Archive for the 'SkyTeam' Category

Delta and Northwest Announce Merger

After month and month of speculation, with four US airlines going under or declaring bankruptcy in the last two weeks, Delta Airlines and Northwest Airlines have finally announced their merger late last night. When the news broke about a possible merger that Delta Airlines is a part of, it was about talks with United Airlines as we reported on the matter earlier. The final couple sounds a little bit more logical, with both of them being members of the same Airline Alliance (SkyTeam) and also sharing membership in the group of 6 SkyTeam members that were given antitrust immunity just last Friday, that allows for integration of their Trans-Atlantic flights under the US-EU Open Skies agreement.

Delta and Northwest planes in Atlanta, Delta\'s Hub Airport

One of the major issues (so far) has been the so-called seniority list of the ~11.000 Pilots at both airlines as the two Pilots’ Unions could not come to agreement earlier. The seniority lists guarantee special rights to Pilots who reach a certain level of experience flying for the airline and actually determines which planes they can fly (which influences their wages…). But if the two airlines merge their lists, the new, combined list may have more pilots with more experience that would move others lower in the list and they would lose or not get their advantages for a few years ahead… Looks like there is a conclusion on the horizon in this issue with Delta offering a pay hike for the pilots as a compensation. As The Atlanta Journal-Constitution published on Monday (14APR2008) “some people familiar with the matter say, Atlanta-based Delta will try to cut a deal with its 6,000 pilots, roll out the merger and then negotiate with Northwest’s 5,000 pilots afterward.

The deal could set off a series of other mergers, “rumours” say that United and Continental could be first in line and that combo would be bigger than Delta-Northwest, and analysts also say that American Airlines would probably intensify its search for a partner. “It’s a very difficult time for the industry,” Delta CEO Richard Anderson told Delta’s 50,000 workers Friday in his weekly “Right from Richard” recorded message. Roughly half are based at the carrier’s huge Atlanta hub. The airline is Georgia’s largest private employer.

The Atlanta Journal-Constitution has done a very interesting comparison in February when the Delta-Northwest tie-up was first revealed, you can read the numbers here. The new, Atlanta based merged DELTA Airlines will have an annual revenue of 35 billion USD, a fleet of more than 800 aircraft, and 75.000 employees worldwide. The new airline together with its regional partners would have a network of 390 destinations in 67 countries. “We’re announcing a transaction that is about addition, not subtraction, and combines end-to-end networks that open a world of opportunities for our customers and employees,” Anderson said.

by balint01

Atlanta Fighting For Delta

Last Friday’s (16NOV2007) edition of The Atlanta Journal-Constitution has published a group of articles related to Delta CEO Richard Anderson denying all the reports from a day earlier which suggested that Delta is in talks with Chicago based United Airlines about a merger.

Delta plane with Downtown Atlanta in the background (c by

Atlanta is surely interested in the possible merger news as it is the current headquarters for Delta Airlines and according to early reports the new merged airlines would have their HQ in Chicago, rather than in Atlanta. The two cities, which are 700 miles apart, reacted very similarly to the emerging news.We’d fight like hell” said Paul O’Connor, executive director of World Business Chicago. “It’s personal. It’s a matter of pride.” Sam Williams, president of the Metro Atlanta Chamber of Commerce countered: “The commitment of Atlanta to keep Delta is unwavering,” he said. “It always has been and always will be: ‘Keep Delta My Delta.” He also added that the chamber is supportive of Delta merging with another airline “as long as the headquarters stays in Atlanta.

At about the same time Delta CEO Mr. Anderson went through some tough minutes last Thursday in the Congress in Washington, too. He arrived for a hearing about the awaited air traffic congestion over the upcoming Thanksgiving weekend, but ended up protecting himself and Delta against the merger “rumours”. During the hearing Representative Lynn Westmoreland (Republican from the state of Georgia) challenged Mr. Anderson to assure him that Atlanta-based Delta was not involved in merger talks with United Airlines. Mr. Westmoreland said he was “dissapointed to read in the paper” about the talks. He said he had also read a statement Delta released Wednesday denying that such talks were taking place: “I want to look at you eyeball to eyeball” and hear you deny it, too.I was as surprised as you were, ther are no discussions. There have been no discussions” replied Mr. Anderson. The congressman from Newnan recalled that he was a “ramp rat” for Delta, his daughter was a flight attendant for the airline, and his wife worked in marketing with Delta (!). He said Delta is part of the Atlanta family, and “we don’t want the family to move north. I’m asking you to keep the family informed.” If the talks are indeed happening, it puts Mr. Anderson in a very-very hard position, having an alumni Delta family as the Congressman’s own family… This could be very useful in any other ways, but if the talks are true, it is a misfortune for him personally. But it would be a big help for Delta’s more than 26.000 emplyees in the state (of Georgia) which includes 3.365 at the headquarters alone.

Even though I’m staying in Atlanta at the moment for a month and a half, let’s hear the other side, too as Chicago is also a tough contender in keeping an airline HQ within the city-limits. United can trace its roots in Chicago to the 1920s, and the above quoted Paul O’Connor also said “They are us.” The two airports have been in a rivalry for a long time to clinch the busiest airport title, Atlanta hosted the Olympics in 1996, while Chicago is pushing to land the 2016 Olympics and show itself to the world, just like Atlanta did 11 years ago. Not so long ago Chicago officials heard rumblings about United Airlines looking at real estate in Denver (possibly to move their offices), and they replied with USD 6 million of incentives to persuade the airline to stay and to shift executive offices from the suburbs to downtown Chicago. O’Conner said if the merger talks “firm up, we would do what we could do.” United has about 16.000 employees in Illinois, almost all of whom are in the Chicago area.

Despite the two cities and their business communities fighting already (without anybody acknowledging the rumours) some people have a different opinion. A consultant from Chicago interviewed by The Atlanta Journal-Constitution said: “At the end of the day, it wouldn’t matter as long as they were on time. They all at this point aren’t very good.” No further comment is needed on that one, I think, but “The Tale of The Two Cities Keeping An Airline Headquarter” seems to have started…

(based on the 16NOV2007 edition of The Atlanta Journal-Constitution)

by balint01

New Air India Merging Towards Star Alliance

India being the second most populated country in the world once had two big state owned airlines: Air India and Indian Airlines. The merger of the two airlines was approved by Indian state authorities earlier this year at the end of August, when the Ministry of Corporate Affairs issued its final approval to the application, thus establishing the new National Aviation Co. of India Ltd. that will fly under the Air India name.

Air India Logo

The merger of Air India and Indian will provide an integrated international and domestic footprint, which will significantly enhance customer proposition and allow easy entry into a global airline alliance,” the government said. “The merged airline has given them the opportunity to unlock significant synergies on account of optimal utilization of resources through improvement in load factors and yields on commonly serviced routes as well as deployment of ‘freed up’ aircraft capacity on alternate routes.

The merged carrier will operate a fleet of 112 aircraft, including seven new 777s, 10 A320 family aircraft and four 737-800s introduced this year. The parent company will comprise the mainline (Air India), an LCC called Air India Express, Air India Cargo (which is in the process of acquiring 737 and A310 converted freighters and plans to be operating 10 aircraft within the next year), and ground handling and MRO divisions that will “gain increased focus on the merged entity,” the government said. Each will be managed as a separate unit.

Only one week after the approval of the merger, the new Air India’s board voted to join Star Alliance, according to the United News of India news service and The Economic Times. A formal announcement about Air India’s entry into Star Alliance is expected in December 2007, highly-placed Indian civil aviation ministry sources said – according to The Economic Times. The agreement would come into effect early next year, enabling Air India to provide seamless connectivity to its passengers across the networks of all Star Alliance partner airlines. However, no other details were revealed, and neither the airline nor the alliance issued a statement.

With most of the European, American and Far-Eastern carriers being already enrolled in an alliance the markets left without proper alliance coverage include China, India, Russia, the Middle-East and Africa. India will now be Star Alliance territory, while they will soon have two members in Africa (South-African Airways and Egyptair as AirlineWorld reported yesterday) and also two Chinese carriers are bound to join Star in the mid-term. SkyTeam currently seems strong in Russia and also has a Chinese candidate, while oneworld has Dragonair operating in China as an associated member, but on the other hand has the only Middle-East airline alliance member: Royal Jordanian. It will be interesting to see where the big Russian carriers, the big Chinese carriers and the rest of the African and Gulf Region carriers will join in.

by balint01

Lufthansa Joins Others In Run For Alitalia

Alitalia had a board meeting a few days ago, regarding the potential sale of the carrier during direct negotiations with potentially interested parties, after the failed open tender earlier this year. The shortlist of six potential buyers was compiled following consultation with Citigroup and industrial adviser Roland Berger. 

The list comprises Aeroflot, Air France-KLM, AP Holding (Air One), Cordata Baldassarre, Lufthansa and TPG (formerly Texas Pacific Group). This means four out of the six potential buyers are from the airline industry. Aeroflot and Air One (and TPG) have taken part in the auction process earlier this year, but both withdrew after learning about the actual situation and state of the troubled Italian carrier, and Air France-KLM has expressed their interest some time ago as well. But Lufthansa has not yet previously taken part in any negotiations (at least not publicly). The Italian government wants to sell most of its 49.9% in AZ and asked Chairman Maurizio Prato, who was appointed in July, to identify potential buyers after its own selloff efforts failed.

“The board has resolved to carry out discussions to assess the interest” of the six identified parties, Alitalia said, adding that it intends “to complete such discussions in the shortest possible timeframe.”

Corriere della Sera reported yesterday that AF KLM is seeking to acquire an initial 15%-20% stake in the loss-making airline through a share swap and would consider a full integration only if the Italian flag-carrier’s earnings improve over the next 2-3 years.

Air France-KLM has previously said it would be willing to listen to any proposition Alitalia makes but would not do a deal unless it created value for the airline.

A Lufthansa spokeswoman said a partnership with Alitalia must make sense for both sides, adding the German airline was basically open for possible talks. Knowing how Lufthansa has turned around the troubled Swiss carrier, Swiss International Airlines, it would make sense to repeat the same procedure with Alitalia, but the Italian airline is in a much worse financial crisis and situation these days…

We will keep you posted on the developments

by balint01

Air France-KLM Preparing Bid For Iberia

Following earlier indications by British Airways, who are joining a consortium to bid for Spanish Flag-carrier Iberia, Air France-KLM has yesterday admitted that they are preparing to launch a bid for Iberia together with several Spanish companies, Madrid’s Expansion newspaper reported. The consortium likely would include investment firm Torreal and publishing house Grupo Planeta, which currently is the largest shareholder in Vueling Airlines (a Spanish low-cost). The AF KLM offer would keep 51% of Iberia in Spanish hands, allowing it to maintain its traffic rights for non-EU and US routes. In recent weeks, as Airlineworld has reported as well, AF KLM Chairman and CEO Jean-Cyril Spinetta has stated several times that the group is “studying” the Iberia dossier, while admitting that they will be open to Alitalia as well, would the Italians decide to talk to them.

British Airways is also planning a potential merger with Iberia though a consortium which would also probably leave 51% in Spanish ownership for the same reasons (flight rights) as AF-KLM.

It is really interesting to follow this story, that includes several players: Iberia – the bride, with fellow oneworld member BA and bigger rival AF-KLM in the role of the potential grooms! But knowing that AF-KLM is also considering proposing to the ripped-off Italian girl: Alitalia if she would express her interests… What a love-circle! 🙂

by balint01

CSA Czech Airlines Launches New Virtual Low-Cost Airline:

CSA Czech Airlines Logo CSA Czech Airlines, a member of the SkyTeam alliance since 2001 with an annual passenger number of around 5.5 million is going through a lot of changes these days. They are in the middle of a fleet renewal program replacing their Boeing 737s with Airbus A320 family aircraft, they are introducing a new overall visual presentation that includes the redesign of their downtown Prague sales office, new uniforms and just lately the introduction of a redesigned logo. Also as part of these changes, which are paving the road for a hopefully successful upcoming privatization sometime next year, CSA has launched a new low-cost airline:

Actually, the new low-cost airline is not really an airline, it’s more of a marketing tool, as they will not operate a fleet or any aircraft, or crew, they simply buy the unsold seats on the CSA flights and then sell those to their passengers. It is basically a separately branded, long-term seat-sale at the Czech National Carrier but instead of advertising low prices on CSA flights and open the CSA brand to a different, low-cost clientele, they have created a separate brand with fixed prices. So in reality, the new Airline is a simple website selling remaining CSA seats at low prices, nothing more, nothing less. But the idea is great! It keeps the CSA brand as an alliance brand with their focus on business travellers and frequent fliers, while the brand can serve a different market segment, while keeping the big brother “untouched”. Technically a similar solution has already been in use, with another Czech Airline: TravelService. They are a charter airline, but have launched a low-cost brand called SmartWings, which has a dedicated fleet and network, but also sells the remaining seats on charter flights operated by TravelService aircraft. But the CSA solution is new that it only does the later solution, it doesn’t operate a single aircraft! A Virtual Airline – we have joked about such an idea with my ex-colleagues at Malev, but never went farther than that. Well, CSA did, and it seems like a really good idea! website 

Tickets can only be purchased via the new website (which after all is THE airline in itself…):  You have to book and purchase your ticket at the same time, and as usual in case of an e-Ticket, upon sucessful payment you receive an email with all necessary details of your flight. They guarantee a low and final price of CZK 1990 (~EUR 72.10) for each direction, that includes all fees. Tickets then can not be changed or refunded, and have several other restrictions as well, such as spending a minimum of 3 days or a weekend at the destination, and you always have to buy a return ticket, one ways are not offered. They offer 36 European destinations (basically all European destinations of CSA – major airports, not 100 km’s from a city as a “normal” low-cost would do) and Cairo, Egypt, and on each flight the passengers will receive the same onboard treatment as if they had bought a regular Czech Airlines ticket (including refreshments and newspapers for example). (It would be funny if a flight attendant would go around with the trolley and give your neighbour a sandwhich and drinks, but would leave you out from the service. Just think about how much administration would be required so that the flight attendants would know who is a regular CSA passenger and which seat seats a Click4Sky passenger – not worth it from an operational point of view.)

CSA expects an annual extra revenue of several hundred millions of Czech Crowns and targets an around 20% of the Czech low-cost market within 2 years. Quite ambitious, but not impossible!

by balint01

Air France KLM Adds Alitalia As Potential Merger Target

Air France KLM Logo Air France KLM has once again admitted their interest in Iberia and Alitalia, which airlines are basically on sale. Iberia, the Spanish national carrier is profitable, but the shareholders wish to find a new owner to protect the company in the long run, while Alitalia has been making losses for long decades by now, and the government is forced to sell it, basically under any circumstances.

Air France KLM wants to grow, and now emphasizes it once again. They are already the biggest European carrier, but they want to move forward and wish to become a major driving force behind the ongoing consolidation of the European Airline Market.

Iberia logo Air France KLM Chairman and CEO Jean-Cyril Spinetta yesterday said in an interview with the Financial Times, that they are indeed studying a potential merger with either Alitalia or Iberia. He said AF KLM has held “informal” talks with potential Spanish financial partners (see earlier report by Airlineworld), though it is not yet in official discussions with Iberia. The cooperation with Iberia would be a little more complicated, but the Spanish carrier is in good financial shape at the moment, and is the leading airline between Europe and South-America. AF KLM are one of the leading members of the SkyTeam alliance, while Iberia is a founding member of oneworld. How they would solve this situation, is not yet known, it is probably one of the major issues in the ongoing evaluations. According to Spinetta: “We are in the phase of evaluating the potential for cooperation with Iberia.

Alitalia logo He explained that AF KLM declined to participate in the failed auction earlier this year for the Italian government’s stake in Alitalia because it did not believe the terms and conditions set for the sale were viable. But the situation has changed with the appointment of a management team led by Maurizio Prato, who initiated a new restructuring effort, which includes cutting back traffic at Milan-Malpensa hub, and has been asked by the government to sell the state’s 49.9% stake, he said.

If Mr. Prato wants to talk to us, we will listen carefully,” Spinetta said. “He has a clear mission to sell this stake, but how he sees this problem I don’t know.” He added that “the Italian market is very strong. There are huge business traffic flows and tourist leisure flows. The potential is very high.” And knowing that both airlines being members of SkyTeam, the traffic integration would not be that big of an issue in this case, but the financial situation is the one that would easily give a headache to AF KLM. Now, that several privatization attempts have failed for Alitalia, AF KLM may be in a better (and stronger) position to discuss a possible solution face-to-face with Alitalia, and Mr. Prato.

by balint01

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