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Posts Tagged ‘Lufthansa’

Air France announced that it has agreed to pay 25% of stake in Italy flag carrier Alitalia for $432 million. CAI, the current owners of Alitalia seem pleased on selection of Air France – KLM over Lufthansa that had bid on the stake too.

From Mizozo.com

Alitalia declared bankruptcy on Aug 29th 2008 and has been subjected
to various suiters like Lufthansa, etc. The future of the airlines was
in grave danger esp. due to it past financial records and current labor
problems. CAI decided to combine Alitalia with Air One and get a
minority foriegn partner for which Lufthansa and Air France showed
interest.

Lufthansa’s Bid

Officials
from Lufthansa complained that they were not provided the required
information to provide a firm bid despite the fact that they were the
earlier of the suitors for buying the airlines.

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Yesterday, Deutsche Lufthansa AG‘s advisory board approved the acquisition of Austrian Airlines Group. The key details are as follows (mostly from ATW and WSJ) –

  • Luftansa will start with the purchase of state holding company OIAG’s share of 41.56% for $463,000 (€366,000).
  • For the remaining share it will make a “€215 million bid for Austrian’s remaining shares at €4.44 per share,
    subject to approval from Austrian competition authorities. The
    per-share price equals the average weighted market price over the past
    six months.
  • It will also issue a debtor warrant potentially worth up to
    €163 million, “depending on Austrian Airlines’ economic performance and
    the Lufthansa share outperforming its competitors.”
  • Lufthansa also plans to launch a tender to buy out private shareholders for a further €215 million.
  • The offer is contingent on the Austrain government assuming “€500 million of AAG’s approximately €900 million debt“. WSJ reports, “deal would require regulatory approval, in part because the Austrian
    government plans to spend €500 million helping to restructure the
    airline

Details about Austrian Airlines (from here)

  • Founded – September 30th 1957
  • First maiden flight – March 31st 1958 (Vickers Viscount 779 took off from Vienna for London, England via Zurich. Austrian Airlines was formed through the merger of Air Austria and Austrian Airways)
  • Headquarters – Vienna, Austria
  • Alliance – Star Alliance
  • Frequent Fliers Program – Miles and More
  • Hub – Vienna International Airport
  • Fleet – 41 (7 Airbus A319, 8 Airbus A320, 6 Airbus A321, 1 Boeing 737-600, 2 Boeing 737-700, 7 Boeing 737-800, 6 Boeing 737-300ER, 4 Boeing 777-200ER)
  • Misc – The armed monitoring of Austrian flights by Cobra
    (police anti-terrorist-squad of Austrian Federal Ministry of interior)
    began in 1981. During each accompanied flight at least two undercover
    armed air marshals are onboard.

A lot of people are a critical about Lufthansa’s buying binge.

Some analysts are worried –  “We are concerned that Lufthansa could be involved in too many deals,”
which could cause it to dilute current shareholders by issuing new
equity, Citigroup analysts wrote in August. Other outsiders worry that
Lufthansa’s management could get stretched too thin.”

I personally believe that it is a good time to buy and increase the network, esp. when the airlines are so cheap (post $150 a barrel and current recession period). Though, airline acquisitions are touch due to fleet differences, union issues, different work cultures and just different cultures.

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Europe’s second largest airline, Lufthansa announced that it agreed to buy 45% of Belgian Airline, Brussels Air for 65 million euros or $92 million. The German based carrier has an option to buy the remaining 55% of the company starting 2011 which might (depends on performance related factors in 2010) bring the total price to the deal for 250 million euros.There was earlier news that Lufthansa might be considering bids for Austrian Airlines, Scandinavian carrier SAS and BMI of UK.

From Bloomberg Article

Lufthansa’s CEO Wolfgang Mayrhuber told reporters that, that the carrier is becoming a “house of
brands.” He declined to discuss possible takeover offers.“Europe needs to have an airline system that can, in the
long term, compete with big systems that are coming up in Asia,
the Middle East and in North America,” Mayrhuber said. “This
is one step in going forward.”

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Last time pilots strike at Lufthansa over pay caused 44 flight cancellations. This time the strike caused to ground a quarter of the flights with 990 cancellations (465 domestic and regional flights on July 22nd and 525 flights today on July 23rd 2008). Lufthansa is offering the affected passengers to rebook on other flights or use their tickets to travel by train.

From Bloomberg

“Pilots at Lufthansa’s Eurowings and CityLine regional units
went on strike at noon in a walkout that will last until
midnight tomorrow, according to the Vereinigung Cockpit union.”

“CityLine pilots rejected an offer that would have raised
pay by a total of 5.5 percent in two steps and paid pilots a
bonus of 7,000 euros ($11,145) and co-pilots a bonus of 5,000
euros, Lufthansa spokesman Jan Baerwalde said. Eurowings offered
6.5 percent more pay in two steps and a bonus of 15 percent of
the salary, Lufthansa spokeswoman Claudia Lange said.”

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Luthansa (or Deutsche Luftansa AG), flag carrier of Germany and second largest airline in Europe, canceled 44 flights and delayed many more after its workers in Frankgurt, Munich, Stuttgart and Cologne walked off the job to press for higher pay raise. Lufthansa has earlier offered 5.5% raise in two steps instead of the union’s request for 9.8% which had resulted in limited strikes started on June 19 2008.

From Bloomberg
“Check-in and catering workers temporarily walked off the job
in Frankfurt and baggage handlers were on strike in Munich. In
Stuttgart and Cologne, engineers joined the walkout. The strike
began at 4 a.m. German time and lasted about four hours. All
employees have since returned to work, Stotz said.”

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Lufthansa, Europe’s second largest airline. has announced plans to mix biofuels with conventional jet kerosene as part of their environmental strategy.

Main points from their announcement –

  • Lufthansa intends to use as much as 10% biofuel (made from non-food sources, not algae) by 2020.
  • They also aim to cut carbon dioxide emissions per km flown by 25% by 2020

With the current market, by 2020 with a possible $1000+ per gallon, I am not sure if any commercial airline will survive. How about a nuclear power as currently used in space flights?

Current Initiatives on Alternative Fuels

  • Virgin Atlantic successfully flew a Boeing 747-400 (without passengers) from London to Amsterdam with 1 of the 4 fuel tanks filled with biofuel made of babassu pil and coconut oil. The test was done in partnership with – Boeing, General Electric and Imperium Renewables. (more read here)
  • Airbus with Rolls-Royce staged a joint test on Feb 1st 2008 of a gas-to-liquid fuel on a Airbus A380.

Seems like a Boeing-GE (US) vs Airbus-Rolls Royce (EU) race with the whole world to benefit :).

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Lufthansa (Europe’s second biggest airline) has announced that it is considering a stake in Austrian Airline Group after their Saudi-Austrian investor Mohamed bin lass Al-Jaber exiting the plans to acquire 20% of the group (He has agreed to buy 20% stake for 150 mil euros). Though, it is said that the carriers aren’t in talks.

Austrian Airlines is owned by “ÖIAG (39.8%), floating stock (48.0%), Austrian institutional investors (10.2%) and Austrian Airlines (2%)” (wiki)

More about Mohamed bin lass Al-Jaber (from here) –

  • #891 on the Forbes World’s Billionaires list
  • Worth – $1.0 bil (He is 48+ years old and self made)
  • Residence – Jeddah, Paris, London
    , Saudi Arabia, Middile East and Africa
  • More –

Founder and chairman of MBI International, a diversified group with
investments in luxury real estate and food. His hotel portfolio
includes some of the toniest addresses in Europe, such as Vienna’s
Grand Hotel Wien and the Berners Hotel in London’s West End. His AJWA
Industries is one of the largest processors of grain and vegetable oil
in the Middle East. Active philanthropist founded the MBI Al Jaber
Foundation which, among other things, grants scholarships to Middle
Eastern students to study conflict resolution at the City University,
London. Also serves as Unesco Special Envoy, actively promoting
educational reform in the Arab world.

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