.

 

The number of airlines being put up for sale or driven to the wall by high oil prices seems to rise by the day.

 

Wednesday also brought news that Danish low-cost carrier Sterling was filing for bankruptcy, adding to the already frenetic pace of concentration in the industry.

 

Lufthansa said bmi founder Michael Bishop had exercised an option requiring the German carrier to buy his 50 percent plus one share stake in bmi.

 

The move would raise Lufthansa's stake in the carrier to about 80 percent and would give it access to bmi's slots at London's Heathrow Airport, estimated to be worth a billion euros.

 

Lufthansa is not the only one interested in bmi. Virgin Atlantic chief executive Steve Ridgway said bmi would be a good match for his airline and make it a stronger competitor to Heathrow kingpin British Airways.

 

Virgin says it has 3 percent of slots at Heathrow, London's main airport, while bmi has 12 percent and BA over 40 percent.

 

In Paris, airlines attending the World Air Transport Forum heard a stark warning that only a handful might survive as the aviation industry endures what many call its worst downturn.

 

"The way Europe is going there will be three big legacy carriers in Europe and not more than 2 or 3 low-cost ones," said Pierre Jeanniot, former president and CEO of Air Canada.

 

A British Airways executive said the world simply had too many airlines but that liberalization should be accelerated.

 

"There are 500 airlines in the world of any reasonable size. That's far too many. We don't need all those to have decent competition but what we do need is a level playing field," Yanik Hoyles, general manager for northern and western Europe said.

 

Analysts have said consolidation in the airline industry is speeding up. Sluggish consumer spending has chipped away profitability, just as oil prices easing off from record highs promise to take pressure off airlines' massive fuel bills.

 

Lufthansa is also touted as a possible buyer for Austrian Airlines, Alitalia and SAS.

 

"These are golden times for Lufthansa to make sensible acquisitions," said LBBW analyst Per-Ola Hellgren.

 

Shares of SAS jumped more than 22 percent after the Icelandic-backed Nordic budget airline Sterling said it had grounded all its aircraft after talks with potential investors to save the airline had failed.

 

Sterling's collapse could ease price competition for SAS, which has struggled with rising costs and rivalry from low-cost carriers in recent years.

 

Elsewhere, the Austrian government caved in to Lufthansa's demands to take on some of Austrian Airlines' debt prior to a sale. Lufthansa's chief executive Wolfgang Mayrhuber said he wanted a "fair" split of the carrier's debt.

 

Austria, which wants to sell a 42 percent stake in indebted Austrian on Wednesday pledged to cough up EUR500 million (USD$637.3 million), accounting for almost half the carrier's debt, to underpin the sale of its loss-making airline.

 

Shares in Austrian Airlines rose 16.7 percent to 2.8 euros, while Lufthansa's stock closed up 6.4 percent.

 

Air France-KLM and Austrian have both issued profit warnings in the past two weeks. Lufthansa followed suit on Tuesday.

 

(Reuters)

 

[Pieter C. 5]

EU Executive Offers Help With Austrian Airlines

 

October 29, 2008

The European Commission said on Wednesday it has offered to help Austria with its privatization of Austrian Airlines.

 

"The Commission has written to the Austrian authorities offering its assistance in connection with the ongoing privatization process of Austrian Airlines," the European Union executive said in a statement.

 

Shares in the indebted carrier have lost more than half their value since the start of the year and a tender of the airline has been extended by two months as bidders ask that the state assumes some of its debt.

 

"The Commission also took the opportunity to remind the Austrian authorities that in the event that the State intends to grant state aid in the context of the privatization such state aid needs to be notified to and approved by the Commission prior to being implemented," the Commission statement said.

 

(Reuters)

 

[Pieter C. 5]

Singapore Air To Cut Flights To Various Asian Cities

 

October 30, 2008

Singapore Airlines will cut the number of flights to some Asian cities in response to falling demand.

 

The airline said in a statement that it would reduce the number of flights between Singapore and several cities in Asia including Penang, Ho Chi Minh City, Seoul, Osaka, Bangalore and Chennai. It will stop flights to Amritsar in India.

 

"Other changes will be made on an ad-hoc basis where demand requires," it said, adding capacity adjustments will be made quickly where demand falls.

 

(Reuters)

 

[James Gota 0]

Ethiopian Airlines could be going to Star. Anybody can confirm?

[Pieter C. 5]

SAS Q3 Pretax Loss SEK1.8 Bln After Writedown

 

November 5, 2008

Scandinavian airline SAS posted a bigger-than-expected pretax loss on Wednesday after a large goodwill writedown at its Spanair unit, sending its shares lower.

 

The airline, half-owned by Sweden, Norway and Denmark, said its pre-tax loss for the period was SEK1.78 billion kroner (USD$231 million).

 

It took a SEK1.96 billion writedown relating to goodwill in SAS's Spanair unit and in tax assets. A Spanair flight crashed shortly after takeoff from Madrid on August 20, killing 154.

 

"The writedown for Spanair is definitely negative. I hadn't expected that," said Jacob Pedersen, analyst at Sydbank. "Apart from that it was okay. We knew it would be a tough quarter for the company and if you exclude one-offs it is in fact a little better than I had forecast."

 

State flag-carriers such as SAS have been struggling for years with overcapacity and competition from more nimble no-frills airlines. Rising oil prices and the impact of the financial crisis on economic growth have added to the burden.

 

SAS has long been tipped as a candidate to be absorbed by a larger rival. In September, sources said Lufthansa was in talks to buy the airline.

 

In response, SAS said it was looking at alternatives. Lufthansa made no comment and no offer has been made.

 

Chief Executive Mats Jansson said SAS, whose latest result marked the fourth consecutive quarterly loss, continued to assess strategic options.

 

"Regardless of the choice of structural alternatives and solutions, it is of the utmost importance that we rapidly close the remaining cost gap we have in relation to comparable competitors," he said in a statement.

 

SAS said its Profit 2008 cost and revenue initiative was on track. Its longer term Strategy 2011 program aims to boost pretax profit to SEK4 billion within three years.

 

SAS plans to sell off non-core units, including its stake in Britain's bmi. Jansson said SAS was eyeing developments at bmi, where Lufthansa has said it is upping its holding to around 80 percent.

 

"The biggest asset of bmi is its slots (at Heathrow)," Jansson said. "There is a game being played out here and we want to be part of it. That can mean that we will make an exit sometime next year instead of the fourth quarter (2008)."

 

SAS owns 20 percent of bmi.

 

Jansson said the recent sharp drop in oil prices had been good for SAS but had been offset by a stronger dollar and the impact on the travel industry of a slowdown in economic growth.

 

(Reuters)

 

[Pieter C. 5]

Thai Air Posts Q3 Net Profit On Forex Gain

 

November 5, 2008

Thai Airways International returned to a net profit in the third quarter on Wednesday as a huge foreign exchange gain more than offset high jet fuel costs.

 

The national carrier reported a net profit of THB426.2 million baht (USD$12 million), in the July-September quarter, compared with a revised loss of THB971.09 million a year earlier and a loss of THB9.25 billion in the previous quarter.

 

The airline posted a foreign exchange gain of THB4.73 billion in the quarter versus a loss of THB3.36 billion a year earlier, mostly due to the conversion of a loan into baht terms, it said in a statement.

 

Its passenger revenue rose 10 percent to THB43 billion, but it posted a loss from operations of THB3.2 billion versus a profit of THB2.43 billion a year earlier.

 

Fuel and oil costs jumped 68.2 percent from a year earlier due to a 79 percent surge in average jet fuel prices, it said.

 

Analysts expect weak earnings in the fourth quarter as passenger volume is likely to be hurt by political instability in Thailand and the global financial crisis.

 

"The fourth quarter is normally the peak season, but it's not very good this year. The number of passengers is easing, especially in regional markets," President Apinan Sumanaseni told reporters.

 

(Reuters)

 

[Pieter C. 5]

Air Canada Boosts Loads On Capacity Cuts

 

November 6, 2008

Air Canada said on Thursday its flights flew closer to full capacity last month than in September as it reduced the number of available seats to cope with falling passenger traffic and financial turmoil.

 

The country's biggest airline said its October load factor, which measures the percentage of available seats filled by paying passengers, rose 2.1 percentage points from the year-prior month to 81.2 percent, a record for October.

 

The rise came as the number of passengers on the carrier, measured in revenue passenger miles, fell 4 percent to 3.55 billion. Air Canada's capacity over the same period dropped 6.5 percent to 4.37 billion seat miles.

 

The company announced last June that it would cut its winter schedule by 7 percent and chop 2,000 jobs from its payroll to deal with worsening economic conditions and burdensome fuel costs. The job cuts have sparked protests from many of its employees,

 

The October load factor for Air Canada's regional affiliate, Jazz Air, fell 2.4 percentage points to 71.6 percent as traffic fell.

 

The regional carrier's revenue passenger miles dropped 3.3 percent to 350 million, while capacity was unchanged at 489 million available seat miles.

 

(Reuters)

 

[Pieter C. 5]

Lufthansa Suspends Talks To Buy SAS

 

November 11, 2008

Lufthansa has temporarily broken off talks to buy Scandinavia's loss-making airline SAS, a source familiar with the matter said on Tuesday.

 

Austrian Airlines and Alitalia, which are both up for sale and for which Lufthansa has been touted as a possible buyer, were a priority for the German flagship carrier, the source said.

 

"Lufthansa can't do so many things at once," it said.

 

The carrier earlier this year began exclusive talks to buy SAS, but that exclusivity expired after Lufthansa's supervisory board meeting on September 24.

 

The source said talks have been on ice since that time, and SAS was now looking for a new possible partner for its business.

 

Germany's Sueddeutsche Zeitung newspaper had also reported that Lufthansa has dropped talks to buy SAS, citing losses at SAS unit Spanair.

 

Lufthansa and SAS both declined to comment on the matter.

 

(Reuters)

 

[Pieter C. 5]

Lufthansa Now Exclusive Austrian Air Bidder

 

November 13, 2008

Lufthansa is now the exclusive bidder for state-controlled, loss-making Austrian Airlines and a deal could come within a month, Austrian state holding company OeIAG said on Thursday.

 

A bid by Russia's S7, the last one competing with Lufthansa after Air France-KLM dropped out of the race last month, did not comply with the rules of the tender, OeIAG said in a statement.

 

The company is now in talks to structure the deal in a way that complies with European Union competition rules. This is necessary because Lufthansa is offering only a nominal amount for OeIAG's stake and also demands that it assume around half of Austrian's EUR900 million euros (USD$1.12 billion) debt.

 

OeIAG chief executive Peter Michaelis said he expected the deal to be decided upon at OeIAG's supervisory board meeting on December 5, and signed within a month.

 

OeIAG, in its statement, quoted a legal opinion by two law professors who it had commissioned to review the sale, saying that the exclusion of the two other bidders was not in violation of European Union rules for privatization tenders.

 

(Reuters)

 

[Pieter C. 5]

Turkish Airlines Net Profit Surges 244 Percent

 

November 14, 2008

THY Turkish Airlines' net profit rose 244 percent to TRY668 million lira (USD$415.4 million) in the first nine months of the year, and it said it had positive expectations for the year as a whole.

 

Sales in the same period jumped 24 percent to TRY4.416 billion as the partly state-owned airline continued to expand to new destinations and added flights.

 

"Although the fall in fuel prices recently has been encouraging for the airline sector, the fact that this fall was a consequence of expected stagnation resulting from the global financial crisis is a negative factor," THY said in a statement on Friday.

 

"However, the Turkish airline sector will continue to grow. Because of the successful performance during this period, our company's expectation for 2008 is positive," it said.

 

THY said fuel costs made up 36 percent of operating costs during the nine month period, up from 27 percent a year earlier.

 

The flag carrier has embarked on an ambitious expansion program to become one of Europe's leading airlines, with plans to buy up to 105 aircraft from Airbus and Boeing over the next few years. The airline is also seeking acquisitions in the region.

 

THY said earlier on Friday the number of passengers it carried in the first 10 months of the year rose 14.7 percent to 18.9 million.

 

Available seat kilometres rose 10.2 percent to 38.2 billion for the period, and revenue passenger kilometres rose 12.6 percent to 28.6 billion.

 

(Reuters)

 

[Pieter C. 5]

Judge Sides With United In Pilot Dispute

 

November 18, 2008

A US federal judge has ordered the pilots union at United Airlines to end an "unlawful campaign of sick leave abuse, pilot intimidation and other actions" that has caused hundreds of flight cancellations.

 

The airline's parent, UAL, said on Tuesday the court granted a motion for preliminary injunction against the Air Line Pilots Association (ALPA) and four individual pilots that UAL has accused of deliberately disrupting operations.

 

UAL alleges the union actions were payback for the company's decision to cut 950 pilot jobs this year.

 

"This is an important ruling because it means our customers and employees will not be subject to ALPA's illegal actions intended to disrupt our operations and intimidate our employees," said Pete McDonald, UAL's chief administrative officer.

 

ALPA said in a statement it would comply with a court order.

 

"ALPA has already advised the United pilots that it remains essential not to engage in any form of economic action involving United Airlines," the union said in a statement.

 

The company, which plans to have the injunction made permanent, has said it was forced to cancel 329 flights between July 19 and 27, costing it millions of dollars in potential profit and disrupting travel plans for some 36,000 people.

 

UAL said the union had engaged in a campaign to encourage members to adhere strictly to contract terms and refuse voluntary assignments as a way of pressuring management to open contract talks early. The current contract expires at the end of 2009.

 

UAL also said the union and four pilots organized abuses of the company's sick leave policy in response to plans announced in June to eliminate 950 pilot jobs as part of capacity cuts.

 

The airline industry is rapidly shrinking as part of a plan announced in the first half of 2008 to combat fuel prices.

 

UAL has said it would cut domestic capacity by 14 percent in the fourth quarter. The downsizing also would eliminate about 7,000 jobs, or 13 percent of the work force United had when cuts were announced earlier this year.

 

The cost of fuel peaked in July and has since dropped. Carriers are going through with the downsizing, however, and has retained fare pricing power that helps the industry survive as economic weakness erodes travel demand.

 

(Reuters)

 

[Pieter C. 5]

Air New Zealand To Cut 200 Jobs As Demand Drops

 

November 19, 2008

National carrier Air New Zealand plans to cut up to 200 full-time jobs in response to falling passenger numbers, it said on Wednesday.

 

The company said it has been reducing capacity in line with falling demand and needed to reduce its work force accordingly. About half of the redundancies will hit long-haul cabin crew, with technical, planning and management jobs also to be cut.

 

It said it had tried to minimize the cuts by offering reduced hours, not replacing some jobs and freezing executive pay.

 

"However these measure will not fully address the excess staff levels we now have as a result of these capacity reductions, especially in the long haul business where capacity is being reduced by 8 percent when compared with the last financial year," chief executive Rob Fyfe said in a statement.

 

Savings from the staff cuts, combined with a company-wide review of spending, are expected to be more than NZD$20 million (USD$11 million) a year.

 

Air New Zealand, which is 76 percent owned by the state, has 11,000 full-time staff.

 

In its September operating statistics, the company said passenger numbers were down 4.5 percent on September 2007, with passenger loads down 2.5 percentage points to 77.8 percent.

 

In the trans-Tasman and Pacific markets, Air New Zealand said passenger numbers were down 10 percent and load factors fell 7 percentage points.

 

In the year to June 2008, Air New Zealand's net profit fell 1 percent to NZD$218 million, largely due to higher fuel prices.

 

(Reuters)