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Record Loss For Brussels Airlines  
User currently offlineSN535 From Belgium, joined Feb 2005, 35 posts, RR: 0
Posted (3 years 1 month 2 weeks 4 days 20 hours ago) and read 9935 times:

SN is heading for a record loss of more than 70 million euros by the end of 2011. Hereby the link to the article in the Belgian newspaper De Standaard:

http://www.standaard.be/artikel/detail.aspx?artikelid=DMF20111103_004

As it is only available in Dutch, this is what's stated:
The company could waist as much as half of its own capital to this bad performance, which is due to high fuel prices and the difficulties of operations in Africa (Ivory Coast, Senegal). SN is currently holding its head above water thanks to LH, who owns 45% of the company.

Nevertheless, the board is optimistic for the future. The turnover in 2011 has gone up about 12% compared to compared to the year before and the forecasts are encouraging. According to the French newspaper L'echo, a staff reduction and increasing rates are not to be ruled out.

I hope they will be able to overcome the current situation without job losses. That would be sad news if it were true, especially considering the 10th anniversary of the Sabena bankruptcy.

17 replies: All unread, jump to last
 
User currently offlineleftyboarder From Turkey, joined Apr 2008, 696 posts, RR: 1
Reply 1, posted (3 years 1 month 2 weeks 4 days 20 hours ago) and read 9828 times:

If I were a conspirator, I'd say LH is scooping up these airlines and then deliberately neglecting them so they can be justifiably chopped down to feeders for FRA / MUC / ZRH. But I am not, so justI'll just say that it is sad that a country the size of Belgium (with an economy arguably much more sound than Greece or Portugal) can't support a medum-sized airline - I guess location can do you good or bad.

User currently offlineByrdluvs747 From United States of America, joined Jul 2004, 2465 posts, RR: 1
Reply 2, posted (3 years 1 month 2 weeks 4 days 19 hours ago) and read 9665 times:

So much for the LH myth. I wonder how much SN lost when the AA partnership was dissolved?


The 747: The hands who designed it were guided by god.
User currently offlinesantos From United Kingdom, joined Dec 2007, 741 posts, RR: 0
Reply 3, posted (3 years 1 month 2 weeks 4 days 19 hours ago) and read 9597 times:

Bit harsh on LH, when they only own 45% of the airline! What about the other 55%?

User currently offlineIndianicWorld From Australia, joined Jun 2001, 3028 posts, RR: 0
Reply 4, posted (3 years 1 month 2 weeks 4 days 18 hours ago) and read 9447 times:

LH would still have significant management and operational control though I would suspect. With this airline and BMI struggling, along with LH Italia closing, the magic seems to have worn off abit.

It seems odd that they are taking on so many airlines, which seems to just make any hub strategy more complex and likely more inefficient. Will be interesting to see how the final product looks, with the set up of all the brands and their specialiation in the structure.


User currently offlinedebonair From Germany, joined Jan 2004, 2468 posts, RR: 4
Reply 5, posted (3 years 1 month 2 weeks 4 days 18 hours ago) and read 9357 times:

This is my opinion, SN was having such a perfect business modell- in the rear part the ex Virgin Express low-cost EconomyClass bLIGHT, in the front the standard ex DAT EconomyClass bFLEX. So it was possible either to buy very cheap low-cost tickets or "real" full service tickets- but after LH took over, these low fares are gone (and so many passengers)!
Another BIG problem: SN is replacing their AVRO RJ 85/100 with more and more A319/A320, which are too hughe for their regional network!

[Edited 2011-11-03 05:27:20]

User currently offlineblueflyer From United States of America, joined Jan 2006, 4179 posts, RR: 2
Reply 6, posted (3 years 1 month 2 weeks 4 days 17 hours ago) and read 9131 times:
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The loss is due primarily to insufficient fuel hedging in the face of rising fuel costs, the inability to pass on higher costs to passengers due to competition and civil unrest at one of its key African destinations that led to an interruption of traffic and lower passenger numbers for weeks thereafter.

To try and mitigate the loss, SN will reduce capacity more than usual in the slow winter months, and redundancies are being considered.

Quoting debonair (Reply 5):
So it was possible either to buy very cheap low-cost tickets or "real" full service tickets- but after LH took over, these low fares are gone (and so many passengers)!

It was a confusing mess that no one could make sense of, and passengers aren't gone by any stretch of the imagination, quite the contrary. Passenger numbers were up by 4% in 2010 and are forecast to be up by 5% this year.

Quoting Byrdluvs747 (Reply 2):
I wonder how much SN lost when the AA partnership was dissolved?
AA was replaced by code-shares with AC, CO, UA and US funneling passengers to Africa through BRU and onto SN's flights. SN didn't lose anything when the partnership was ended. The loser was AA (see the cancellation of ORD-BRU). Since the partnership with AA has ended and SN joined Star, AC has begun YUL-BRU and has switched to daily service two years ahead of schedule, CO has gone to all-year 777 (using UA metal), UA has opened ORD-BRU and US has gone from 757 to 767. All that is actually a pretty big net gain for SN.

Quoting debonair (Reply 5):
SN is replacing their AVRO RJ 85/100 with more and more A319/A320

They are not replacing the entire fleet, but they are getting rid of thirsty BAe 146-200s. A fully loaded A319 has the same fuel burn as a lightly loaded 146, gets there a little bit faster and some destinations clearly need something bigger than an 146/Avro, so it makes perfect sense.

The more recent Avros are more fuel efficient than the 146s, and the overall load factor is a low 77% so there's no need to upgauge the entire fleet.

There are persistent rumors that LH is working on a combined order for the carriers it owns or has a stake in for a similar-sized Avro replacement, such as the CSeries.

[Edited 2011-11-03 06:33:27]


I've got $h*t to do
User currently offlineLIPZ From Austria, joined Jun 2006, 1075 posts, RR: 0
Reply 7, posted (3 years 1 month 2 weeks 4 days 16 hours ago) and read 8966 times:

Seems like they will open up a direct service to New York in S12 anyway.

(in French)

Quote:
Vols sur New York en 2012

Les dirigeants ont élaboré des mesures correctrices pour éviter d’être pris de court. Une baisse importante de la capacité (en attendant une hausse des tarifs?) a déjà été décidée pour cet hiver et l’on n’exclut pas une réduction de personnel. Actuellement, Brussels Airlines occupe environ 3.300 collaborateurs dont environ un millier de personnel de cabine (hôtesses, stewards) et quelque 500 pilotes. Elle annonce de nouveaux produits vers l’Afrique début 2012 et une liaison sur New York avec un A330-200 dès la saison d’été.

full article

http://www.lecho.be/actualite/entrep...d_pour_2011.9123080-3017.art?ckc=1


User currently offlinebralo20 From Belgium, joined May 2008, 628 posts, RR: 0
Reply 8, posted (3 years 1 month 2 weeks 4 days 15 hours ago) and read 8738 times:

SN posted a small profit during fiscal year 2010, even though they had to deal (like all others) with the Eyjafjallajökull vulcano. Overall figures were quite decent last year with a small increase in passengers.

This year however SN invested quite a lot in their fleet and invested also in subsidiary ZC (Korongo Airlines). Older planes like the 737's and some Avro's with ending leases left the fleet (or are going to) and were replaced by bigger, yet more fuelefficient A319's. In addition 2 (older) A320's joined the fleet as SN was awared a contract for holiday flights by Club Med. They also invested in moving into a bigger maintenance hangar and took over staff from Sabena Technics. Add some bad fuel hedging and you'll get not so good financial results... They also added 2 A330-200 (one yet to enter the fleet) so this is also an additional cost (even thought they are being leased like all other planes in the fleet).

But if you see at the loads (pax & cargo) you'll notice a decent increase.

Before LH took over SN for 45% it was agreed that the rest of the shares could be bought either in 2011,2012 or 2013 and the final price which would be paid is being determined by the financial results. So if they have bad results it will be cheaper for LH to buy the remaining shares. If SN does OK it will cost LH a lot more. So if LH has the intent to buy SN in full it will be good to have bad results.

So a bad result can be actually a good result. If LH buys SN next year I figure that the shareholders of SN will have all their investments back without significant profit. Both parties will be happy since SN's shareholders will get their money back and LH didn't had to pay much.

Actually the cash situation of SN isn't too bad, in fact they are in quite a decent shape. No need to worry at this point.

If SN continues on the path they are following now they have quite a decent chance to grow into a decent mid sized carrier with specialities in AFI ops. And those AFI ops are the backbone of SN... Lot of airlines have tried, few have succeeded. SN is one of the few airlines who manage to operate (profitable) into certain AFI markets thanks to their knowledge and experience that goes back for nearly 90 years...


User currently offlineflyguy89 From United States of America, joined Feb 2009, 2006 posts, RR: 21
Reply 9, posted (3 years 1 month 2 weeks 4 days 14 hours ago) and read 8635 times:

Quoting IndianicWorld (Reply 4):
LH would still have significant management and operational control though I would suspect. With this airline and BMI struggling, along with LH Italia closing, the magic seems to have worn off abit.

I agree. While I concede that the LH group is on fairly solid footing, I can't help but be reminded with their latest airline-buying binge of SAirGroup. They've undoubtedly had success in turning around Swiss, but it's yet to be seen whether that success can be repeated with OS and SN, I just hope all their investments don't backfire on them like those of SAirGroup.


User currently offlineSN535 From Belgium, joined Feb 2005, 35 posts, RR: 0
Reply 10, posted (3 years 1 month 2 weeks 4 days 11 hours ago) and read 7128 times:

If I remember correctly, LH has to make its mind up at the latest in 2012 if it will buy the remaining 55% of SN. As bralo20 said, the worse the financial result for SN is, the better the deal for LH is. Seems like good timing for LH to make up its mind.

User currently offlinekiwiandrew From New Zealand, joined Jun 2005, 8626 posts, RR: 13
Reply 11, posted (3 years 1 month 2 weeks 4 days 11 hours ago) and read 7020 times:
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I think that SN, unlike BD, is a good long term possibility for LH. BD they were railroaded into buying on the basis of an agreement written when BD was a very different airline. LH chose to invest in SN. As for talk of reducing SN to a feeder service I think that overlooks some very important aspects of SN's importance ( even though a relatively small carrier).

Brussels is not only the capital of the EU, it is also the European headquarters of quite a number of multinationals, and for NATO, so there is a larger pool of high yield pax than you might expect for a city of BRU's size.

The other area which cannot be underestimated in it's importance is Africa. SN are one of the major player in this market and those routes cannot simply be moved to FRA or MUC at the whim of LH, firstly, they are bound up in restrictive bilaterals, secondly, Brussels and Belgium have longstanding ties with Francophone Africa ( even if some of them are rather dark and shameful such as the pillaging of the Congo ) which would not easily transfer to LH even if traffic rights permitted. I believe that SN are a key part of the LH ( and *A) African strategy along with MS/SA and ET.



Moderation in all things ... including moderation ;-)
User currently offlineLJ From Netherlands, joined Nov 1999, 4477 posts, RR: 0
Reply 12, posted (3 years 1 month 2 weeks 4 days 10 hours ago) and read 6752 times:

Quoting SN535 (Reply 11):
If I remember correctly, LH has to make its mind up at the latest in 2012 if it will buy the remaining 55% of SN. As bralo20 said, the worse the financial result for SN is, the better the deal for LH is. Seems like good timing for LH to make up its mind.

Not really. LH already had to take losses on its stake in SN, and given this projected loss it would probably have to take a loss again this quarter (my recollection is that in the LH annual report of 2010 they mentioned that they lost 24% on their investment in SN already). As everyone knows, it's not a good investment to invest in a loss making enterprise regardless of the price.



Quoting kiwiandrew (Reply 12):

Brussels is not only the capital of the EU, it is also the European headquarters of quite a number of multinationals, and for NATO, so there is a larger pool of high yield pax than you might expect for a city of BRU's size.

Apparently not enough as SN is loss making. LH can easily get these pax by flying them to FRA, MUC or ZRH.

Quoting kiwiandrew (Reply 12):

The other area which cannot be underestimated in it's importance is Africa. SN are one of the major player in this market and those routes cannot simply be moved to FRA or MUC at the whim of LH, firstly, they are bound up in restrictive bilaterals, secondly, Brussels and Belgium have longstanding ties with Francophone Africa ( even if some of them are rather dark and shameful such as the pillaging of the Congo ) which would not easily transfer to LH even if traffic rights permitted. I believe that SN are a key part of the LH ( and *A) African strategy along with MS/SA and ET.

I get the impression that ET is becoming more important than SN for Star's Africa strategy. Not that LH will let SN go (would be a foolish idea), The only reason why LH needs is SN is to annoy AF and ensure that AF/KL don't get a monopoly on Europe - Africa. However, once ET grows more, and ADD is a viable alternative for BRU, I wonder if LH would prefer ET above SN.


User currently offlinetomcat From Belgium, joined Sep 2000, 173 posts, RR: 0
Reply 13, posted (3 years 1 month 2 weeks 4 days 10 hours ago) and read 6591 times:

Quoting kiwiandrew (Reply 12):
Brussels and Belgium have longstanding ties with Francophone Africa ( even if some of them are rather dark and shameful such as the pillaging of the Congo )

I don't see the relevance of the text in brackets in this discussion.

This being said, the position of SN on the African market may be interesting, but it's hardly a goldmine for LH. Sure, if well managed, these operations to Africa will bring some profits, but so what? With planes like the 787 on one hand, and the growth of the middle eastern carriers on the other hand, the growing number of travelers flying to Africa from Asia and North America will no longer need to funnel through Paris or Brussels to get to their destination.

What will be left to SN for making a living in Africa is the growing ethnic traffic between northern Europe and sub-saharian Africa and hopefully the development of the trade between these 2 regions.

As for the supposed high yield traffic originating in Brussels, it's a reality but it's not expected to grow crazy in the next 10 to 20 years. This is not Hong Kong or Shanghai ! Simply, it makes sense for LH and *A to take the biggest share of this trafic. This is achievable through a relatively small and safe investment. Nobody will try to compete with them. Ryanair operating from Charleroi is addressing (successfully) a different market.

Overall, I see that LH is simply trying to invest its cash-flow in a not too risky places that will help them to balance their sources of income and spread their operational risks while generating some long term economies of scale at the fleet level.


User currently offlinekiwiandrew From New Zealand, joined Jun 2005, 8626 posts, RR: 13
Reply 14, posted (3 years 1 month 2 weeks 4 days 9 hours ago) and read 6050 times:
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Quoting LJ (Reply 13):
Quoting kiwiandrew (Reply 12):

Brussels is not only the capital of the EU, it is also the European headquarters of quite a number of multinationals, and for NATO, so there is a larger pool of high yield pax than you might expect for a city of BRU's size.

Apparently not enough as SN is loss making.

Loss making at the moment ( as indeed many airlines are), the question is whether LH believe that it will always be a loss maker.... clearly they have decided that this is the case with BD ( which they didn't want to buy), whether LH see SN as a dead end is another matter. My opinion is that they see long term potential and won't be in a hurry to throw that away.

Quoting LJ (Reply 13):
I get the impression that ET is becoming more important than SN for Star's Africa strategy

ADD is not well placed as a hub for Europe-West/Central Africa traffic. It remains to be seen what, if any, role Asky will play for LH/Star. I think LH will continue to pursue a multi pronged approach to Africa. Some markets may be best served through BRU, some through FRA/MUC, some through ADD/CAI.



Moderation in all things ... including moderation ;-)
User currently offlinestaralliance85 From United States of America, joined Jul 2011, 201 posts, RR: 0
Reply 15, posted (3 years 1 month 2 weeks 4 days 4 hours ago) and read 4756 times:

Do you think it is possible that IAG's Willi Walsh might make an offer to buy SN from Lufthansa? He already wants BMI and TAP so anything can be possible!!


brad Fitzpatrick
User currently offlineeta unknown From Comoros, joined Jun 2001, 2089 posts, RR: 0
Reply 16, posted (3 years 1 month 2 weeks 4 days 3 hours ago) and read 4677 times:

Wikipedia (never 100% accurate) states Korongo was shut down 31 Oct.

User currently offlinebralo20 From Belgium, joined May 2008, 628 posts, RR: 0
Reply 17, posted (3 years 1 month 2 weeks 4 days ago) and read 4155 times:

Quoting eta unknown (Reply 17):
Wikipedia (never 100% accurate) states Korongo was shut down 31 Oct.

Well, SN said that they still believe in the project and that it isn't -yet- shut down... But I guess it's only a matter of time before it's really shut down.

At least Lubumbashi did get a decent maintenance hangar:



[Edited 2011-11-03 23:58:15]

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