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DL Wants LH To Restructure Its B6 Stake  
User currently offlineCOexpress From United States of America, joined May 2001, 32 posts, RR: 0
Posted (5 years 12 months 2 days 10 hours ago) and read 11850 times:

http://www.businesstravelworld.com/p...n=Archive/ArchiveID=7/EntryID=1401

Lufthansa should restructure JetBlue stake, says Delta

01 Dec 2008



Delta Air Lines says that Lufthansa must relinquish its seats on the board of JetBlue and restructure its 19% stake in the airline in order to get its proposed four-way joint venture with Continental, United and Air Canada approved.

In a submission to the US Department of Transportation, Delta said that Lufthansa’s investment in JetBlue will dramatically affect the New York market if the proposed anti-trust immunity is granted.

The submission said: “Lufthansa’s 19% equity investment in JetBlue, together with Lufthansa’s two seats on JetBlue’s board create an unacceptable risk of spillover if Lufthansa is simultaneously engaged in antitrust immunised competition with Continental – which also operates a large domestic hub at New York. To fully address the potential for domestic spillover, any grant of immunity should be conditional upon Lufthnsa relinquishing its two JetBlue voard seats and restructuring its investment to remove the immediate profit potential of collusive actions involving JetBlue and Continental.”

It added: “As a result of the close relationship between Lufthansa and JetBlue, the Department must evaluate the potential impact of an immunised Continental-Lufthansa alliance on the substantial competition that currently exists, and that might otherwise potentially exist in the future between Continental and JetBlue. This is not simply a domestic issue - JetBlue already provides service to eight international destinations from New York.”

[Edited 2008-12-01 08:26:44]

43 replies: All unread, showing first 25:
 
User currently offlineFlynavy From , joined Dec 1969, posts, RR:
Reply 1, posted (5 years 12 months 2 days 10 hours ago) and read 11840 times:

It makes perfect business sense I think. This one will be interesting to watch play out, and I look forward to hearing the speculation that will undoubtedly follow in this discussion.

[Edited 2008-12-01 08:17:19]

User currently offlineGsosbee From United States of America, joined Jan 2005, 825 posts, RR: 0
Reply 2, posted (5 years 12 months 2 days 8 hours ago) and read 11581 times:

It is strictly business. If LH and DL were applying for ATI, CO (and probably UA) would be doing the same thing.

User currently offlineSimairlinenet From United States of America, joined Oct 2005, 922 posts, RR: 2
Reply 3, posted (5 years 12 months 2 days 8 hours ago) and read 11236 times:

Not entirely unreasonable, given the NYC passenger market shares (http://panynj.gov/CommutingTravel/airports/pdfs/traffic/DEC2007_REG.PDF):
Continental+United+Lufthansa+Air Canada: 29.2%
Continental: 24.0%
Delta/Northwest: 16.7%
American: 14.7%
JetBlue: 14.2%

If looking internationally, the complaint becomes even more legitimate:
Continental+United+Lufthansa+Air Canada: 27.8%
Continental: 22.0%
American: 12.8%
Delta/Northwest: 8.8%
JetBlue: 2.1%


User currently offlineKiwiandrew From New Zealand, joined Jun 2005, 8603 posts, RR: 13
Reply 4, posted (5 years 12 months 2 days 6 hours ago) and read 10663 times:
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Quoting Simairlinenet (Reply 9):
Not entirely unreasonable, given the NYC passenger market shares (http://panynj.gov/CommutingTravel/airports/pdfs/traffic/DEC2007_REG.PDF):
Continental+United+Lufthansa+Air Canada: 29.2%
Continental: 24.0%
Delta/Northwest: 16.7%
American: 14.7%
JetBlue: 14.2%

If looking internationally, the complaint becomes even more legitimate:
Continental+United+Lufthansa+Air Canada: 27.8%
Continental: 22.0%
American: 12.8%
Delta/Northwest: 8.8%
JetBlue: 2.1%

according to the figures you have given the CO/UA/LH/AC share actually decreases when looking internationally - so I am not sure why you feel that makes the complaint even more legitimate

Also I notice that you seem to be comparing apples with oranges here since your DL/NW figures seem to exclude KL/AF but your UA/CO figures include LH



Moderation in all things ... including moderation ;-)
User currently offlineSimairlinenet From United States of America, joined Oct 2005, 922 posts, RR: 2
Reply 5, posted (5 years 12 months 2 days 5 hours ago) and read 10498 times:

Kiwiandrew,

Thank you for noting my oversight. I will correct, and include AA/BA as well (the spreadsheet doesn't include IB or KL though). However, the overall conclusion does not change.

All passengers:
Continental+United+Lufthansa+Air Canada: 29.2%
Continental: 24.0%
Air France+Delta/Northwest: 16.3% (I misstated the old, sorry)
American+British Airways: 16.3%
American: 14.7%
JetBlue: 14.2%

All international passengers.
Continental+United+Lufthansa+Air Canada: 27.8%
Continental: 22.0%
American+British Airways: 17.8%
American: 12.8%
Air France+Delta/Northwest: 11.7%
JetBlue: 2.1%

I feel that my claim regarding international is more legitimate because the proportion of Star JV's international market share vs. the next largest (138%) is noticeably higher than when looking at all passengers (79%).

This is admittedly a rudimentary analysis, but it does provide some perspective.

[Edited 2008-12-01 12:00:40]

[Edited 2008-12-01 12:02:02]

User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5562 posts, RR: 7
Reply 6, posted (5 years 12 months 2 days 5 hours ago) and read 10335 times:

This is one of four issues DL raised regarding the CO ATI and joint venture application. The four are: 1) JetBlue, 2) scope of the ATI request, 3) Open Skies issues chiefly in China and Brazil regarding ATI, and 4) EWR and IAD hub service overlap.

DL first raised the issues on October 30, asking for additional testimony and evidentiary submissions. On November 13th, the DOT said we have all the evidence on the record that we need, but DL could submit its views. On November 28, DL did so. See DOT-OST-0008-0234 for the individual filings.

The Business Travel World article trivializes both DL's argument and the Star members replies; the arguments are more nuanced than the article suggests.

It's almost pointless to try to discuss the issues without reading the full DOT record as background. Of course, that has never stopped posters on a.net.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineAirbazar From United States of America, joined Sep 2003, 8577 posts, RR: 10
Reply 7, posted (5 years 12 months 2 days 4 hours ago) and read 9997 times:



Quoting Simairlinenet (Reply 13):
I feel that my claim regarding international is more legitimate because the proportion of Star JV's international market share vs. the next largest (138%) is noticeably higher than when looking at all passengers (79%).

It's totally irrelevant when you compare it by market. LH only serves TATL from NY, while B6 and UA have no TATL service, for example, leaving the DL/NW/AF alliace the larger of the 2 in that market. This is nothing but DL whining in hopes that at some point in the future they may get something. It's a joke.


User currently offlineDeltaL1011man From United States of America, joined Sep 2005, 9672 posts, RR: 14
Reply 8, posted (5 years 12 months 2 days 3 hours ago) and read 9447 times:



Quoting COexpress (Thread starter):

well.............anyone want to bet that if LH has to dump B6 that it will take all of 5 min. before DL trys to buy them?



yep.
User currently offlineKiwiandrew From New Zealand, joined Jun 2005, 8603 posts, RR: 13
Reply 9, posted (5 years 12 months 2 days 3 hours ago) and read 9386 times:
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Quoting DeltaL1011man (Reply 8):
anyone want to bet that if LH has to dump B6 that it will take all of 5 min. before DL trys to buy them?

I wonder if that is what LH had in mind the whole time - take a stake in B6 as insurance in case CO decided not to go with Star so that LH could try to force some sort of deal B6/UA to gain a presence in the NY frequent flyer base but have the ability to use the stake as a bargaining chip if things went the way Star wanted and they got CO signed up



Moderation in all things ... including moderation ;-)
User currently offlineTHEENGINEER From Germany, joined Mar 2007, 106 posts, RR: 0
Reply 10, posted (5 years 12 months 2 days 3 hours ago) and read 9185 times:

I don't really understand the LH-CO-AC joint venture. What happened to Star Alliance?

User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3806 posts, RR: 29
Reply 11, posted (5 years 12 months 2 days 2 hours ago) and read 8976 times:



Quoting COexpress (Thread starter):
DL Wants LH To Restructure Its B6 Stake

No matter how the Deltoids among us choose to spin it, it is nonetheless a case of the proverbial pot calling the kettle black. Or, if you prefer, it's like one world-class sleeparound opposing the practice of the same lifestyle by another.


User currently onlineUnited1 From United States of America, joined Oct 2003, 6103 posts, RR: 9
Reply 12, posted (5 years 12 months 2 days 1 hour ago) and read 8700 times:



Quoting THEENGINEER (Reply 10):
I don't really understand the LH-CO-AC joint venture. What happened to Star Alliance?

Stars still alive and well....

CO and AC are joining the existing UA/LH joint venture across the Atlantic, in a nut shell the 4 airlines will operate as one across the Atlantic coordinating schedules, prices and marketing. All revenue goes into one pot and is split based upon an agreed upon formula, it makes absolutely no difference which airline operates the flight or if a passenger is booked on one airline or the other as the JV operates as if all 4 airlines transatlantic flights are flown by one airline.

CO is also joining the Star ATI and adding marketing agreements with other Star airlines who are not part of the ATI agreement/ .

On top of all that UA and CO are forming a partnership that eventually will include JVs to Latin America and to Asia in addition to an extensive domestic code share and marketing here in the US.



Semper Fi - PowerPoint makes us stupid.
User currently offlineXdlx From United States of America, joined Aug 2008, 682 posts, RR: 1
Reply 13, posted (5 years 12 months 2 days 1 hour ago) and read 8684 times:



Quoting Tango-Bravo (Reply 11):

What ever happened to the "golden Share" NW/KL had in CO.
Does it belong to DL now?

Can DL block this relationship by virtue of this "asset".

Looks to me DL got everything they wanted out of the NW/DL deal.
Can we say they are a little "spoiled" by everything going their way!

Not your father's Delta for sure!


User currently onlineUnited1 From United States of America, joined Oct 2003, 6103 posts, RR: 9
Reply 14, posted (5 years 12 months 2 days 1 hour ago) and read 8666 times:



Quoting Xdlx (Reply 13):
What ever happened to the "golden Share" NW/KL had in CO.
Does it belong to DL now?

CO bought the share back within hours of NW & DL entering into the merger agreement, CO is free to decide its own destiny.



Semper Fi - PowerPoint makes us stupid.
User currently offlineSTT757 From United States of America, joined Mar 2000, 16892 posts, RR: 51
Reply 15, posted (5 years 12 months 2 days 1 hour ago) and read 8623 times:



Quoting Xdlx (Reply 13):
What ever happened to the "golden Share" NW/KL had in CO.
Does it belong to DL now?

Can DL block this relationship by virtue of this "asset".

It was nullified by the mere announced intentions of NWA to pursue a merger with DL, CO bought it back with 24 hours of the DL/NWA announcement for $100.00 dollars.

It was non transferable and served it's purpose, to keep other carriers from acquiring CO which is what DL was trying to do when CO and NWA formed their partnership in 1998.



Eastern Air lines flt # 701, EWR-MCO Boeing 757
User currently offlineDeltaL1011man From United States of America, joined Sep 2005, 9672 posts, RR: 14
Reply 16, posted (5 years 12 months 2 days 1 hour ago) and read 8613 times:



Quoting STT757 (Reply 15):
It was nullified by the mere announced intentions of NWA to pursue a merger with DL, CO bought it back with 24 hours of the DL/NWA announcement for $100.00 dollars.

It was non transferable and served it's purpose, to keep other carriers from acquiring CO which is what DL was trying to do when CO and NWA formed their partnership in 1998.

BTW forgot to tell you.................you called this one...........very nice.  Wink



yep.
User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5562 posts, RR: 7
Reply 17, posted (5 years 12 months 1 day 21 hours ago) and read 7639 times:



Quoting Kiwiandrew (Reply 9):
I wonder if that is what LH had in mind the whole time - take a stake in B6 as insurance in case CO decided not to go with Star

The Star viewpoint of the B6 issue is discussed here:

http://www.regulations.gov/fdmspubli...rch/searchresult/docketDetail.jsp#

The major argument is that DOT has already reviewed the potential UA issues and found no conflict and that CO's issues and potential for conflict are no different.

DL doesn't agree but is just kicking up dust; they have not offered any argument that wasn't already addressed in the previous B6 control case.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineBOStonsox From United States of America, joined Dec 2007, 1993 posts, RR: 0
Reply 18, posted (5 years 12 months 1 day 20 hours ago) and read 7378 times:

Well, as much of a fan I am of the B6/LH deal I have to say DL has a point. New York is the only market with two connection points (EWR for CO and JFK for B6/LH) and it is an important one. They have a solid argument, what can I say.


2013 World Series Champions!
User currently offlineDavescj From United States of America, joined Jun 2007, 2307 posts, RR: 0
Reply 19, posted (5 years 12 months 1 day 19 hours ago) and read 7212 times:



Quoting BOStonsox (Reply 19):
Well, as much of a fan I am of the B6/LH deal I have to say DL has a point. New York is the only market with two connection points (EWR for CO and JFK for B6/LH) and it is an important one. They have a solid argument, what can I say.

While I think you raise a serious point, I think DOT and DOJ will ultimately focus less on the ownership and more on the interline/codeshare/redemption of FF points issues. B6 and CO are two truly different animals. That said, I think the JFK/EWK is a serious sticking point.

Dave



Can I have a mojito on this flight?
User currently offlineHiflyer From United States of America, joined Nov 2004, 2177 posts, RR: 3
Reply 20, posted (5 years 12 months 1 day 14 hours ago) and read 6446 times:

The time for DL to complain about the B6/LH deal is long past. DL was involved in their own deal acquiring NW and obviously did not want to start an inter carrier complaint war then that could have jeopardized/delayed their acquisition.

Spilt milk.

Tough.....but nice try!


User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 21, posted (5 years 12 months 1 day 13 hours ago) and read 6224 times:



Quoting BOStonsox (Reply 18):
They have a solid argument, what can I say.

Sorry, in my opinion they have no valid argument whatsoever.


User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5562 posts, RR: 7
Reply 22, posted (5 years 12 months 1 day 11 hours ago) and read 5863 times:



Quoting Davescj (Reply 19):
That said, I think the JFK/EWK is a serious sticking point.

I think the only argument to be made is that future CO/B6 international competition might be inhibited to LatAm and Asia. It's already inhibited to Europe by LH and DOT found no problem with that. But future competition by B6 is highly speculative, while other potential competitors are plentiful and barriers to entry are low.

In sum, DL can't make much of a case.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineRichierich From United States of America, joined Nov 2000, 4289 posts, RR: 6
Reply 23, posted (5 years 12 months 1 day 9 hours ago) and read 5371 times:

What sort of position does this put LH in? Will they have to choose between B6 and DL/CO? Will they have to choose between EWR and JFK as their North American connection "hub"? What will happen if LH ignores DL's request?


None shall pass!!!!
User currently onlineUnited1 From United States of America, joined Oct 2003, 6103 posts, RR: 9
Reply 24, posted (5 years 12 months 1 day 6 hours ago) and read 5198 times:



Quoting Richierich (Reply 23):
What sort of position does this put LH in? Will they have to choose between B6 and DL/CO? Will they have to choose between EWR and JFK as their North American connection "hub"? What will happen if LH ignores DL's request?

The only reason that LH would be affected by this would be if the DOJ makes selling off the B6 stake a condition of the ATI request. Its highly unlikely that the DOJ will rule in DLs favor on this issue as its really a stretch to believe that this is a valid argument. LH has no obligation to sell the shares in B6 just because DL wants them to ie: DL has no ability to force LH hand just because LH ignores DLs request, only the DOJ can do that.

Quoting AirNZ (Reply 21):
Sorry, in my opinion they have no valid argument whatsoever.

Completely agreed.....if LH having these shares of B6 and JV is such an issue why is AA not all up in arms about this? It affects their NYC operations just as much as it allegedly would affect DLs, as others have mentioned this is just DL attempting to slow things down a little I doubt if DL even believes that this will effect the JV/ATI ruling in the long term.



Semper Fi - PowerPoint makes us stupid.
25 DeltaL1011man : Because I'm telling you it makes life much easier on DL to buy B6 and lose maybe 15% of B^'s JFK slots. They get more slots, a larger domestic networ
26 United1 : DL doesn't need LH to give up its shares to buy B6, LH only has 20% of the company that means that 80% of it is up for grabs and while LH has some se
27 DeltaL1011man : I agree Not sure..............how much is B6 worth? I think it would have cost them 3B in 2000 so that would be more now.(for a new terminal that is)
28 United1 : B6s is worth about 1.4 Billion on the open market but the enterprise value is around 4 Billion. LH paid around 300 Million for its 19%.
29 MasseyBrown : If, as DL argues, an alliance between CO and the owner of a 19% stake in B6 is unacceptable on anti-trust grounds, why would a merger between DL and B
30 MasseyBrown : The Star Alliance reply to DL's arguments has been posted by the DOT. Search under DOT-OST-2008-0234-0086.1. It's closely argued. Some points are good
31 Hiflyer : I would not try to speculate that the DL action is in any way related to an attempt to buy B6. It is only an attempt to put a roadblock on Star/LH and
32 DeltaL1011man : Because Once DL gave up the slots they would likely have to give up DL would like be the size of or smaller than CO in NYC. useing this math Domstic
33 NW748i : I'm not wholly disagreeing with you when I say that it is DL typical business style to do all possible to eff up everybody else's business when they
34 Hiflyer : Minimal customs and on the wrong side of Terminal 4 from the rest of their complex and not designed for widebody and on and on....pretty terminals ar
35 DeltaL1011man : Thats pretty easy. Pay for a new T6 (which FIS and WB gates.) Also get PANJNY to re-build T2/3 and move everyone into the new terminal and let DL tak
36 MasseyBrown : That's a 25-year project, assuming they want to do it.
37 Hiflyer : With what money out of whose allowance??? Read the latest from the State of New York on budget shortfalls for a start. Recession on verge of depressi
38 Post contains links MasseyBrown : To make this clearer, go to http://www.regulations.gov and enter docket number DOT-OST-2008-0234-0086 in the search box - it will bring up 0086.1, th
39 SHUPirate1 : Can you say "Keep jetblue my jetblue"?
40 DeltaL1011man : looks like the NRT-China routes may come back to hurt Delta.
41 MasseyBrown : It's a good rhetoric in Star's filing, but how can it hurt DL? DL's only in the case to delay it; notice the One World airlines never bothered to fil
42 Ikramerica : Since when is less than 1/4th to 1/3rd of an overall market something to call out the cavalry about? What is DL+AF+NW+KL share of: ATL, DTW, MSP, SLC,
43 Kleiner : Would VS sell its stake in VX, should it join Star Alliance?
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