Sensation In Germany : DBA Takes Over LTU...

Beaucaire · Fri Feb 17, 2006 4:20 pm

Following media-reports in Germany,the smaller DBA will take over the majority in the Düsseldorf based airline LTU,by acquiring a 49,9 % stake so far held by the REWE retail group plus another 10 % stake from a bank.
This would create a major competitor to Lufthansa.
Should Air Berlin also join the conglomerate,it would build a formidable entity !
http://www.handelsblatt.com/pshb/fn/...00012,200040,1036463/SH/0/depot/0/

[Edited 2006-02-17 08:21:19]

Lufthansa · Fri Feb 17, 2006 4:25 pm

Holy cow, things are changing in Germany

Actually this could be good. LH could use a little competition in some areas.

Leskova · Fri Feb 17, 2006 4:26 pm

I absolutely did not see this one coming!!! I am stunned!!!

They're quite big as DBA/LTU combined already - but, you're right - if AB joined as well (which I don't really see, but I didn't see this either, so who knows) then LH might, for the first time, see some serious competition around here!

Let's see what happens...

Regards,
Frank

columba · Fri Feb 17, 2006 4:27 pm

Wow, first DBA made this huge Boeing order now this.
Interesting to see how the business model of LTU will develop at the moment you don´t know really where there are heading leisure carrier or business or low cost.

TriStar500 · Fri Feb 17, 2006 4:44 pm

Nothing is secure yet, so the thread title is misleading.

IMO this would be a major mistake on behalf of DI - the merger of two cripples does not produce a healthy person, as some near-fatal mergers in other branches have shown.

LTU932 · Fri Feb 17, 2006 4:56 pm

Quoting Leskova (Reply 2):
I absolutely did not see this one coming!!! I am stunned!!!

I fully agree. I'm really stunned about what has been happening at LTU to the date and DBA's plans to take over the airline. It would be sad to see them continue to bleed money for me, since my first and until now last transatlantic flights were with LT and I still have fond memories of flying with them.

Quoting Columba (Reply 3):
Interesting to see how the business model of LTU will develop at the moment you don´t know really where there are heading leisure carrier or business or low cost.

Maybe LTU should go back to the roots and focus on leisure flights only. I don't think that a business carrier model would be the right way for them. The Handelsblatt article says something about LT going back to focusing on longhauls. Maybe they should slowly expand in their German focus cities and bring transatlantic flights to places that are not DUS, FRA and MUC. A perfect example would be a possible return of transatlantic flights into HAM. I know they used to have such flights (though maybe they were merely charters) out of HAM, so why not take advantage of HAM as an alternate secondary hub or as a focus city?

LGW · Fri Feb 17, 2006 5:05 pm

Hi all,

Interesting news if true!

I done know the German charter market as well as the German forum members so this may already be happening or wouldnt work in the German market but wouldnt it be a good move for LT to focus on medium and long haul routes were there is less competition from low cost rivals, in particular AB?

Routes to the Greek Islands, Cyprus, North Africa and long haul services would surely allow the airline to avoid price wars which must exist on traditional short haul med routes

Cheers

Ben

TriStar500 · Fri Feb 17, 2006 5:14 pm

The big construction sites are still open and the huge problems of LTU and dba are not solved just because they are allegedly planning to combine their power.

It is easy to suggest a division of competences along the line "LTU - longhaul and leisure markets, dba - shorthaul and feeder" if you don't take the real life legal and financial situation into account. Is LTU supposed to "just" fire a few hundred or even a thousand employees, because they are now focussing on those markets, which have been suggested above? How is cash-strapped dba going to finance acquiring another 10-15 aircraft in order to strengthen their short haul business? Are LTU employees just going to work at the lower pay rates of dba without any form of resistance or blockade?

LTU and dba first need to settle their own individual problems before they can start to discuss fancy merger plans.

LTU932 · Fri Feb 17, 2006 5:29 pm

Quoting TriStar500 (Reply 7):
LTU and dba first need to settle their own individual problems before they can start to discuss fancy merger plans.

Well said! It seems that REWE just want to find the easy way out of LTU in some way. Sure, LTU has to find a way to get back into profitability, but maybe REWE should do much more than just handing out cash and hope for the best. Did REWE even put certain terms to LTU regarding the cash they are giving them to survive? I mean serious terms, not just something that could be viewed as Business as Usual.

[Edited 2006-02-17 09:39:14]

nudelhirsch · Fri Feb 17, 2006 5:36 pm

According to Handelsblatt it is Hans-Rudolph Woehrl, the major stockholder of DI who is investing in big shares of LTU.

First, this is not a take over by DI, although the connections are there...

Second, Woehrl so far did not do a bad job with DI and his influence might lead to a strong alliance.

There are private and corporate ownerships there, not to be mixed up... Wink

It will lead to Woehrl being somewhere in the board or leaderhsip of LTU but clearly is not a takeover by DI.

geizistgeil · Fri Feb 17, 2006 6:04 pm

This would be INCREDIBLE.

Woehrl indeet did a good job ad DBA, but I can not see the strategic background of such an action. DBA/LTU would become second largest carrier in Germany and displace AB. But, what for?

Only a perfect hub´n spoke network come to my mind. LTU for longhaul and dba as feeder. This could improve LTU´s performance.

!!!
Breaking news!

Radio news just reported: LTU confirms such plans!!!

LTU932 · Fri Feb 17, 2006 6:07 pm

Quoting Geizistgeil (Reply 10):
Radio news just reported: LTU confirms such plans!!!

I was expecting this. In the subject of the report from Der Spiegel, they pretty much made it look like a done deal.

geizistgeil · Fri Feb 17, 2006 6:33 pm

There will be a press-conference at 11a.m. (in half an hour), in which a new shareholder will be announced.
It seems, that it will be Intro, the holding company oh Hans-Rudolf Woehrl.

PADSpot · Fri Feb 17, 2006 6:43 pm

Well, I feel strange about that ... An airline with a bad cost structure (DBA) merges with another one with a bad business model (LTU, neither fish nor fowl ... ) .. I eat my hat if this is gonna be sucessful ...

cheers,
Jan

TriStar500 · Fri Feb 17, 2006 6:50 pm

Quoting PADSpot (Reply 13):
Well, I feel strange about that ... An airline with a bad cost structure (DBA) merges with another one with a bad business model (LTU, neither fish nor fowl ... ) .. I eat my hat if this is gonna be sucessful ...

I have the same reservations. For the sake of the employees of both companies and the strong need for an economically healthy domestic competitor against the LH Group, I hope that both companies will sort out their fragile situations. Maybe we will also see a replacement of Mr. Marbach at the top of LTU - a man, who might be popular with his employees, but who hasn't been able or willing to make the sharp unpopular cuts the company needs to survive.

[Edited 2006-02-17 10:52:32]

fd728 · Fri Feb 17, 2006 6:54 pm

Guten Appetit Jan!
As it has been stated before I think this is what both carriers need. They can help out eachother, one is carrying more pax by feeding and the other is making money with fuller long haul flights.
Great news!
Will be interesting to see what their fleet plans will look like. My guess is eventually 737s and A330s. But that is far away from now...
My 2 cents.
Regards, FD728

Chiguire · Fri Feb 17, 2006 6:58 pm

This is why I like a.net !

You get up early in the morning and the topics in a.net make you think that it is 1st April !

Mr. Wöhrl made a great job with NFD/Eurowings and dba. But I am not sure if it is a good idea to take over LTU.

This company is much more structured in the old fashioned way. Pushing through his ideas at LTU will be much much more difficult than at dba.
Cutting costs at dba was difficult - but finallly possbile because the employees were young, flexible and were afraid to loose their job. LTU staff would simply go on strike. They don't care about Mr. Wöhrl.

So either he has a revolutionary idea nobody else had before about how to turn this airline around or he will fail for the first time !

Maybe he reopens flights to Venezuela ?

pelican · Fri Feb 17, 2006 7:32 pm

This is the second big news concerning DBA within a few days. First DBA got a new investor and now their biggest sharholder buys the majority of LTU.
Is there a connection?

pelican

NumberTwelve · Fri Feb 17, 2006 7:33 pm

Quoting FD728 (Reply 15):
Guten Appetit Jan!

Time will tell if PADSpot will have to eat his hat - I highly doubt he has to.

StarFlyer · Fri Feb 17, 2006 7:45 pm

Quoting Pelican (Reply 17):
This is the second big news concerning DBA within a few days. First DBA got a new investor and now their biggest sharholder buys the majority of LTU.
Is there a connection?

You bet!

The investors strategy is probably to add value by building a large entity worth more than its business units (DBA, AB, LTU) would be if seperate. Once succeeded, the investor will float the company or sell it to an industry/financial investor, making a nice profit. Obviously this is a high risk operation, as cutting costs at LTU will be a major pain in the ar**. Nevertheless, I am convinced the German market is large enough for two competing carriers!

Cheers

S/F

sorayafaradiba · Fri Feb 17, 2006 8:04 pm

I am a little bit confused about Wöhrl!

LTU is somehow a big fish...

What is his strategy?

But LT and AB are about to cooperate. Does AB like the LTU-deal? On many routes AB and LT are rivals...

By the way AB and HF also cooperate (e.g. code share). Will this continue?
So we might have LH-4U-DE-EW and LT-DI---AB-HF?

dba4u · Fri Feb 17, 2006 8:29 pm

Quoting Geizistgeil (Reply 10):
But, what for?

In my opinion this is a great deal for both airlines. If they get relly strong connected dba can take over LTU's "City" routes and LTU can focus on leisure flights, where they've already got a strong brand. Plus I trust Wöhrl to make LTU profitable as he did with dba.

Chiguire · Fri Feb 17, 2006 8:44 pm

Quoting Dba4U (Reply 21):
Plus I trust Wï¿½hrl to make LTU profitable as he did with dba.

I think this will be much mor difficult. The LTU structure is different.

Quoting Dba4U (Reply 21):
In my opinion this is a great deal for both airlines. If they get relly strong connected dba can take over LTU's "City" routes and LTU can focus on leisure flights, where they've already got a strong brand.

I totally agree on that. LTU is known as leisure (charter) carrier and not as business airline or low cost airline. They have been doing a little bit of everything in the last months/year in order to find a place in the market where they can make money.
It they focus on leisure flights, leave such "adventures" as DUS-JFK etc. aside, they could be succesfull - just as Condor did in the past. Just out of DUS and maybe HAM (or/and Berlin).
Then they can leave the city trips for dba.
IMO they should also thing in stopping the short and medium haul flight to PMI, Greece etc., leaving only some profitable ones to dba.
Then they could really focus on the giant German longhaul leisure market.

columba · Fri Feb 17, 2006 8:49 pm

Since DBA will likely be the European feeder does that mean LTU will get rid of its A320/321s ?
I can think of that Woehrl will turn LTU into a longhaul airline and DBA will work as a feeder for them flying within Germany and Europe.

If Woehrl would turn LTU in a longhaul airline would this mean the end of the classic leisure charter flights of LTU to Mediterranean destinations ?
I think it will besides there are too many airlines serving that market as it is.
Air Berlin will continue their dual strategy of offering low cost and charter flights in code share with Hapag Fly.
Condor/Thomas Cook will continue as Lufthansaï¿½s charter subsidiary flying to the Mediterranean and longhaul flights to the Caribbean Florida, etc...
Also low cost carriers such as Easyjet have taken away a huge share from classic "holiday airlines" such as LTU.

nudelhirsch · Fri Feb 17, 2006 8:59 pm

I could imagine Woehrl to establish a codeshare and FFP within the network.
To succeed he cannot just combine things, he will have to create a new network.

PanHAM · Fri Feb 17, 2006 9:08 pm

Smart move. Still too early but from what is on the news dba will fly German domestic and LTU European and long haul.

More important, for the first time in many many years (and that includes the SR ownership), LTU will have a majority owner who is not only interested in the development and the turn around of the company but who has the expertise as wellas the money to do that.

SR was only interested in building an empire and offload surplus Airbus orders after stripping LTU of their assets, the proceedings went into the Swiss coffers and laid the foundation of LTU's present malaise.

West LB got involved by order of the State Govrnement and was never interested in running an airline. REWE is a retailer and does not understand that there are products which are even more perishable than the produce oin their shelves.

Good news for LTU empleyees, they may have to get aquainted with new contracts and less pay or longer working hours. They should agree because the new ownership means that their jobs are a lot more secure as of today.

Orion737 · Fri Feb 17, 2006 9:40 pm

I think LTU should focus on charter flights and move away from its scheduled ambitions. I think their problems lie from trying to be all things to all people. They have lost sight of what they do best, providing good quality charter flights to holiday destinations for tour operators.

While its true that the LCCs have captured some of the traditional charter market to the likes of PMI and AGP, the Greek Islands, Turkey and Canary Islands are all largely free of LCCs so charter airlines can still exploit this market, which they have laregly to themselves.

Flying-Tiger · Fri Feb 17, 2006 9:56 pm

I wouldn't be so sure about the 737s to stay. dba's order is only for 10 -700 plus 30 options/purchase rights, so basically a small order. In terms of streamlining the fleet, especially should Air Berlin come to the table as well, the A32X has the better cards. The 737 days at Air Berlin are numbered, to be replaced by A320s. No big deal for them to divert some to DI or to excercise some of the existing options to have one standardized fleet.

UA933 · Fri Feb 17, 2006 10:06 pm

Does anybody know if LTU will after the purchase be dba still only be allowed to grow by 1 aircraft per year?
This restriction was put into place after swissair went down and LTU was helped by sb.

Beaucaire · Sat Feb 18, 2006 5:10 am

The way I read Wôhrl in his interview with " der Spiegel" - he is going clearly after LH. He hints that LTU could offer first class service to the USA for half the price of LH's tickets.
This might be in indication that his goal is to set up a global airline not just offering Low Cost but also premium services at discounted prices.He's a brillant strategist and can do it !Merging his DBA as a feeder into Longhaul flight from Germany might just be a first step,with aircraft based outside Germany under an LTU umbrella name following.
Hans Rudolf Wöhrl might be good for other surprises ,now that he seemingly has found a deep pocket partner.

N1120A · Sat Feb 18, 2006 5:16 am

I am really hoping that this suceeds and doesn't sink dba. I flew them into THF last summer, which was cool enough given the cuts in service to the historic air field, and their service was the type that all the EU LCCs should be offering.

A342 · Sat Feb 18, 2006 5:22 am

DI leases aircraft from Germania which is, so to speak, now in the hands of AB. AB codeshares with Niki and I believe they also codeshare with HF. Now DI basically takes over LT.

WHERE THE HELL WILL THIS END ???

N1120A · Sat Feb 18, 2006 5:38 am

Quoting A342 (Reply 31):
DI leases aircraft from Germania which is, so to speak, now in the hands of AB. AB codeshares with Niki and I believe they also codeshare with HF. Now DI basically takes over LT.

WHERE THE HELL WILL THIS END ???

With a true competitor for Lufthansa

Beaucaire · Sat Feb 18, 2006 6:00 am

Quoting UA933 (Reply 28):
Does anybody know if LTU will after the purchase be dba still only be allowed to grow by 1 aircraft per year?
This restriction was put into place after swissair went down and LTU was helped by sb.

This restriction was only applicable during the period of 49,9% ownership by REWE,due to a loan(agreement with the land of Nordrhein-Westfalen.)
I would assume the clause has become obsolete with new funding provided by Intra Holding.

PSA727 · Sat Feb 18, 2006 10:53 am

I used to fly them when it started out as Deutsche BA in the 90s.

It was great because it was a much cheaper alternative than flying LH
within Germany.

However, the LCC market in Europe, and especially in Germany, is a lot
different today than 10 years ago. And not in DIs favor.

DI still has a limited route network, whereas Germanwings and easyJet are
growing tremendously, as well as Air Berlin.

To put it mildly, if DBA were to stop flying, there are plenty of other LCC
alternatives to not even make it that noticeable if occured.

If LTU and DBA were to "merge", they basically need to collect their assets
and create a new airline, and not have a big airline and little airline under
the same banner.

N1120A · Sat Feb 18, 2006 10:59 am

Quoting PSA727 (Reply 34):
To put it mildly, if DBA were to stop flying, there are plenty of other LCC
alternatives to not even make it that noticeable if occured.

Actually, within Germany, this hasn't been the case.

TheSonntag · Sat Feb 18, 2006 11:09 am

Quoting A342 (Reply 31):
DI leases aircraft from Germania which is, so to speak, now in the hands of AB. AB codeshares with Niki and I believe they also codeshare with HF. Now DI basically takes over LT.

WHERE THE HELL WILL THIS END ???

Sounds like a Deutschland AG with wings. Not so bad if LH could get competition which manages to last.

BDKLEZ · Tue Feb 21, 2006 2:14 am

Monday 20 February 2006
DBA IN PARTNERSHIP WITH LTU

German airline DBA has purchased a 60 per cent share in charter company Lufttransport Unternehmen (LTU).

The collaboration is hoped to create a low-cost travel option which will compete with Lufthansa.

It is believed that LTU, which is based in Dusseldorf, will operate all international services and DBA will focus on domestic flights.

No plans of an official merger are believed to exist between the companies and the remaining 40 per cent of LTU will continue to be owned by Germany's Rewe group.

LTU released a statement on the deal saying that the two airlines' operations "dovetail ideally" in terms of their routes.

In 2004 the charter airline recorded an overall turnover of €852 million (£584.2 million) and flew 5.9 million passengers to destinations across the world.

Source: Adfero Ltd

Delta777Jet · Tue Feb 21, 2006 6:26 am

Things not so easy as they seems to be:

1.) LTU have negative numbers every year and every year somebody need to rescue them. They have further more expensive staff and all member in unions.

2.) DBA seems to be operational profitable, but the questions is if they are working according to international accounting standards ? Pilots just fly less hours and are members in this stupid VC union etc.

The main operational bases are MUC and DUS. However DBA is not operating so many flights into DUS to feed a lot of LTU flights and further more the airport system in DUS is quite expensive and slots are rare for a major expansation.

This means LTU will transfer slots at DUS to DBA and DBA will use them for german domestics, using the LT A320 equipment ?!? LT will give up some charters ex DUS and will concentrate on long haul using A330 equipment. Eventually DBA will replace the Fokker 100s leased from Germania with the A320 coming from LT ?!? The initial winner would be Air Berlin for the holiday flights out of Duesseldorf area.

Its a nice idea, but I doubt it will function because LH will not be happy to see this kind of changes and can react with a very hard and strong attack to protect their long haul segment as well as their domestic network, even if they did this not before. Further more I can not really see any advantage to use DBA,LTU on long haul ?!? The operational costs are around the same for all airlines, specially on long hauls and passengers want that little extra miles on their Miles & More account.

I hope DBA have deep pockets !!

cheers

Humberside · Tue Feb 21, 2006 6:33 am

Where does this leave dba's international routes. Would they be operated by dba still or by LTU?

TriStar500 · Tue Feb 21, 2006 3:58 pm

Some sort of route interchange, be it on a temporary or permanent basis, is bound to happen. The CEO of LTU mentioned that the cooperation with dba would facilitate putting the right aircraft onto the right route, i.e. there is no longer a need to fly a half-empty A320 through Europe if you can use a Fokker 100 or B733 instead.

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