LH is in talks with the Austrian government about funds for OS, but officials are demanding a lot, like guaranteed expansion of especially long haul, guarantees for the hub in VIE, new airplanes, and so on. It is unclear at this point if LH is willing to accept it all for roughly 270 million euros (total 767 millions, rest is based on loans).

IAG and Etihad have already approached the Austrian government to express interest in OS should LH let them fall. Especially for IAG placing foot in VIE would be a very interesting opportunity and I think that VIE, being 2-3 hours away from the closest OW-hub, could or would potentially benefit from this and not be the victim of FRA/MUC/ZRH anymore. On the other hand, having LH as a competitor especially in the very important (and lucrative) German market can’t be a benefit for them.

Your thoughts?

German: https://www.austrianaviation.net/detail ... native-an/

Oh dear, hope OS doesn´t fall in IAGs hands... it will just be sandwiched by LH Group.

Not that I don´t like the idea, but I don´t see OS surviving under anything but LH Group,

It is a good idea to turn VIE into oneworld hub after Malev’s collapse left a big gap in Central and Eastern Europe a few years ago. Austrian has a good network in the area that can benefit OW.

https://www.aerotelegraph.com/en/iag-wa ... -lufthansa
incase you need it in English

Not taking over OS, but IAG builds VIE hub (maybe in the name of LEVEL) and starts long haul flying in the event of OS bailout doesn't go through.
Didn't expect this is what Kurz called alternatives Austria currently working on should LH make no more concessions. Imagine IAG takes second largest German speaking city in the face of LH.
But I don't think it's likely, not that IAG hasn't got enough financial holes itself (Air Europa and BA 12,000 job cut), unless they get more bailout somewhere.

https://www.diepresse.com/5809607/briti ... in-wien-an Die Presse report (in German)

Sit down Etihad!

I can't seem to understand Etihad. First the usual every year multibillion loss, second the situation with Alitalia (and the whole partners thing) terribly not working out, third the sale of lots of jets to get money, fourth the deferrals of jets deliveries because of poor financial situation, fifth covid and REALLY low oil prices (which is the only reason they still exist).
And believe me, I am big av geek when it comes to middle eastern carriers, but Etihad will always be that white elephant in the room that seems to always do things in a manner that never seems the right way financially speaking.

I don’t quite see what IAG or Etihad can do better than LH in the case of OS and VIE. Especially long haul seems to be tough from VIE.

You wonder if Lufthansa will make with their daily loses. Could be smart for OS to go with British Airways which will not go under. Lufthansa has much better in flight service than BA, but Lufthansa seems much more affected. Would not be good in terms of service to go with BA as they are not as customer focused as Lufthansa.

DTVG wrote:

I don’t quite see what IAG or Etihad can do better than LH in the case of OS and VIE. Especially long haul seems to be tough from VIE.

The potential advantage for OS is that IAG doesn't have a hub anywhere near VIE, unlike LH. Right now VIE is the 4th wheel for international long haul service in the Lufthansa Group, behind FRA, MUC, and ZRH (and arguably even BRU since that has a distinct purpose - French-speaking African destinations). With IAG, VIE might be freed up to be a more significant hub within Eastern Europe.

Another thought is that perhaps IAG could get OS some "new" long haul aircraft by winding up LEVEL and transferring some 332s over to OS.

As a side note, I didn't realize OS was so much of a basket case that EY would be interested in investing...

LH is not going to give OS up.

FSDan wrote:

The potential advantage for OS is that IAG doesn't have a hub anywhere near VIE, unlike LH. Right now VIE is the 4th wheel for international long haul service in the Lufthansa Group, behind FRA, MUC, and ZRH (and arguably even BRU since that has a distinct purpose - French-speaking African destinations). With IAG, VIE might be freed up to be a more significant hub within Eastern Europe.

I understand the structure of that argument but do you really think LH has inhibited a bunch of profitable Eastern Europe destinations from VIE? (Ontario martyr syndrome.) The continent is small enough that increments as small as E75s could cover it from LHR or MAD. Would IAG really want the costs of running Eastern Europe - VIE - Eastern Europe? That sounds like poor yields to me.

Take note. This is IAG looking good acquire OS. Moreso encouraging the Austrian government to allow to it fail thereby allowing IAG to use its Austrian based brand - Level with the mantle to become some sort of flag carrier. Maybe rebrand from level and turn into full service. ETC. I think at least

Why would EY want to invest in other airlines when pretty much all their previous airline investments have failed?

This will probably be the worst nightmare to happen (in terms of pax experience).

Michael

And what does QR think of IAG teaming up with EY ?

Sorry but this isn't happening IMHO.

I think its more of IAG and EY having interest for their own goals rather than both going in together.

I agree that OS would have a bitter niche for Oneworld/IAG filling the geographic void left by Malev. I always though OS was redundant for LH Group with MUC and ZRH being pretty close by. Honestly I think OS being in the group is more due to Germanic ties than anything.

Coincidentally, just today I was thinking about how OS wants new planes (787 would be perfect to replace the 767 and 777 with the A32x on the lower end) but LH wants them to get their affairs straightened up first. Its funny because they both argue you cant do one without the other. I.e. OS says they'll have lower costs with new (more efficient) a/c and LH is using new a/c as a reward.

Personally, I think LH should drop OS for LO. LO has been really ambitious and thinking out of the box by moving away from being WAW-centric and even offering a (EU)legacy base in Budapest which can be really a good hold on eastern Europe. Taking over SK would offer some interesting options as well.

Or this news could have been leaked by the Austrian government in order to put pressure on Lufthansa to accept the terms they proposed. Even if IAG takes over, I doubt they would be free to act as they please. The Austrian government seems determined to keep OS as a growing legacy carrier. Turning it into a glorified LCC a la Iberia won't go down well. This is something that might discourage IAG from taking over OS.

At the end of the day I think it will boil down to just two solutions:

1. LH Group accepts the terms of the Austrian government.
2. Austrian Airlines is re-nationalized.

p.s. the Serbian government mentioned that they might be buying back the 49% EY has in JU. If that happens Etihad will be left with no airline in Europe. This could be one reason why they are considering getting a part of OS.

Given their track record of "rescuing" other airlines they have invested in, plus their own financial shortcomings, is EY really in a position for investing in another airline??

------------------------------------------------
@Mods: Can we please adjust the thread title: Nowhere in the sources is one word about "taking over OS". It just say (wthout naming a source): "Both offer themselves as an alternative to Austrian Airlines to provide Vienna International Airport as a hub with planes and connections."
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Blerg wrote:

At the end of the day I think it will boil down to just two solutions:

1. LH Group accepts the terms of the Austrian government.
2. Austrian Airlines is re-nationalized.

3. LH Group rejects the conditions of the Austrian government, OS gets a haircut.

The Austrian government IMHO massively overestimates their bargaining position.

Etihad as an alternative is a joke in itself, plus they are in a casual affair with LH already. After their failed hunter strategy, and with ol prices at record lows, these are hardly the time for Abu Dhabi to finance a new European adventure.

IAG - as every other airline - is busy with itself. Re-negotiating or cancelling Air Europa takeover, laying off 12.000 staff at BA alone, and their own state aid gambling (some say they are only waiting for VS to go belly up before they will ask for help, to).

Is it just me that finds this (if true) utterly insane. While IAG is being bailed out on the Spanish side by the Spanish government, and BA is propping up the group with Union-busting contracts and 12,000 redundancies, IAG are considering expanding the group by BUYING an entire airline? I understand that is how this industry works, but where is the humanity? Time and place and all that. Bonkers.

EDIT I acknowledge this is only a rumor and may have no basis in truth. At least that's what I'd hope.

Given EY's financial state, i'd be surprised if they were even able to buy a plane ticket on OS let alone buying OS itself!

I only see IAG being interested in it to expand LEVEL which I doubt is what the Austrian government would have in mind. Not that there isn't the real possibility to keep it as a full service hub but not sure that's what IAG would have in mind.

EY is a joke that's in any case fighting for survival and botched every acquisition its made almost. The money it might get for its Air Serbia stake will not be substantial.

Think this is really as the article suggests. A bargaining ploy by the Austrian government to get some leverage. To be honest I'm a little surprised LH isn't giving in a little more given its situation and not bending over. It hasn't got too many avenues to raise desperately needed cash.

If LH gets the10BN bailout from the German government, I am pretty sure they'll have a few hundred millions of funds available to cover the essential operations at the reluctant group members Austria and Belgium: of course, in that case the gloves will come off and it will be quite brutal in terms of restructuring AND future purpose.
The blame can easily be put on the governments refusing to compromise and as a company bailed out by Germany (and Switzerland) alone, Lufthansa no longer have to pretend being fair to the other home countries like they call them: Austrian will just be downgraded to Air Dolomiti status then, maybe even sizewize.
I fear some are overplaying their hands here: the German government bailout basically flushes all other demands out, with only Switzerland holding on to it's rights by means of the size of the check written.

At first brush it sounds absurd, however IAG has clearly been interested in the VIE market already. It's hard to think they'd actually want to take over OS as it's currently constituted, but maybe they think the group has some excess widebodies (with the lack of demand the next few years) that could be sent down to VIE to revitalize OS' fleet? It's probably just an expansion of Level Austra though .

I flew back from Bratislava via VIE in March and was my first time there. Really a very nice airport and apparently is a very easy place to connect. As an OW flyer, a hub in Central Europe would be a dream!

JamesCousins wrote:

Is it just me that finds this (if true) utterly insane. While IAG is being bailed out on the Spanish side by the Spanish government, and BA is propping up the group with Union-busting contracts and 12,000 redundancies, IAG are considering expanding the group by BUYING an entire airline? I understand that is how this industry works, but where is the humanity? Time and place and all that. Bonkers.

EDIT I acknowledge this is only a rumor and may have no basis in truth. At least that's what I'd hope.

The humanity is in protecting IAG as an entity. IAG, as a group, employs 65k people. If they have to make 20k individuals redundant they still saved 45,000 jobs. What choice do the management teams and directors have?

There is always opportunity, however. IAG still plan to acquire Air Europa, although they don't want to pay the €1 billion price tag. In London VS have walked away from LGW (which is only 5 aircraft worth of flying) and cancelled new routes, so IAG looks to be in relatively good strategic positions at their MAD, LON and DUB core, BCN and FCO are also very strong short haul bases, for leisure but also business. While IAG don't see 2019 traffic levels until at least 2023 they do have strategic issues with the LEVEL, LEVEL Austria and Vueling trio. OS would be a very good strategic add for IAG, they have very poor representation in Western and Central Europe and it would solve the issue with LEVEL Austria. VIE has a new terminal, good strategic location for connections from the East and South of Europe - where IAG have no representation. The OS short-haul fleet is relatively modern and comparable with IAG. The long-haul fleet is a different story, particularly the 767s but IAG has more aircraft than they need in that size class. The A332 (Iberia or LEVEL) or 787(BA or Air Europa) would be suitable replacements. Realistically OS will always struggle in the LH group - it has neither the network of LH, the premium appeal of LX or the Africa expertise of SN. The on/off reorganisations of the airline and brand show that LH do not know what to do with OS, because there is just no logical fit for OS pithing the LH group. That is not to say there is no place for OS elsewhere.

I'm wondering if IAG are looking at a poisoned chalice in the shape of Vienna. The country's economy is deeply tied to Germany, and it doesn't have the Asian long haul location advantage that Helsinki has. If Austrian wereto leave LH and be sold to IAG, I imagine LH would significantly increase routes to Eastern Europe from Munich. Furthermore, Wizz have the advantage over Austrian for routes to Eastern Europe - nonstop on a LCC always beats changing planes with a token meal at a high price. In effect, IAG going into Vienna in a big way looks a bit like the Deutsche BA experiment of the 1990s - big enough to inflict serious damage on the parent company while always likely to be a 3rd rate player

As for Etihad - well we know what's happened to their previous investments in other airlines...

EY might be in complete denial, but they do have a surplus of modern aircrafts that could've put into use in Vienna.

IAG could have complete the purchase of Air Europa and use this brand in Vienna rather than the controversial Level. Thus Iberia takes over all Latin America routes and Air Europa takes over Vienna and Barcelona based flying.

I am just saying above things can be done.

Any news regarding the current situation and the prospect for LEVEL within the IAG group from the meeting today?

BrianDromey wrote:

JamesCousins wrote:

Is it just me that finds this (if true) utterly insane. While IAG is being bailed out on the Spanish side by the Spanish government, and BA is propping up the group with Union-busting contracts and 12,000 redundancies, IAG are considering expanding the group by BUYING an entire airline? I understand that is how this industry works, but where is the humanity? Time and place and all that. Bonkers.

EDIT I acknowledge this is only a rumor and may have no basis in truth. At least that's what I'd hope.

The humanity is in protecting IAG as an entity. IAG, as a group, employs 65k people. If they have to make 20k individuals redundant they still saved 45,000 jobs. What choice do the management teams and directors have?

British Airways alone made an operating profit of nearly €2 billion last year, the option they had would have been to stop paying hefty dividends left right and centre, taking liquidity out the business and prioritizing takeover bids over existing group operations. Making 20,000 people redundant hasn't single-handedly saved those jobs. In the case of VS I get it, they're running on empty and have to make drastic cuts to the workforce - it's sad but I appreciate the necessity. Furthermore, acquiring Austrian isn't the difference between IAG surviving or not - if anything it's a risk, it's something which will require further investment especially if the Austrian government have their way. I am all for free markets and businesses going through mergers/acquisitions etc, but it's not the time imo.

IAG have got a god damn cheek haven't they.

Take state aid from Spain, don't do anything in the UK, put 12,000 staff on a redundancy notice in the most profitable area of the group and then has the cheek look at buying OS.

BrianDromey wrote:

JamesCousins wrote:

Is it just me that finds this (if true) utterly insane. While IAG is being bailed out on the Spanish side by the Spanish government, and BA is propping up the group with Union-busting contracts and 12,000 redundancies, IAG are considering expanding the group by BUYING an entire airline? I understand that is how this industry works, but where is the humanity? Time and place and all that. Bonkers.

EDIT I acknowledge this is only a rumor and may have no basis in truth. At least that's what I'd hope.

The humanity is in protecting IAG as an entity. IAG, as a group, employs 65k people. If they have to make 20k individuals redundant they still saved 45,000 jobs. What choice do the management teams and directors have?

You spread them out around the group considering BA is the most profitable part of the group. You also don't have the cheek to take €1 billion in state aid from the Spanish and then go on the lines of "survival of the fittest" in the UK.

After the demise of MALEV and Air Berlin, and the massive screw-up they made trying to buy SWISS, IAG/Oneworld don't really have much in the way in partner airlines in Central and Eastern Europe. So perhaps they'd be some logic in acquiring OS, although I'd be pretty pretty surprised to see it happen, we do live in strange times and wouldn't rule anything out in the aviation sector at the moment.

I don't understand any IAG attempt to buy OS. Wouldn't the better strategic option be to buy Condor then rejig their leisure orientated routes/destinations and have an actual presence in the heart of Germany. IAG had a chance with AB but blew it. It seems they want to repeat that mistake.

Byrdluvs747 wrote:

I don't understand any IAG attempt to buy OS. Wouldn't the better strategic option be to buy Condor then rejig their leisure orientated routes/destinations and have an actual presence in the heart of Germany. IAG had a chance with AB but blew it. It seems they want to repeat that mistake.

And go toe to toe with LH who have all the corp contracts locked down, no chance.

VIE offers a niche, that's it, I really don't see this rumor going anywhere, but we will see.

Byrdluvs747 wrote:

I don't understand any IAG attempt to buy OS. Wouldn't the better strategic option be to buy Condor then rejig their leisure orientated routes/destinations and have an actual presence in the heart of Germany. IAG had a chance with AB but blew it. It seems they want to repeat that mistake.

They tried this before with Deutsche BA and failed. So I doubt they will try it again.

Don’t worry they took money from the UK government too, and THEN made all the job cuts anyway!!!

https://www.headforpoints.com/2020/05/0 ... t-bailout/

Nickd92 wrote:

IAG have got a god damn cheek haven't they.

Take state aid from Spain, don't do anything in the UK, put 12,000 staff on a redundancy notice in the most profitable area of the group and then has the cheek look at buying OS.

BrianDromey wrote:

Realistically OS will always struggle in the LH group - it has neither the network of LH, the premium appeal of LX or the Africa expertise of SN. The on/off reorganisations of the airline and brand show that LH do not know what to do with OS, because there is just no logical fit for OS pithing the LH group. That is not to say there is no place for OS elsewhere.

Also IAG has the recent experience of turning Iberia around. The could upgrade the Austrian brand and network and make it the IAG gateway to Asia and Eastern Europe. Win-win for everybody except Lufthansa.

MIflyer12 wrote:

FSDan wrote:

The potential advantage for OS is that IAG doesn't have a hub anywhere near VIE, unlike LH. Right now VIE is the 4th wheel for international long haul service in the Lufthansa Group, behind FRA, MUC, and ZRH (and arguably even BRU since that has a distinct purpose - French-speaking African destinations). With IAG, VIE might be freed up to be a more significant hub within Eastern Europe.

I understand the structure of that argument but do you really think LH has inhibited a bunch of profitable Eastern Europe destinations from VIE? (Ontario martyr syndrome.) The continent is small enough that increments as small as E75s could cover it from LHR or MAD. Would IAG really want the costs of running Eastern Europe - VIE - Eastern Europe? That sounds like poor yields to me.

I don't think they've necessarily inhibited much, but they also haven't invested much. What I'm saying is that I think IAG would have more incentive to invest in having a strong OS than LH has.

Another thought is that if you can serve lower yield Eastern European destinations primarily from a nearby hub in VIE, that might actually free up some slots at LHR to use on increased frequencies to more business-oriented destinations.

SCQ83 wrote:

BrianDromey wrote:

Realistically OS will always struggle in the LH group - it has neither the network of LH, the premium appeal of LX or the Africa expertise of SN. The on/off reorganisations of the airline and brand show that LH do not know what to do with OS, because there is just no logical fit for OS pithing the LH group. That is not to say there is no place for OS elsewhere.

Also IAG has the recent experience of turning Iberia around. The could upgrade the Austrian brand and network and make it the IAG gateway to Asia and Eastern Europe. Win-win for everybody except Lufthansa.

Why do you think a gateway to Asia and Eastern Europe is a profitable venture? LHR has the O&D; most major markets already have non-stop flights. Eastern Europe can be served by non-stops; little hubbing is required (as evidenced by the lack of a hub in Eastern Europe, frankly). LCCs have won in Europe with point-to-point.

This is like arguing that Kansas City is a great hub to the U.S. West Coast. How'd that work out?! Or that Berlin is the essential gateway to Eastern Europe - it's not 1910.

MIflyer12 wrote:

Why do you think a gateway to Asia and Eastern Europe is a profitable venture? LHR has the O&D; most major markets already have non-stop flights. Eastern Europe can be served by non-stops; little hubbing is required (as evidenced by the lack of a hub in Eastern Europe, frankly). LCCs have won in Europe with point-to-point.

This is like arguing that Kansas City is a great hub to the U.S. West Coast. How'd that work out?! Or that Berlin is the essential gateway to Eastern Europe - it's not 1910.

VIE had 31M PAX last year. So that is comparable to Dublin, Zurich or Copenhagen. It is not Kansas City. A wealthy market and a good mix of business, tourism and local market. It is an interesting market on its own with the obvious added advantages to IAG which is weak in Asia and Eastern Europe.

Eastern Europe is not only about London - Krakow for city-breakers or VFR. It is also connections to the US/Canada which is a big market that IAG currently does not serve and which is almost a monopoly of Lufthansa.

For Asia (given its attraction for tourists) it could be a gateway to serve secondary cities that are not served by BA or IB.

Never say never, especially in the current environment. Consider:

1. Austrian Airlines will always be "stunted" as a part of the Lufthansa Group, since Munich and Zurich are by definition ($$$) higher priorities;

2. Alitalia may be up for grabs yet again as a partner (with the upside of no major financial commitment needed!). Push comes to shove, AZ is far more useful as a collaborative partner for LH than OS;

3. As traffic recovers, BA will at some point need to resume its mission of being the forerunner for new expansion opportunities (e.g., its recent expansion into the US sunbelt), and re-centering its business on O&D vs. connecting traffic since neither God nor government is building another runway at LHR .A Vienna hub would be useful in shifting a chunk of connecting traffic away from LHR, and brings back many central and eastern European markets BA can't economically serve (but wants/needs to offer).

Nonsense rumours. Time will tell but this makes no sense currently. This is all negotiation posturing.

I can see so much wishful thinking here. Etihad itself can barely survive on it`s own and BA wants to layoff thousends.
LH owns OS by 100% and is also able to shut them down if needed ( or forced to ) A bancrupt OS in a time where every airline in the world fight even for a single pax ? This way , Mr Kurz will face a bigger problem then he expected on his gamble.Let`s not forget in wich estate OS was when LH bought them. If anyone can see Laudamotion / Ryanair as the better solution for this country , will remain to be seen

FSDan wrote:

As a side note, I didn't realize OS was so much of a basket case that EY would be interested in investing...

Comment of the week.

BrianDromey wrote:

so IAG looks to be in relatively good strategic positions at their MAD, LON and DUB core, BCN and FCO are also very strong short haul bases, for leisure but also business. While IAG don't see 2019 traffic levels until at least 2023 they do have strategic issues with the LEVEL, LEVEL Austria and Vueling trio. OS would be a very good strategic add for IAG, they have very poor representation in Western and Central Europe and it would solve the issue with LEVEL Austria.

No, acquiring loss making Austrian isn't going to magically make LEVEL Anisec profitable. And, reality check, it also won't make Lauda, WIZZ and Lufthansa Group (Eurowings Europe) stop their bloodbath at Vienna.

OTOH it would be a true testament to IAG's mismanagement if they had to get out the cheque book and throw even more money down the drain to "fix" LEVEL Anisec - which itself was a lot of money thrown down the drain to fix Vueling's toxic brand reputation.

eamondzhang wrote:

This will probably be the worst nightmare to happen (in terms of pax experience).

Michael

Agreed.

oldJoe wrote:

I can see so much wishful thinking here. Etihad itself can barely survive on it`s own and BA wants to layoff thousends.
LH owns OS by 100% and is also able to shut them down if needed ( or forced to ) A bancrupt OS in a time where every airline in the world fight even for a single pax ?

Indeed. If IAG was begging the Spanish state for cash to keep Iberia and Vueling running then they're not going to have the funds on hand to buy Austrian. And no-one is going to lend an airline group money for an acquisition in this climate.

zkojq wrote:

OTOH it would be a true testament to IAG's mismanagement if they had to get out the cheque book and throw even more money down the drain to "fix" LEVEL Anisec - which itself was a lot of money thrown down the drain to fix Vueling's toxic brand reputation.

Should we also assume that the fact that IAG is the most profitable of the big 3 in Europe is also a true testament to their mismanagement?

fraT wrote:

They tried this before with Deutsche BA and failed. So I doubt they will try it again.

Deutsche BA was just a feeder airline back when BA stupidly believed all roads went through LHR. I would hope that IAG had better sense and created a real airline that flew to NA, Asia,.... nonstop from FRA and/or MUC.

jetwet1 wrote:

And go toe to toe with LH who have all the corp contracts locked down, no chance.

Are they really "locked down" or is it a case of LH having a monopoly in Germany?

IAG and Etihad have said they can be an ALTERNATIVE to OS should it collapse (by expanding Level in VIE in the case of IAG). They did not say they would take over OS so most of the posts in this thread are worthless...

I am surprised Etihad would be in the frame for any takeover (airline or services). It may be taken over by EK anytime soon the way it is going.
IAG (not BA) would certainly place LEVEL there but would not gather any favours from the Austrian Government since they would lose their flagship in exchange to a cheap LCC.

LH treats OS as a feeder really and it is past the time OS got shot of this and went away but they have no resources on their own.

The Government should try to prize them away from LH's and maybe consider something involving another alliance that values VIE and OS better but who??