LufthanseatLAX
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:20 pm

The big news at Star Alliance water-cooler for the past few weeks is that United is wanting to combine with another airline. Of course as we know, the USAirways deal fell through which everyone seems pleased about. There was talk about United absorbing Continental, but now it seems Lufthansa is interested in purchasing as much of UA as possible under U.S. law which I believe is 49%. This combination seems very much encouraged by United employees.
 
SNATH
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:21 pm

Let me be the first (of many) to ask: source?

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hz747300
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:26 pm

49% of all stock, 25% of voting stock. That leaves little room for influence. The people at the water cooler in the Star Alliance must living in a fantasy land.

I think BA tried owning the max allowable of a US airline once. But you should change the title of your post, people will think you are mentally defective.
Keep on truckin'...
 
Shenzhen
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:28 pm

What the heck are they putting in the water cooler.... certainly not water  Smile
 
SA7700
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:36 pm

First of all Lufthanseatlax, welcome to A.net! I hope you have a great time here.
Guys and Girls, please give the new member a break, we all make mistakes one time or another.


Rgds

SA7700

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Shenzhen
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:36 pm

I think that is would be in Lufthansa's interest to ensure that UAL receives any cash infusion that would be required to keep them out of liquidation, but..... they better be willing to write it off as they may not get anything in return if it ever got to that point.

Cheers
 
N754PR
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Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 6:43 pm

Well, one way or another UA will go down unless someone steps in.
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BostonGuy
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RE: Lufthansa To Buy United

Fri Aug 19, 2005 9:31 pm

Quoting LufthanseatLAX (Thread starter):
The big news at Star Alliance water-cooler for the past few weeks is that United is wanting to combine with another airline.

And a lone sailor who falls overboard wants to be rescued. Doesn't mean a Coast Guard cutter is nearby.

Quoting LufthanseatLAX (Thread starter):
but now it seems Lufthansa is interested in purchasing as much of UA as possible under U.S. law which I believe is 49%. This combination seems very much encouraged by United employees.

There are frequently elements of truth in the majority of water cooler rumors. Wouldn't surprise me if UA desperately wants a white knight and LH is drooling over select UA pieces that might become available in a liquidation sale.

My advice to UA employees is to spend less time around the Star Alliance water cooler and more time polishing the old resumé.

Of course, the water cooler rumors sure are fun!
 
PanHAM
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RE: Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 9:38 pm

Mr, Mayrhber would be grilled, roasted and sliced and not necessarily in that order at the next year's AGM if he would make a mistake like that. Besides, the brain behind Star Alliance, Weber is Chairman of the Board who would have to approve such a deal and he for surfe would not sign that. It always has been the intention to form an alliance without buying or exchanging shares between the partners.

Swiss is an exception and has to be seen the same way Air Dolomiti was bought, this was to strenghten the market base in the home markets of these carriers (Air Dolomiti is also an important feeder, making "Monaco" (MUC) the best Italian hub airport. Swiss was an occasion and not too expensive, LH could pay that from petty cash and the overall exposure is not that big, if Swiss fails they write off 300 Million Euros or so but gain that back from syphoning off traffic from a (then) unserved market. So. these are othjer stories.

Buying shares in a company that is Union infested and unable to reach a cost base that allows them to operate profitable would be insane.
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RE: Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 11:16 pm

Quoting LufthanseatLAX (Thread starter):
There was talk about United absorbing Continental, but now it seems Lufthansa is interested in purchasing as much of UA as possible under U.S. law which I believe is 49%. This combination seems very much encouraged by United employees.

Continental backed by Boeing, GE and other investors and with the support of UAL's creditors is going to absorb UAL, Lufthansa can invest in UAL but cannot control the carrier.

http://www.forbes.com/services/2005/...0816airlines.html?partner=yahootix

[Edited 2005-08-19 16:18:44]
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hoya
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RE: Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 11:21 pm

Don't discount this rumor as something idiotic and a mistake. This LH buyout is actually quite possible, if not likely. LH and UA have a very strong relationship, especially since they were the founding members of the Star Alliance. It's in LH's interest to keep UA alive. If UA fails, who will LH have as its U.S. partner? I don't think the new US/HP would cut it as they're trying to becoming a large LCC.

Don't forget that UA's Tilton had strongly lobbied Congress this past year to lift the limit on foreign ownership of US airlines. There were many press releases with Tilton stating that consolidation is the future and that the current limit hurts american airlines' competitiveness. With Tilton trying to push for the scrapping of that limit, it's safe to conclude that UA is trying to court a foreign entity, most likely LH.
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rabenschlag
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RE: Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 11:33 pm

whats the rationale behind preventing foreign buyouts?

why for airlines but not for a carmaker?

and isnt that a huge biasing factor in the airlines market? so all the US based companies have to be afraid of is being bought by a US competitor.
 
IADLHR
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RE: Lufthansa Interested In Buying United Stake?

Fri Aug 19, 2005 11:43 pm

Hoya,

Very, very, very, well said. I could not agree more. Spending a lot of time in Germany and in DC,I can tell you that what you said is absolutely true!!!!!!!!!

LufthansatLAX,

Friends of mine who work in various places in FRA and DC have been hearing thos water cooler rumors for quite some time now. However, in recent months, they have increased.

There might possibly, perhaps, maybe be some interest in the US Govt in letting this happen. People might be more interested in letting this happen as there is already an openskies with US/Germany. I say this because there would be a lot of politicians and people in power that would have to explain why their districts and states lost air service and thousands of innocent people also lost jobs.

To everyone else under no circumstances would I be so out right dismissive of such a possibility of this happening. I am not saying with absolute certainity that this will happen. It is just that there is a much, much better chance of it happening than people might realize. Stay tuned!!!!!!!!
 
ikramerica
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 12:19 am

I still think that UA, DL and/or NW will have to broken up and sold in pieces, as at least one can't survive as is. Even if one were to merge with a more viable airline, there would be some massive divestiture to make it financial viable and to pass anti-trust. Everyone seems to think of mergers or "buyouts" or what have you as a 100% deal, but that's not usually the case in many industries if the players are so large.

I could see a company like CO "merging" with SOME of UA, but UA would sell off ALL the A32X aircraft as part of a TED spinoff to a venture capital/private investment firm creating a low cost carrier based in DEN with hubs in LAX, ORD and NYC, and I could also see some of the European network sold off to somebody else. The LHR rights are valuable to an American carrier as are a few other routes, but not all of it. Wonder if LH could take over the the bulk of the non-LHR european A/C and route authorities (maybe using a US subsidiary so as to be able to operate non-Germany flights). CO could acquire Asia and LHR routes and expand ops in the west via LAX and SFO, etc.
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flyinTLow
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 12:35 am

Quoting PanHAM (Reply 8):
Mr, Mayrhber would be grilled, roasted and sliced and not necessarily in that order at the next year's AGM if he would make a mistake like that. Besides, the brain behind Star Alliance, Weber is Chairman of the Board who would have to approve such a deal and he for surfe would not sign that. It always has been the intention to form an alliance without buying or exchanging shares between the partners.

Swiss is an exception and has to be seen the same way Air Dolomiti was bought, this was to strenghten the market base in the home markets of these carriers (Air Dolomiti is also an important feeder, making "Monaco" (MUC) the best Italian hub airport. Swiss was an occasion and not too expensive, LH could pay that from petty cash and the overall exposure is not that big, if Swiss fails they write off 300 Million Euros or so but gain that back from syphoning off traffic from a (then) unserved market. So. these are othjer stories.

Buying shares in a company that is Union infested and unable to reach a cost base that allows them to operate profitable would be insane.

Absolutly have to agree with PanHAM. As interesting as this might make the aviation world, I just don't think anything like this will happen.

1. It is LH policy to not invest in other airlines and to buy up stakes but more to form agreements and alliances. Air Dolomiti and Swiss, as said before, were major exceptions. And I think the world learned from the history of Swiss that it's not always a good idea to invest in every possible airline there is.

2. UA is by far a bigger airline than Air Dolomiti or Swiss. It has more aircraft, more workers, more destinations, larger operations. The risk in taking over an airline like that would be gigantic, nothing I see Lufthansa taking.

3. Swiss and Air Dolomiti were home turf. Their operations are being turned into feeders for the LH network again. With UA, they would have to organize another airline on another continent that is far from being their turf.

Cheers,

Thilo
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 1:05 am

It's also possible LH will wait for a new management group (Bethune) to come in with other large investors such as Boeing, GE and support the CO/UAL takeover.

LH would then gain CO as a Star partner.
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semsem
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 1:16 am

Why would Lufthansa buy a stake in an airline that is in deep financial doo dah?
 
buslover
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 1:51 am

Let's get Austrian first
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VORFMD
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 2:10 am

Quoting Buslover (Reply 17):
Let's get Austrian first

You think they can get it ?
 
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:41 am

I agree with Buslover. Lufthansa - especially Mr. Mayrhuber repeatedly said that they were interested in merging (I guess in the sense of buying out) with another airline. As there are already strong links between AUA Group and Lufthansa this seems like a logic pick to me. And I believe that SAS could be next given that they continue to operate profitably. But give this at least another year or so and see what the Swiss merger goes like.
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gigneil
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:46 am

Quoting Ikramerica (Reply 13):
I could see a company like CO "merging" with SOME of UA, but UA would sell off ALL the A32X aircraft as part of a TED spinoff to a venture capital/private investment firm creating a low cost carrier based in DEN with hubs in LAX, ORD and NYC, and I could also see some of the European network sold off to somebody else.

And then the new CO/UA would fly what?

N
 
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:54 am

This would be a BAD strategic move, to say the least. UA has still not emerged from Chap 11, and there is no indication of robust earnings potential upon their eventual emergence given their acrimonious union/mgmt issues as well as still-high unit costs and a mgmt team that is not very adept. I fail to see any profit flow to LH from such a move, or any addl revenue synergies.

The EU airline map is changing rapidly. Ryanair will come to challenge LH in the coming 5-7 years like no other airline has. LH would be best placed to preserve its cash and fight the EU battle before investing in bankrupt and inefficient US legacy carriers.

My analytical rant of the hour.

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StevenUhl777
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:58 am

Quoting Ikramerica (Reply 13):
I could see a company like CO "merging" with SOME of UA, but UA would sell off ALL the A32X aircraft as part of a TED spinoff to a venture capital/private investment firm creating a low cost carrier based in DEN with hubs in LAX, ORD and NYC, and I could also see some of the European network sold off to somebody else. The LHR rights are valuable to an American carrier

Huh? So what would be the point of CO merging with UA, then? Bethune and CO have been saying for a long time they want the LHR slots. Without them, why bother?
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searpqx
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 4:27 am

LH has a strategic interest in having a secure and stable US partner, so I could see them providing some investment, but nothing close to a buyout. History and common sense go against it. To date every significant purchase of stock by a foreign carrier has resulted in friction between the purchaser and the US carrier (including KL & NW) and in all but one case this eventually led to the foreign airline dumping all of their stock and termination of the relationship.

As noted, US law limits foreign ownership to 25%/49% voting/total stock. While the idea of raising or eliminating those limits has been floated from time to time, every indication is that it would be a bruising political battle, something the current administration probably isn't eager to add to their plate at the moment.

So while I'd never say never in this industry, I wouldn't hold me breath for more than a loan or secured credit facility in the short term.
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ikramerica
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 4:29 am

Quoting Ikramerica (Reply 13):
and NYC

Should have said IAD, not NYC.

Quoting Gigneil (Reply 20):
And then the new CO/UA would fly what?

UA has a large fleet of Boeing aircraft that CO also flies (though some with the wrong engines):
733
735
752 PW
772 PW
772ER PW

They also have 763ER and 744 with PW. I could see CO adding some of the 744s to the fleet if they had the routes to fly them (LHR, SYD, MEL), and probably unloading the 763ER in favor of keeping the 772s. And by adding a large fleet of all PW aircraft, even though CO flies GE and RR, with a number as large as that, servicing the PW engines should be fine (considering they would likely hire over all UA mechanics they could and keep maintenance bases where they are now for UA).

UAL have a large pacific route structure, an NRT hub, as well as LHR rights and routes and CDG slots, etc. This is what CO would want to have (fleet and routes), the whole reason they would consider any kind of merger anyway. They would also be able to expand west coast ops if they could take over the aircraft and infrastructure of T7-8 at LAX (and bring COPA along) and give T6 to whoever buys TED (and DL could keep their gates if they are still around and not shrunk), take part of SFO. Have no idea if they would have interest in ORD or IAD (possibly another airline would want those operations), and they pulled out of DEN years ago by you never know if there is a case to keep a regional hub there.

CO is not interested in a low cost subsidiary nor a large fleet of 145 A320/319 aircraft if they also have a fleet of up to 160 733/735s to absorb until they are retired, but there is no doubt that independent investment groups could see a real business case for TED, with bases already established and aircraft already configured and/or in the fleet. And a fleet of 150 planes with an established route structure, airport space, etc. would be a very desirable airline to operate.

Not sure about the UAex fleet with their CRJs and 146s, but the 145s fit into the COex fleet, and the E170 would be an interesting mainline addition to CO. I suppose you could see COex based CRJs based on the west coast to keep fleet simplified, with E170s connecting small western cities with IAH. There's obviously a ton to work out, but there is also real interest in doing so.
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UAMAYBACH1239
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 7:37 am

Quoting LufthanseatLAX (Thread starter):
U.S. law which I believe is 49%. This combination seems very much encouraged by United employees.

29% Is the max that can be held by a foreign carrier and or Government.
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baw716
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:07 pm

LH can only purchase 29% of UA. If the valuation of the airline is only around $174M, 29% of that is peanuts. However, with that 29%, the question becomes how much can LH pour into the airline? I believe there would be some restrictions on the amount of investment capital LH would be able to put into the venture and as such, a LH investment in UA would not amount to enough to save the sinking ship....and UA is sinking.

If the rumors are correct and the delay by the "creditor committee" is a smoke screen for the fact that the creditor committee would not accept UA's business plan, then there is a much larger problem looming on the horizon. How much longer will the creditors (the DIP lenders) continue to support UA when it continues to lose $1B per quarter, most of it coming from "reorganization costs?"

The court needs to open up to other bidders to allow someone else with capital and a viable plan to try to save United. If not, then a Chapter 7 conversion will start to be discussed before years end.

baw716
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gigneil
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RE: Lufthansa Interested In Buying United Stake?

Sat Aug 20, 2005 3:26 pm

Quoting UAMAYBACH1239 (Reply 25):
29% Is the max that can be held by a foreign carrier and or Government.

49% is the correct number. 25% of voting shares, and 49% of total shares.

N
 
lijnden
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RE: Lufthansa Interested In Buying United Stake?

Sun Aug 21, 2005 3:59 am

AF and Delta
KLM and NWA
AF-KLM and Continental
BA and somewhat AA
and Lufthansa?

In order to keep in line with AF-KLM and BA, Lufthansa's own future as a major player in aviation becomes under pressure if they do not seriously hook up with an American partner. UAL is a bargain at the moment and with some fresh management troops from Europe to run UAL, Lufthansa will only gain from it in the long run. On the other hand, it is a must because there is no basis for any alliance without an US carrier involved. A Lufthansa hook up with SAS, Austrian or Swiss might sound great but is very limited in the long run and too local as a market with severe competition. I think Iberia would make more sense for Lufthansa as a European carrier to buy-out. Anyway, it is clear that LH must do something for UAL, knowing that oil prices are hitting almost the critical UAL edge of $ 70,00. A cash deal would be for both parties a good solution.

Imagine a Euro-white plane with a LH-blue tail and a small yellow (Uni)Ted logo in it and LH-Blue United titles and a name of a city like 'Las Vegas' or 'Cleveland' and underneath that the text Lufthansa-United? I also want to suggest to name the 747 after former US presidents and the 777 after US first ladies. Other good names would be vice-presidents!
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UnitedTristar
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RE: Lufthansa Interested In Buying United Stake?

Mon Aug 22, 2005 4:06 am

Quoting Baw716 (Reply 26):
If the rumors are correct and the delay by the "creditor committee" is a smoke screen for the fact that the creditor committee would not accept UA's business plan, then there is a much larger problem looming on the horizon. How much longer will the creditors (the DIP lenders) continue to support UA when it continues to lose $1B per quarter, most of it coming from "reorganization costs?"

UA has actually been operationally profitable since March. If you look at the quarterly loss this last quarter, its a paper loss. Most of which will be written off later in the bankruptcy process. UA has a very solid business plan. Also very complex. The creditor committee asked for more time to review the complexity of the contract. UA would have been out of bankruptcy a few months ago if it weren't for the creditors arguing over who gets a larger part of the new united. I will just laugh after you guys see UA's yearly operating profit. Then you will see just how much this airline is "struggling"

Lets not all be bitter jealous.

Quoting Gigneil (Reply 27):
49% is the correct number. 25% of voting shares, and 49% of total shares.

This is correct...LH and UA have been cross utilizing each others trans Atlantic routes for some time. Profit sharing/risk sharing. Which has paid off quite nicely. If you look recently LH has quietly taken over as the number one western carrier servicing India in terms of ASM's and schedules. Germany has one of the lowest travel rates to India of all western country's...now I wonder who is feeding them these passengers?

UA is not going anywhere anytime soon. While others are posting doom and gloom look for UA to make some major industry leading product changes shortly and the new UA be like nothing you have ever seen and will blow you away!

-m

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