mikey72
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VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:34 am

According to various newspaper reports VS has made an offer of £50M compared to IAG's offer of £100M with the hope that LH will prefer a quick sale. (Not so much regulatory involvement)

That's all very well but what precisely will VS do with all those slots etc if they acquire them ?
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 8:46 am

The VS offer has always been "on the table". As reported in another thread, the difference is that BA as a public company had to disclose their offer. VS didn't.

Personally, I think it would be better if BA won. They have deeper pockets, and they're going to need them!

Its been said many times before, but the only value is really in the slots, and even a large number of those are of no use on a long haul schedule.
So long 701, it was nice knowing you.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 8:56 am

Quoting sevenheavy (Reply 1):
Its been said many times before, but the only value is really in the slots

'only'.....that's refreshing. (this is still LHR we're talking about ??)
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:11 am

I didnt say they weren't valuable......the point is that not much else is.

Although, even LHR slots aren't worth anything like what they were a few years ago.
So long 701, it was nice knowing you.
 
skipness1E
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:31 am

Bididng so low that LH says no and so that they can maintain the myth of the plucky under dog against evil BA. They'd be screwed if LH said yes but given the duty to shareholders, can;'t see it happening,
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:45 am

Quoting sevenheavy (Reply 3):
I didnt say they weren't valuable......the point is that not much else is.

Well obviously. What's your point ? I'd say the pro's outweigh the cons for a UK based airline.
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
anstar
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:46 am

Quoting skipness1E (Reply 4):
Bididng so low that LH says no and so that they can maintain the myth of the plucky under dog against evil BA.

Bidding 50M makes sense... why overpay? I mean it would prob cost LH more to sell it for BA and go through the competition hoops in which time they would likely be loosing more than 50M.

Plus as I menaitoned in the other thread - VS have publicly said if the bmi deal goes through the mreged company would be in STAR...
 
Burkhard
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:22 am

LH can sell for any price with the same profit, only detail on page 658 of the contract how many slots they keep for themselves...
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:34 am

Quoting mikey72 (Reply 5):
Well obviously. What's your point ? I'd say the pro's outweigh the cons for a UK based airline.

Um....my point the bit where I said "the point is that not much else is"  

I do enjoy how you desperately look for non existent meanings in perfectly simple statements, but it does kind of get in the way of a grown up debate. Anyway, the fact it is obvious to you doesn't mean it is to everyone.

I also dont think anyone on here is yet qualified to say that the pros outweigh the cons for a UK based airline....unless you've seen BMI's books? Not much advantage to taking over an airline thats haemorrhaging money and only serves to suck valuable resource from its new owner. Sure, strategically it makes sense, although even then some serious reorganisation is needed, but how quickly will the new owner see a ROI, if ever?

Quoting skipness1E (Reply 4):
Bididng so low that LH says no and so that they can maintain the myth of the plucky under dog against evil BA. They'd be screwed if LH said yes but given the duty to shareholders, can;'t see it happening,

You might be right but there are at least a couple of other more likely scenarios. Again, easy to dismiss the deal as a joke, and maybe it is. But have you seen the terms of the deal? Do you even know that BA bid first? Maybe they heard VS were bidding and upped the ante to make things very difficult for LH. Many business analysts would consider £50m over the odds. Just because BA bid double it doesnt make them the smart ones. If I were LH I could see a good case for giving BMI away just to write off the liability!

Figures of £50m and £100m are very press friendly because they are easy for the public to digest. These are headline figures, nothing more. The devil is in the detail and I've yet to find anyone who has actually seen anything more than the headlines.
So long 701, it was nice knowing you.
 
skipness1E
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:41 am

Quoting sevenheavy (Reply 8):
Again, easy to dismiss the deal as a joke, and maybe it is. But have you seen the terms of the deal?

No I have not, I just cannot begin to fathom why any serious minded outside neutral observer could imagine a realistic plan to save BMI by merging into VS. It would be Pan Am / National all over again. The feed would be minimal, the cost wouold be astronomical and given VS already suffer from having tow different service levels under the same branding (LHR vs Everywere Else), throwing the confusion of BD into the mix would be commercial suicide.

However they used to know a good headline and PR opportunity when they saw one, however the net effect lessens as the years go by.
 
vv701
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:48 am

Most market prices are determined by supply and demand. Here we are talking today of approximately 700 BD weekly LHR slots. That is a pretty substantial supply.

Compare these 700 weekly slots with the following, the number of slots operated by the other five largest operators out of LHR as at the start of Summer Season 2011:

BA: 4,040
LH: 528
EI: 332
VS: 288
SK: 286

For any of these airlines - including BA - to absorb 700 additional slots is going to be more than a challenge. No airline - including BA - is likely to be able to operate 700 additional slots without suffering severe indigestion or continuing to operate for at least the medium term what are presumably BD's heavily loss making routes. And it would be a real challenge for VS to increase its LHR operations by around 250 per cent (from 288 to 1,000 weekly slots) while avoiding severe financial problems particularly in the current economic climate.

Of course an alternative would be for any purchaser to try to quickly sell off at least a significant proportion of BD's existing slots. But surely this would already have been seen as a possibility by any owner with, for example, the commercial nous of Lufthansa Group. And this is probably why Lufthansa Group quickly redistributed former BD slots to LH, LX and SN and then sold 6 daily LHR slot pairs to BA. In this way they reduced the BD LHR slot holding from the 1,090 weekly slots it had operated at the time it was forced to buy BD to the current estimated level of 700.

This raises a couple of significant questions. Why did Lufthansa Group stop there if there really is such a heavy demand for BD's "valuable" LHR slots? Why did VS (if it really needs additional LHR slots) not do what BA did and buy some from Lufthansa Group? (Here I assume that Lufthansa Group would look more favourably on an offer for slots from non-competitive VS than one from its direct competitor BA.)

Finally there is, of course, the Virgin Group's 49 per cent per cent partner in VS, SQ. Perhaps they need an additional daily LHR slot pair or two? But would they be happy with VS effectively purchasing an additional 50 LHR daily loss-making slot pairs?

Note: Excepting the estimated current figure of 700 BD LHR weekly slots all the above figures are taken from various reports on the Airport Co-ordination Ltd (ACL) web site. The figure of 700 is a (low?) approximation based on the ACL BD figure of 800 weekly slots at start of Summer Season 2011 while recognising the subsequent disposal of 6 daily slot pairs to BA (84 weekly slots?) plus other possible minor disposals.
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:53 am

Quoting skipness1E (Reply 9):
The feed would be minimal, the cost wouold be astronomical and given VS already suffer from having tow different service levels under the same branding (LHR vs Everywere Else), throwing the confusion of BD into the mix would be commercial suicide.

I kind of agree with you. Its a hell of a job, and I think maybe letting BA deal with it might just be the lessor of two evils. VS would probably pick up a few scraps out of the deal anyway with far less exposure.

Regarding branding, by this time next year (bearing in mind that next year would be a mess anyway!) VS will have a brand new product on ALL leisure aircraft. If anything the LHR fleet will overall be slightly inferior. The service levels have never (by design anyway) been different, its only the hard product (IFE, Premium seats, arguably economy seats although there's not much difference either way) that differs
So long 701, it was nice knowing you.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 11:20 am

Quoting sevenheavy (Reply 8):
Um....my point the bit where I said "the point is that not much else is"

Um....well it has always been about the slots.

Quoting sevenheavy (Reply 8):
I also dont think anyone on here is yet qualified to say that the pros outweigh the cons for a UK based airline....unless you've seen BMI's books?

10% of slots at LHR.....mmm again a refreshing approach. LOL - who gives a damn about the books ?

For BA this could be the only substantial opportunity for desperately needed expansion in the foreseeable future.

I'd say short-term losses are acceptable for the obvious long-term gains at capacity restricted LHR.

The pros outweigh the cons.

[Edited 2011-12-12 03:21:05]

[Edited 2011-12-12 03:31:02]
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 11:43 am

Quoting mikey72 (Reply 12):
who gives a damn about the books ?

Wow.....brilliant!!

Lets see, an airline losing £200m a year. A brand thats gone down the toilet. Constantly shifting strategy that has left it with a laughable network, and a confused customer base......but who gives a damn about the books because they've got a bucketload of LHR slots which, whilst valuable, are difficult to put a figure on and as mentioned by VV701, it may well be that there is not nearly the demand that some assume.

Maybe its just me........I'm sure companies get bought all the time without the accountants pouring over every little detail in the knowledge that there have been plenty of times in the past where a tiny detail has put the brakes on the deal, and even sunk previously healthy companies.
So long 701, it was nice knowing you.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 12:24 pm

Quoting sevenheavy (Reply 13):
Lets see, an airline losing £200m a year. A brand thats gone down the toilet. Constantly shifting strategy that has left it with a laughable network, and a confused customer base.......

It doesn't matter one iota what state BD, its brand, its strategy or its network is in. All BA are interested in are those slots becuase they are the only airline that can put them to good use at LHR.

Quoting sevenheavy (Reply 13):
but who gives a damn about the books because they've got a bucketload of LHR slots which, whilst valuable, are difficult to put a figure on and as mentioned by VV701, it may well be that there is not nearly the demand that some assume.

£100M for those slots is a bargain.

It's like refusing to buy the Mona Lisa at knock down price because she's in a scruffy frame.
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
LHRFlyer
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 12:48 pm

Quoting mikey72 (Reply 12):
10% of slots at LHR.....mmm again a refreshing approach. LOL - who gives a damn about the books

Of course the books matter.

Look at what happened to Royal Bank Of Scotland when it bought ABN Amro without doing a full due diligence!

The reason why the reported bid prices are so low is because the buyer will have to assume a lot of liabilities as well as the assets. Whoever buys bmi will have to do a lot of hard work very quickly to stem the losses and the cash drain from the business. A poorly integrated bmi has the potential to destroy a lot of value in the acquirer.
 
mcpcshowcaseHD
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 1:30 pm

I think its important that Virgin Atlantic get these slots. If BA get them they will simply be too dominant at the UK's only major hub which is unacceptable. I think Virgin Atlantic could really benefit from those slots too enabling them to expand to new destinations and become stronger as an airline.
by mcpcshowcaseHD
 
by738
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 1:40 pm

Quoting mcpcshowcaseHD (Reply 16):
If BA get them they will simply be too dominant at the UK's only major hub which is unacceptable.

Yet remains less dominant than LH, KL, AF at their respective hubs ?
 
sevenheavy
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 1:49 pm

Quoting mikey72 (Reply 14):
£100M for those slots is a bargain.

Indeed. It will come in really handy in paying off £1bn of debts, interest payments and anything else that could very easily be lurking under the surface. All BA or VS will be left with is £900m in costs!. Hypethetical, but entirely possible.

Quoting mikey72 (Reply 14):
It's like refusing to buy the Mona Lisa at knock down price because she's in a scruffy frame.

No, its like buying the Mona Lisa without even seeing it just because someone told you it was valuable, and then realising when it arrives on your doorstep that what you have in fact bought is a squashed dog turd in a fake gold frame.
So long 701, it was nice knowing you.
 
anstar
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 1:55 pm

Quoting BY738 (Reply 17):
Yet remains less dominant than LH, KL, AF at their respective hubs ?

Whilst BA are not as dominant as those carriers - does it make it right that they are so dominant?
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 2:18 pm

Quoting LHRFlyer (Reply 15):
Look at what happened to Royal Bank Of Scotland when it bought ABN Amro without doing a full due diligence!
Quoting sevenheavy (Reply 18):
No, its like buying the Mona Lisa without even seeing it just because someone told you it was valuable, and then realising when it arrives on your doorstep that what you have in fact bought is a squashed dog turd in a fake gold frame.
Quoting mcpcshowcaseHD (Reply 16):
I think its important that Virgin Atlantic get these slots. If BA get them they will simply be too dominant at the UK's only major hub which is unacceptable. I think Virgin Atlantic could really benefit from those slots too enabling them to expand to new destinations and become stronger as an airline.
Quoting anstar (Reply 19):
Whilst BA are not as dominant as those carriers - does it make it right that they are so dominant?

LOL - oh I give up, I simply cannot argue with any of that...IAG better withdraw their bid immediately and somebody better tell Sir Richard Branson too !
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
skipness1E
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 3:22 pm

Quoting anstar (Reply 19):
Whilst BA are not as dominant as those carriers - does it make it right that they are so dominant?

I think it depends, as ever on here the question is not clear.
I think once the operation is of a certain size, then BA is the best carrier to operate a route from LHR.
How many profitable routes are there from LHR with a BA monopoly?
Even then how many of them are routes that only BA could make pay?

No other European legacy is going to open a long haul hub from LHR. Virgin is in retreat as the real competition from BA now comes from her legacy European competitors and the gulf carriers. The fact that BA is a certain size from LHR is only relevant in markets where they dominate, like London - USA. They cerrtainly don't dominate in Europe, the Gulf, the Far East. Australia or Canada and South America.
 
slinky09
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 3:56 pm

Quoting VV701 (Reply 10):
This raises a couple of significant questions. Why did Lufthansa Group stop there if there really is such a heavy demand for BD's "valuable" LHR slots?

Perhaps it was the only way to make what's left of BD attractive to a buyer, I mean what would you offer for a loss making airline, who owns only three (is it 3 or a little more) of its aircraft, with the others on expensive leases, with losses running at £200m a year, with a pension fund deficit of whatever that is on top (£100m+) ... say it takes two years to integrate and turn around, that's an effective cost of say £700m plus? All conjecture of course, since none of us armchair CEOs have taken a look at the books. Oh I forgot:

Quoting mikey72 (Reply 12):
who gives a damn about the books

Too funny for words!

Quoting sevenheavy (Reply 18):
All BA or VS will be left with is £900m in costs!. Hypethetical, but entirely possible.

Well, the true figure may be nearer your guesstimate!

Quoting skipness1E (Reply 21):
I think once the operation is of a certain size, then BA is the best carrier to operate a route from LHR.

Ultimately I agree with you - if BA and VS were smart, they would have made a joint bid, VS does not need 700 slots, maybe a seventh of that would provide for all the growth it needs? This may have warded off any threat of takeover investigation up front.

Even with say a hundred slots a week, and with a supposed further eight A333s coming soon (or pulled from leases already made), together with better fleet utilization, VS could use them without taking on loss making parts of BD, could use the BD A330 certified crews to good effect, and could open up the new routes it wants, and bring back double dailies like HKG.

So why VS has gone for the whole mystifies me, it has no experience in running a BD-like operation here, BD's routes and timings are not optimal to feed VS long haul, it has no experience in integrating an acquisition, there are so many risks not even covered by the cash bleed (and where is VS financing that from). Perhaps VS thinks that if it does buy BD then it could keep a 100 slots and sell the rest for £50m to BA ... well that's what I'd do, get 100 slots for nowt   .

Quoting skipness1E (Reply 9):
given VS already suffer from having tow different service levels under the same branding (LHR vs Everywere Else)

Really, UC is the same across the fleet, food and drink is the same, PE has two seats, with normalization happening next year, the old IFE is being upgraded next year, etc. Would you say BA has a consistent service level in terms of the same seats, IFE, service on all short haul and long haul flights ... erm no. How many airlines actually do, all seem to have newer and older product as the evolve their cabin service, with upgrades frequently overlapping.
 
babybus
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 4:16 pm

Quoting skipness1E (Reply 4):
Bididng so low that LH says no and so that they can maintain the myth of the plucky under dog against evil BA.

I think you are so right. If they didn't put in an offer a lot of people would be asking a lot of questions. Such a low bid was to make it safely unacceptable to the seller.

I'm not a corporate lawyer or economist but I would think in these meagre times it would be better to dissolve an old carrier like BMI and start anew with cheaper staff and newer aircraft.
and with that..cabin crew, seats for landing please.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 4:31 pm

Quoting slinky09 (Reply 22):
Quoting mikey72 (Reply 12):
who gives a damn about the books

Too funny for words!

What's funny ? Who does give a damn about the books in this case ?

BA are doing everything in their power to get their hands on BD and VS are doing everything in their power to stop them ?

Why ?

With the situation being what it is at LHR I'm sure BA are prepared to take a pretty big preliminary financial hit on this.

It is obvious that nobody seeks to purchase a heavilly loss making company (let alone airline) without there being sizeable incentives.

I would much prefer LH to sell to BA but to be honest with the way things are going I will just be glad to see those slots (at the worlds busiest most congested international airport) back in the hands of a British based airline that can best serve the UK with them.

No matter what the outcome that will be the case.

 
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
LHRFlyer
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 4:40 pm

Quoting mikey72 (Reply 24):
What's funny ? Who does give a damn about the books in this case ?

See my example above regarding RBS and ABN AMRO. And there are three rules of airline economics:

1. Unprofitable growth destroys value.
2. Unprofitable growth destroys value.
3. Unprofitable growth destroys value.

If either IAG or Virgin, after completing due diligence, consider they can't turn around bmi, then they have a duty to their shareholders to walk away from the deal.

Bear in mind BA has acquired 8 extra slot pairs in the past few months, so there is still scope to grow at LHR, albeit at a slower pace.

[Edited 2011-12-12 08:41:25]
 
PezySPU
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 5:05 pm

Quoting Babybus (Reply 23):
Such a low bid was to make it safely unacceptable to the seller.

Or they simply couldn't afford a higher bid.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 5:13 pm

Quoting LHRFlyer (Reply 25):
See my example above regarding RBS and ABN AMRO. And there are three rules of airline economics:

Don't you think that's rather a dramatic comparison ?

RBS was run into the ground to the tune of tens of billions of pounds (for reasons we won't go into here ) along with every other bank on the planet.

Hardly a similar example to little old BD.

Quoting LHRFlyer (Reply 25):
1. Unprofitable growth destroys value

British Airways is in the unenviable position of having its base at LHR.

Playing the long game simply isn't an option for them when this kind of opportunity arises. It won't arise again.

With '''no possibility of a third runway''' it's a case of getting what you can get while you can get it.

In essence this '''is''' BA's third runway.
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
rampart
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 6:38 pm

I don't follow BA much. But, why must they grow to become sustainable? And why does this have to be at LHR? To the first question, the economics of continued growth seems to drive everything these days, but it is, ultimately, unsustainable. Growth can be seen in zero-sum, taking more passengers from competitors, and that can make sense and possible by improving service or some other enticement. To the second question, BA has plenty of room to grow at its partner-subsidiary hub at MAD, or can establish a new hub at BHX or any other secondary UK airport. LH does this in Germany. SK does this. All American airlines have more than one hub -- not all are concentrated in ORD or JFK or SFO. If the purpose is to grow with more transfer traffic rather than O&D, it doesn't matter if the transfer is in DFW or ATL, or LHR or EDI or BHX or MAD. Why is BA such a 1-hub airline?

-Rampart
 
1stfl94
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 6:45 pm

Quoting PezySPU (Reply 26):
Quoting Babybus (Reply 23):
Such a low bid was to make it safely unacceptable to the seller.

Or they simply couldn't afford a higher bid.

Or they might be waiting for the outcome of IAG's due dliligence. Don't forget that LH managed to push down the price of BMI when they took it over, so if IAG start negotiating their bid (at the moment it's only an agreement in principle), VS could be in a negotiating position.

That said I still don't think that combined BMI and VS is a good idea, if it was going to be done it should be have been as soon as SMB wanted to go longhaul.
 
commavia
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 6:59 pm

Quoting rampart (Reply 28):
But, why must they grow to become sustainable?

Growth, if it's profitable, is one of the most effective means means to deliver value to shareholders, which is why it is - generally - the objective of just about every profit-seeking enterprise (not just airlines) on the face of the earth.

Quoting rampart (Reply 28):
And why does this have to be at LHR?

It doesn't, per se, but since BA will always have its largest base and critical mass at Heathrow, and since London is in and of itself one of the largest and most important cities and air markets on earth, it seems logical for BA to attempt to grow their presence there.

Quoting rampart (Reply 28):
To the first question, the economics of continued growth seems to drive everything these days, but it is, ultimately, unsustainable.

Why need they be unsustainable? As global populations continue to rise (albeit at slower rates), and prosperity gradually spreads to more and more corners of the earth, growth is most definitely sustainable if the business is positioned well to take advantage of it.

Quoting rampart (Reply 28):
Growth can be seen in zero-sum, taking more passengers from competitors, and that can make sense and possible by improving service or some other enticement.

It's true that in a well-developed and "mature" air market like the U.K., organic growth is likely to be lower than in more rapidly-growing emerging markets like India, Southeast Asia, Latin America, etc. Nonetheless, that still doesn't mean that all growth has to be zero-sum.

Quoting rampart (Reply 28):
To the second question, BA has plenty of room to grow at its partner-subsidiary hub at MAD, or can establish a new hub at BHX or any other secondary UK airport.

IAG will most definitely be taking full advantage of the potential that Madrid represents. But, nonetheless, it doesn't mean IAG need ignore opportunities to grow at Heathrow. As for secondary U.K. airports, history has shown - repeatedly - that the regions simply cannot support full-service hubs for airlines with BA's cost structure. Manchester, Birmingham, Glasgow, etc. can certainly support tons of capacity - primarily focused on O&D, rather than connections - but none of them can fully capture the potential that Heathrow inherently has.

Quoting rampart (Reply 28):
LH does this in Germany. SK does this. All American airlines have more than one hub -- not all are concentrated in ORD or JFK or SFO. If the purpose is to grow with more transfer traffic rather than O&D, it doesn't matter if the transfer is in DFW or ATL, or LHR or EDI or BHX or MAD. Why is BA such a 1-hub airline?

All of those comparisons are highly flawed.

Lufthansa's home country is the largest - economically and demographically - in Europe, by a wide margin. And even with that, Lufthansa only has two true hubs.

SAS has three home countries, and has long attempted - some would argue uneconomically - to maintain "hub" operations in all three. Partly as a result, none of those hubs has the critical mass of a Heathrow, Frankfurt, Paris or Amsterdam.

As for comparisons to U.S. carriers, that is totally different. The U.S. is a massive country with a dispersed population and the world's largest and most powerful economy. U.S. carriers have multiple hubs across the country to cater to the huge traffic demand in their (massive) home market. Even the largest European (excluding Russia) country is absolutely tiny by comparison. And, as recent history has shown, there is little opportunity for European flag carriers to make any substantial inroads into other countries' home markets - for better or worse, Europe's flag carriers are seen as symbols closely identified with their home markets, which is why you generally don't see BA flying domestic in France, Lufthansa domestic U.K., etc. There is little opportunity for growth there outside of the "nationless" carriers with relatively more pan-European identities like Ryanair, EasyJet, etc.
 
mikey72
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RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:05 pm

Quoting 1stfl94 (Reply 29):
That said I still don't think that combined BMI and VS is a good idea, if it was going to be done it should be have been as soon as SMB wanted to go longhaul.

Well for one thing VS can drag this one out for a very long time.

It's 'no way AA/BA' all over again I fear.

Quoting rampart (Reply 28):
Why is BA such a 1-hub airline?

One surely has to be able to mature 1-hub (in this case your main hub) to a reasonable competitive level before thinking about creating another ?

BA is very quickly entering an era where it will have two highly profitable markets both in the west and now in the east.

It would be 'nice' if it could serve both equally from its main base without having to sacrifce one market for the other 'OR' its domestic operations.

To be able to remain in the same league as its nearest 'real' competitors this is imperative.

That is all.
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
skipness1E
Posts: 4662
Joined: Sun Aug 19, 2007 9:18 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:11 pm

Quoting rampart (Reply 28):
I don't follow BA much. But, why must they grow to become sustainable? And why does this have to be at LHR

Have a google. The hub at LGW was a massive loss maker, every route moved to LGW from LHR saw yields fall and the competitors at LHR reaped the benefits. Regional bases never made money in 30 years. There are very good commercial reasons as to why it must be LHR. That's a commercial reality.
 
anstar
Posts: 3172
Joined: Sun Nov 23, 2003 3:49 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:12 pm

Quoting 1stfl94 (Reply 29):

That said I still don't think that combined BMI and VS is a good idea, if it was going to be done it should be have been as soon as SMB wanted to go longhaul.

I dont think Bishop was a push over and he would have been asking way too much for any deal to have been worth it to VS. Whislt I believe they should have merged about 5-10 years ago - I still think a merger now makes sense.

Though it is a big step from VS to change froma point to point carrier to a network/hub carrier. Hopefully they can make ti work otherwise IAG will be the winner when the new co goes tits up!
 
loveofflying
Posts: 117
Joined: Thu Jan 11, 2007 6:45 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:21 pm

I would greatly prefer VS than BA.
Fly the DC10 before you can't!
 
richardw
Posts: 3168
Joined: Tue May 08, 2001 3:17 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 7:36 pm

Quoting rampart (Reply 28):
Why is BA such a 1-hub airline?

Because of economic viability, it really is that simple. If a BA hub at MAN was viable, there would be one.
 
slinky09
Posts: 657
Joined: Sat Jun 06, 2009 5:03 pm

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 8:17 pm

Quoting commavia (Reply 30):
history has shown - repeatedly - that the regions simply cannot support full-service hubs for airlines with BA's cost structure

Ahh, and there you have it, BA's cost structure. Change that and you have a new paradigm. Which is why it is viable for say EK to fly three class one, two or is it soon to be three daily A380s out of MAN.

Quoting skipness1E (Reply 32):
There are very good commercial reasons as to why it must be LHR. That's a commercial reality.

See above, in my view BA, with all its advantages at LHR, and still not very profitable / making a loss, has radical overhaul to make it a future viable airline - think AA to see just what BA is or could soon become.

Really, with its size, it's service, it's predominance, and soon to be dominance, why can't BA make a decent profit? Is it because it has good competition, is it inefficient, does it have poor management, poor union relations, etc.?

I do think a competitor like VS should be given a crack at substantial growth because BA just about blows away every advantage it has. Still don't think it the right answer though.
 
skipness1E
Posts: 4662
Joined: Sun Aug 19, 2007 9:18 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 8:53 pm

Hey slinky, would you swap UAE Law for ours? Course not. Why do armchair experts want British workers to be paid less? So BA can hub at MAN? Have you any idea the cost base differential between CFE and BA? Between Open Skies and BA? If the LCY operation was any tighter it would twang! BA have already made cabin crew a job for young things at the start of a career with the introduction of Mixed Fleet but I hardly thing industry ts and cs being forced lower still is a worthy aim. Haven't we all dumbed down enough already?
 
theginge
Posts: 531
Joined: Wed Oct 25, 2006 1:53 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 8:54 pm

Quoting slinky09 (Reply 36):
Ahh, and there you have it, BA's cost structure. Change that and you have a new paradigm. Which is why it is viable for say EK to fly three class one, two or is it soon to be three daily A380s out of MAN.

The BA serving long haul from regional airports always comes around.... So BA fly multiple daily between Manchester and their hub, at Heathrow, with that logic why don't Emirates fly MAN-LHR?!

How many of those people getting on an EK flight at Manchester actually get off in Dubai? I would guess not enough to support 3 daily services....
 
mikey72
Topic Author
Posts: 1439
Joined: Tue Oct 06, 2009 1:31 pm

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:06 pm

Quoting slinky09 (Reply 36):
I do think a competitor like VS should be given a crack at substantial growth

They've been having a 'crack' at it for 25 years.
Quoting slinky09 (Reply 36):
BA just about blows away every advantage it has.

What advantages are/were they then ?
Flying is like sex - I've never had all I wanted but occasionally I've had all I can stand.
 
LHRFlyer
Posts: 1034
Joined: Sun Apr 11, 2010 12:50 pm

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:17 pm

Quoting slinky09 (Reply 36):
See above, in my view BA, with all its advantages at LHR, and still not very profitable / making a loss, has radical overhaul to make it a future viable airline - think AA to see just what BA is or could soon become.Really, with its size, it's service, it's predominance, and soon to be dominance, why can't BA make a decent profit? Is it because it has good competition, is it inefficient, does it have poor management, poor union relations, etc.?I do think a competitor like VS should be given a crack at substantial growth because BA just about blows away every advantage it has. Still don't think it the right answer though.

BA is profitable. It made a healthy operating profit in the 9 months to the year ended 31 December 2010 and IAG expects to double operating profit on a proforma basis compared to last year (and that's with Iberia being loss making).

BA will never have a cost base to match easyJet et al. It's a completely different animal, a network carrier operating all over the world with multiple channels to market. However, it's now a much leaner organisation than it used to be. Head office numbers have been rationalised (and continue to be rationalised post IAG merger). Ground staff numbers have fallen significantly post the move to T5 and working practice changes have delivered a quantum leap in operational performance. Pilots and engineers have also gone through reforms over the years. Cabin crew proved to be a sticking point but management managed to push through changes.

What hurts, like all carriers, is the oil price.
 
sam1987
Posts: 550
Joined: Tue Jul 19, 2005 11:27 pm

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:20 pm

Quoting BY738 (Reply 17):
Yet remains less dominant than LH, KL, AF at their respective hubs ?

.. and this is what VS need to realise. Any competition commission interference needs to compare IAG's slot portfolio at LHR with the other European carriers at their home hubs. VS and BD equivalents don't really exist at FRA, AMS and CDG.
Next flights: LGW-LBA-LGW, LHR-SIN-SYD, SYD-BKK-LHR, LGW-GRO, GRO-CIA, CIA-MAD, MAD-LGW
 
David_itl
Posts: 6399
Joined: Wed Jun 27, 2001 7:39 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 9:40 pm

Quoting theginge (Reply 38):
How many of those people getting on an EK flight at Manchester actually get off in Dubai? I

And how many of the BA passsengers get off at LHR then? Lots of premium pax going long-haul carried by lots of airlines operating ex-MAN (EY have been quoted recenty roughly a third travelling business if I remember correctly with 2 more dailiy services due in the next 5 years, EK going 3-class on all services with the 2nd A380 and 4th daily by the end of 2013). Highly unlikely that it's going to be 1 connecting passenger only to a city.

As for the VS/BD link-up, we know that they'll have the slots for 4 new routes to launch without taking into account the BD route structure as they've previously said that MAN-LHR will disappear. Won't be too bad a thing for MAN given the increasing Star presence. But it does make it rather more interesting that VS has a number of LHR slots that they're not using themselves, so BA could say that there's no guarantee that VS will be using them so it's not in the national interest for VS to have them.
 
theginge
Posts: 531
Joined: Wed Oct 25, 2006 1:53 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:15 pm

Quoting david_itl (Reply 42):
And how many of the BA passsengers get off at LHR then?


Probably a similar proportion to who don't get off in DXB!

Quoting david_itl (Reply 42):
As for the VS/BD link-up, we know that they'll have the slots for 4 new routes to launch without taking into account the BD route structure as they've previously said that MAN-LHR will disappear. Won't be too bad a thing for MAN given the increasing Star presence. But it does make it rather more interesting that VS has a number of LHR slots that they're not using themselves, so BA could say that there's no guarantee that VS will be using them so it's not in the national interest for VS to have them.

I would guess that VS not using their own slots will form part of any IAG argument to the competition authorities.
 
deltaflyertoo
Posts: 1499
Joined: Tue Nov 14, 2000 3:18 pm

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 10:47 pm

I can't believe VS put 50M vs. BA's 100M and is now crying victim over all this. IMO VS is such a joke. I used to think they had the best marketing of anyone and were on their way to the top but now it seems like most of their press is winy at best and always playing like they are the underdog when I see its their own decisions that put them there. I remember 15 years ago when they ran the "No Way BA/AA" campaign. If they had insight into it THEN, they should have made proper preparations now. From what I've read, they have given valuable Heathrow slots up in past and don't fully utilize the ones that they have now. And why aren't they in an alliance, Branson makes big stink about hiring third party consultant to look into it, how hard could it be, its Star or Skyteam. And they should have joined one 10 years ago.

Over the past 15 years they could have easily been grabbing slots where they could, set up a small narrowbody fleet and fed LHR from at least the big European capitals.
 
sevenheavy
Posts: 944
Joined: Tue Mar 23, 2004 3:30 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 11:13 pm

Quoting deltaflyertoo (Reply 44):

Nice rant, but in terms of relevance to this thread it's a bit bizarre. Where does it say they are crying victim? They are making their case just like BA, as they are entitled to.

As for the slots, I think you need to do more reading up. All slots are currently being used. Sure, they have given back a small number of less desirable slots, but this was during the recession when almost every other carrier was doing the same.

As for the alliance stuff, this same old argument gets regurgitated frequently. Joining an alliance is not nearly as easy a choice as you imply. The set up costs are huge, particularly for an airline the size of VS. It doesn't necessarily make financial sense.

Bash VS, or anyone else by all means. But do it with substantiated arguments, rather than just whinging about what a "joke" they are
So long 701, it was nice knowing you.
 
skipness1E
Posts: 4662
Joined: Sun Aug 19, 2007 9:18 am

RE: VS Makes Indicative Offer For BMI

Mon Dec 12, 2011 11:24 pm

The major airlines are in alliances with the exception of the gulf trio of majors and VS. In fairness perhaps VS are not a major airline.
 
deltaflyertoo
Posts: 1499
Joined: Tue Nov 14, 2000 3:18 pm

RE: VS Makes Indicative Offer For BMI

Tue Dec 13, 2011 12:22 am

Quoting sevenheavy (Reply 45):
Where does it say they are crying victim?

I'm the one saying it, its a figure of speech, to mean always having an excuse for when things don't go your way and taking no action to correct it. And that is what VS is like. They are always putting press out there that BA is larger, bigger, trying to stomp them out. Well in the 1980s, yeah that was the case. All I'm saying is every year since then where have they been? In 1995 they knew then a possible AA/BA alliance might go through, its going to be 2012 and they act shocked now that it happened. This IAG thing, they should have known BA was working w/ much more cash and been prepared for this.

Quoting sevenheavy (Reply 45):
Joining an alliance is not nearly as easy a choice as you imply. The set up costs are huge, particularly for an airline the size of VS. It doesn't necessarily make financial sense.

It takes money to make money. If it doesn't make sense for VS due to its size, then maybe a real conversation needs to be had within at VS about what it means to be VS and where they are going. But trumping Branson around who's always making promises and objections (i.e. AA/BA and IAG buy of BMI) or how he's going to get an A380 when even back then it was obvious VS wasn't in a place to do it financially or capacity wise, its getting to be a bit outrageous. I speak from media and press only, maybe on the inside things are changing but on the outside, what they say, they give this impression.

Quoting skipness1E (Reply 46):
As for the slots, I think you need to do more reading up. All slots are currently being used.

Wasn't aware of this, however I questions why after over 25 years they don't have a more diverse portfolio.
 
skipness1E
Posts: 4662
Joined: Sun Aug 19, 2007 9:18 am

RE: VS Makes Indicative Offer For BMI

Tue Dec 13, 2011 12:32 am

Slots are held as use or lose. The active VS slot holding is decreaaing.
 
skipness1E
Posts: 4662
Joined: Sun Aug 19, 2007 9:18 am

RE: VS Makes Indicative Offer For BMI

Tue Dec 13, 2011 12:32 am

Slots are held as use or lose. The active VS slot holding is decreasing.

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