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Cimber Sterling's IPO In Dire Straits  
User currently offlineKevin777 From Denmark, joined Sep 2006, 1165 posts, RR: 1
Posted (5 years 5 days 11 hours ago) and read 3610 times:

According to several Danish newspapers, Cimber Sterling's IPO on the Copenhagen Stock Exchange is going poorly; they've had to half the initial offering price, and they are also extending the offering period by two days. The value of the airline was initially supposed to end up at around EUR 100 million, but now they're looking at closer to EUR 60 million.

All along, analysts and commentators alike have questioned the viability of Cimber Sterling - and I can only agree with them.

The airline is a weird mix of domestic and international, business routes and leisure routes, small a/c and larger a/c, turboprop and jet, LCC-concepts and full-service elements - sure enough, some airlines share this diversity, but QI is way, way too small for such a diverse operation.

They used to operate sound domestic Danish routes as well as more thin international routes out of Denmark, heavily skewed against business traffic. Worked all right with this simple structure (although they never made huge profits) of smaller a/c, modest load-factors and high yields - oh yes, and monopoly on most routes. Then they bought Sterling (already bankrupt twice in history), and ventured into highly competitive leisure routes to the Mediterranean, adding 737s to their fleet of ATR's and CRJ's, adding a price-sensitive leisure segment. They are semi-going LCC, with surcharges for many things, yet they still give free coffee and tea onboard, and partly participate in SAS' Eurobonus.

Unlike DY and HV, QI doesn't have the cash to stay alive during a long price war out of Scandinavia - and DY and HV are certainly not going to give up

I think QI is swimming in dangerous waters where they have nothing to do.. I'd say cut back and save what you can - go back to DK domestic, thin business routes etc. - or else the airline will, sadly, go the same way af Sterling did twice before I'm afraid..

What do you guys think..?

regards,

Kevin777  Smile


"I was waiting for you at DFW, but you must have been in LUV" CPH-HAM-CPH CR9
8 replies: All unread, jump to last
 
User currently offlineHumberside From United Kingdom, joined Dec 2005, 4927 posts, RR: 4
Reply 1, posted (5 years 5 days 10 hours ago) and read 3573 times:

Quoting Kevin777 (Thread starter):
I think QI is swimming in dangerous waters where they have nothing to do.. I'd say cut back and save what you can - go back to DK domestic,

Though I read last week DY are adding three more Danish domestic routes - CPH-Billund, CPH-Karup and CPH-Bornholm. Plus Billund-Oslo (though only once daily so maybe not such an impact). Even Cimber's 'bread and butter' routes are being attacked

A good example of Cimber's problems is the recent 'new' ABZ-Billund service. Lasted about a week IIRC

[Edited 2009-11-23 09:34:25]


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User currently offlineKevin777 From Denmark, joined Sep 2006, 1165 posts, RR: 1
Reply 2, posted (5 years 5 days 10 hours ago) and read 3509 times:



Quoting Humberside (Reply 1):
Though I read last week DY are adding two more Danish domestic routes - CPH-Billund and CPH-Bornholm. Plus Billund-Oslo (though only once daily so maybe not such an impact). Even Cimber's 'bread and butter' routes are being attacked

Right, DY is getting seriously in on QI's hometurf - QI might have an advantage here if they hurry though; they have many repeat customers (particularly local politicians and business people) who they could fence off from further "DY stealing" if they work for it. But right now their focus is in all kinds of other places where they are beaten on most accounts by other players..

Quoting Humberside (Reply 1):
A good example of Cimber's problems is the recent 'new' ABZ-Billund service. Lasted about a week IIRC

Yes - even their good reputation for reliability is fading.. Their daily CPH-NCL morning flight was dropped in the middle of May, then it returned one week later anyway, then they changed it to a (completely useless) noon departure suddenly..

Also, they were initially in Eurobonus, then they exited, and then they came in again on selected routes recently.. messy

Add to this, that in these current economic times, customers are not just blindly buying the full Y ticket on QI that they have bought for the last 30 years, pulling yields down, it's even more dire for QI..

Kevin777



"I was waiting for you at DFW, but you must have been in LUV" CPH-HAM-CPH CR9
User currently offlinePrebennorholm From Denmark, joined Mar 2000, 6517 posts, RR: 54
Reply 3, posted (5 years 4 days 2 hours ago) and read 3086 times:

I really hate to see anything happen to Cimber. They are such a great part of Danish traffic infrastructure, which they have been for fifty years.

On the other hand, I really didn't understand their business plan when they bought bankrupt Sterling almost a year ago.

They bought the name and published an expansion plan telling that by summer 2010 they would fly to almost all former Sterling destinations. Many of them had already been snatched up by Norwegian and Transavia.

When they did want that sort of business, why didn't they rush out immediately after Sterling folded and snatch up the most profitable routes? If they didn't have the equipment and crews, then they could have wet leased for a period.

And why did they add "Sterling" to their name? Cimber was probably the best brand name in Danish aviation, while Sterling was the worst. Then why pay money for a name change from Cimber to Cimber-Sterling?

Now they are left with an unfulfilled, almost one year old, roughly 100% expansion plan, when the competitors have already skimmed the cream from the cake. And - surprise-surprice - the bank doesn't automatically throw $50M into realizing that plan during the next six months. And the stock market doesn't scream Halleluja when they issue new stocks on the open market to finance an expansion into a business where all former Danish players have committed suicide.

Quoting Kevin777 (Thread starter):
I think QI is swimming in dangerous waters where they have nothing to do.. I'd say cut back and save what you can - go back to DK domestic, thin business routes etc.

I think you are right, Kevin. Scandinavian charter business has always been a pain when travel agency and airline were not controlled from the same office. How much cash did Mr Møller burn on that business on 25 years of Maersk Air? At least another Copenhagen Opera House. Well, he could afford both Maersk Air and the opera house, but Cimber cannot.

If I was Cimber CEO, then I would leave that battleground to other players, and then I would concentrate on fighting the competitors where Cimber is strong.

I do understand that some travel agencies are reluctant to place summer 2010 business with Cimber as long as their expansion plan hasn't been financed. And I do understand that financing doesn't come easy when the travel agencies refuse to place orders because of financing uncertainties. It's a terrible "dog eats its own tail" situation.

I really hope that they find a way out of this so late Ingolf Nielsen's vision can continue to place its footprint in the Danish sky.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
User currently offlineYVRLTN From Canada, joined Oct 2006, 2532 posts, RR: 0
Reply 4, posted (5 years 4 days 2 hours ago) and read 3076 times:

Think I read somewhere that Cimber just won the Silver ERA award for the way they integrated Sterling?


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User currently offlinePrebennorholm From Denmark, joined Mar 2000, 6517 posts, RR: 54
Reply 5, posted (5 years 4 days 1 hour ago) and read 3061 times:



Quoting YVRLTN (Reply 4):
Think I read somewhere that Cimber just won the Silver ERA award...

What is the Silver ERA Award?

Quoting YVRLTN (Reply 4):
...for the way they integrated Sterling

For most practical things they haven't integrated Sterling yet. That's what they have planned to do over the next six months or so, going full speed for the summer 2010 holiday season. And that's what they are now seeking financing for. Financing which has run into trouble.

1. Insurance companies refuse to cover travel agencies against a Cimber failure

2. Travel agencies consequently refuse to book summer 2010 business with Cimber

3. Investors.... well, we will see whether there are investors?

To me it looks like all sails are set for a possible total integration failure. God forbid that happens!!!

Add to that the fact that Norwegian and Transavia are already sitting firmly on large parts (likely the more profitable parts) of Sterling's traditional business.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
User currently offlineKevin777 From Denmark, joined Sep 2006, 1165 posts, RR: 1
Reply 6, posted (5 years 3 days 19 hours ago) and read 3005 times:



Quoting Prebennorholm (Reply 3):
How much cash did Mr Møller burn on that business on 25 years of Maersk Air?

He he... well, let's just say that I hope he had a lot of fun running an airline  Smile because he sure as h.. lost a lot of money.. I reckon he could have bought an opera house for the top-five cities in Denmark at least for that money..

Quoting Prebennorholm (Reply 3):
Well, he could afford both Maersk Air and the opera house, but Cimber cannot

And that's the Achille's heal - spot on. DY can afford an Opera House or two in Oslo if they want. HV has backing from AF/KLM - no problems there, they can also bleed for a long time. SK has the most solid backing of them all (fairness is another discussion!): Three Scandinavian governments. QI..? A wealthy family, yes, but not rich by these standards - and very reluctant investors...

Quoting Prebennorholm (Reply 3):
I do understand that some travel agencies are reluctant to place summer 2010 business with Cimber as long as their expansion plan hasn't been financed. And I do understand that financing doesn't come easy when the travel agencies refuse to place orders because of financing uncertainties. It's a terrible "dog eats its own tail" situation.

Yes, that was the rumour from last night - oddly enough though, nothing mentioned on Takeoff.nu today.. I'm sure Take Off wants to stay good friends with QI, but still.. poor journalism.. but that's another subject

Quoting Prebennorholm (Reply 5):
For most practical things they haven't integrated Sterling yet.

Also, their operations is a mess, as is their management structure. They are headquartered at SGD, 300 kms or so from their CPH hub - yet recognizing that they would have huge difficulties attracting skilled management staff (including former NB employess) to relocate to the Danish country side, they set up a "semi"-HQ at CPH. What a mess...

Well, interesting times in Danish aviation.. sad though, that we can't seem to win the battle ourselves!  Smile

Kevin777



"I was waiting for you at DFW, but you must have been in LUV" CPH-HAM-CPH CR9
User currently offlinePrebennorholm From Denmark, joined Mar 2000, 6517 posts, RR: 54
Reply 7, posted (5 years 2 days 4 hours ago) and read 2805 times:

It is now said that Cimber has secured financing of the expansion plan. Haleluja!!!

One major new investor is rumored to be "Bitten & Mads Clausen's Fond". It may not be very well known internationally, but when it is translated into "Danfoss", then more people will know that it is one of Denmark's largest and most successful industries. Mr. Mads Clausen was founder of Danfoss (with assistance from his wife Bitten Clausen).

It makes good sense. Cimber has HQ in Soenderbord (Southern Castle) and Danfoss has HQ in Nordborg (Northern Castle), which are two very close neighbor cities. Danfoss is beyond any doubt by far the largest customer on the SGD-CPH shuttle operated by Cimber - by far the smallest domestic shuttle in the country. It is natural to assume that part of the deal is that the SGD-CPH shuttle has been secured for a quite distant future.

If that shuttle closed down, as has so many other similar domestic shuttles after the Great Belt motorway and railway bridge was finished in 1998, then Soenderborg Airport might also be in danger, or at least the present day service level. That could also seriously impact Danfoss' own biz jet operations from that airport.

So everything turned out well.

Very likely there was never any danger. But when you adopt the name "Sterling", and the same year issue new shares, then later cut the price of new shares in half because of lack of investor interest, then I understand that partners like travel agencies become uneasy.

My assumption is that everything was well planned, and Cimber was never in real danger. Only the last hill to climb was that Danfoss wanted a larger control of Cimber, probably a majority control. In that case the Nielsen family can no longer run Cimber Air as their private hobby, they will have to ask good friends in the neighbor city first before major plans are carried out.



Always keep your number of landings equal to your number of take-offs, Preben Norholm
User currently offlineBmiBaby737 From United Kingdom, joined Jun 2005, 1822 posts, RR: 9
Reply 8, posted (4 years 12 months 2 days 9 hours ago) and read 2634 times:

Apperently G-STRH will shortly join the Cimber Sterling fleet, any news on this and any future aquisitions?

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