Posts Tagged 'Swiss International Airlines'

Lufthansa Shopping Around Europe

Lufthansa Logo

Lufthansa, the German flag carrier has been one of the most successful airlines in Europe in recent years and a leader in the Star Alliance. They have made very strong relationships with the other European Star Alliance members by sharing loyalty programs (pushing through their own Miles & More program to be used by others), promoting strong code-share agreements, etc. They have also assured to have an insight and some influence over at least some of their fellow European Star partners by having minority stakes in British bmi and the Scandinavian SAS. Lufthansa has also made a strong partnership with Italian Air One in 2000 – this is a nowadays often heard name, as Air One is merging with the nearly-collapsed Alitalia to form the new Italian flag-carrier.

Swiss logo 1. SWISS International Airlines (2005)

Other European carriers may have also had some similar agreements in place, but no minority ownership in other airlines, until only a few years ago. Then in 2004 Air France merged with KLM, creating Air France-KLM and created the world’s largest Airline in terms of annual revenue in those days. As an answer, Lufthansa purchased the bankrupt Swiss International Airlines in March 2005, which was also officially communicated as a merger, but in reality it was a take-over by the Germans. Swiss has been turned around and is making profit these days – thus it is living proof that Lufthansa may be very successful in acquiring other airlines and merging them into its extended line of subsidiaries that contain smaller, regional partners such as Air Dolomiti, Lufthansa CityLine, Augsburg Airways just to name a few. Obviously Swiss became a much bigger subsidiary than these others by keeping its own brand and identity but sharing the coherences.

JetBlue logo

2. jetBlue (2007)

Then, two years after the succussful Swiss take-over, Lufthansa began airline shopping in late 2007. First it purchased a 19% stake in the American low-cost airline, JetBlue and announced extended partnerships.

Brussels_Airlines_Logo3. Brussels Airlines (2008)

But in 2008, Lufthansa really shifted gears and became the main advocate and driver of airline consolidation around Europe. Basically any airline sales that have happened this year, included Lufthansa as a potential buyer at some point, but more interestingly in a number of cases they turned out to be the actual buyers. On September 15 2008, Lufthansa announced a relative surprise 45% stake acquisition in Brussels Airlines, just two weeks after the first rumours of such a tie-up. It is interesting as Brussels Airlines has not been a member of Star Alliance (has been an outsider to any airline alliances actually), and is a result of a merger by itself, that happened not so long ago. In 2006 SN Brussels Airlines (replacement of the earlier bankrupt Sabena) merged with Virgin Express, a Richard Branson owned low-cost carrier to create the largest Belgian airlines. Lufthansa now owns 45% of it, but has an option to purchase the remaining 55% by 2011. Brussels Airlines is bound to gain full membership to Star Alliance in the coming years as a result. During the merger process it was revealed that Brussels Airlines was also in talks with British Airways, but that deal has fallen through.

Over the course of 2008, Lufthansa was also mentioned as a potential buyer of SAS, or its subsidiary in Spain: Spanair. They are both members of Star, so it would have been a logical step. (The Spanair interest has been expressed already in 2007 as we reported.) However, a Spanair flight suffered a very bad, deadly accident on August 20th, 2008, following of which Lufthansa seems to have given up on purchasing the SAS lead airline group that fell into heavy losses after the accident.

bmi logo4. bmi (British Midland) (2008)

But let’s not forget the large UK market, where as said earlier, LH has held a minority stake (30%-1 share) in the second largest local player on the market: bmi. The current majority stakeholder, Sir Michael Bishop has 50%+1 share, with the remaining 20% being owned by the Scandinavian SAS Airlines group. Lufthansa is planning to purchase the stakes of Sir Bishop (who expressed his intentions of selling his stakes to the Germans in late October, 2008), with which they would become the 80% owner of the second largest British Airlines, and the airlines holding the second largest number of take-off and landing slots at London Heathrow airport, the biggest European Gateway to North-America. This sale is expected at around GBP 314 Million, which at the time of the announcement was worth around EUR 400 Million. By the time the sale is concluded sometime in January 2009, it may cost less for the Germans due to the recent weakness of the Pound against the Euro. Having mentioned Sir Richard Branson’s name in connection with Brussels Airlines above, both parties have confirmed that should Lufthansa become the majority owner of bmi, he would very much like to link up the long-haul operations of his Virgin Atlantic Airways with the short and medium haul flights of bmi – to create a realistic competition to British Airways in the UK. Virgin Atlantic Airways President Richard Branson said in December that “talks will take place with Lufthansa, maybe are taking place, to see whether it makes sense for the two companies to work together,” the Associated Press reported.

Update: On 18MAY2009, the takeover bid has been approved by the European Commission.

austrian_airlines_logo5. Austrian Airlines (2008)

On the other hand, Lufthansa quickly turned its focus towards the recently loss-making Austrian Airlines, a long-time close Star Alliance partner. The Austrian Government was selling off the majority stake of its own flag-carrier over the course of October-November, 2008. There are some controversial details to the final bidding process where AirFrance-KLM had dropped its bid, but after all, Lufthansa was announced as the winner of this privatization effort. This sounds like a logical step, based on their long-time partnership. The deal is expected to be closed by January 2009.

Update (29AUG2009): It took much longer than expected, but finally on 28AUG, the European Commission has officially approved Lufthansa’s acquisition of Austrian Airlines Group. Lufthansa alleviated antitrust concerns by agreeing to reduce service between five European cities (Frankfurt, Munich, Stuttgart, Cologne and Brussels) and Vienna.

Update (05FEB2010): All remaining shares in Austrian Airlines Group held by minority shareholders have been transferred to Lufthansa subsidiary Osterreichische Luftverkehrs Holding by order of the Vienna Commercial Court. Share certificates are redeemable for cash compensation, Lufthansa said. In December it said it would pay €0.50 ($0.70) for each outstanding share. Austrian Airlines Group is expected to be delisted from the Vienna Stock Exchange soon.

germanwings logo6. Germanwings (2008)

Another late 2008 announcement saw Lufthansa taking full ownership of the German low-cost carrier, Germanwings (established in 1997), that was owned by Eurowings, a Dortmund based regional air carrier. To twist this story, Lufthansa has been holding a 49% stake in Eurowings since 2006 with full control as parent company, thus it was already partial owner of Germanwings before the announcement in December, 2008, that it will fully take it over as of January 1, 2009.

7. What’s next in 2009?

Looking at the dynamics of Lufthansa shopping around Europe for other airlines, we are sure they will continue in 2009. But what could be their next target(s)?

  • Alitalia
    The Italian flag-carrier is just being reorganized and the new owners are looking for a strategic partner, which could be either Lufthansa (given their strong relationship to Air One, it would make sense) or Air France-KLM (they have been cooperating with Alitalia and are all in SkyTeam). And let’s not forget that Lufthansa has been interested in Alitalia all along the long and rocky road to its privatization.
    Update (09JAN2009): Lufthansa confirmed that it did not make an offer for Alitalia in the end, and prefers to work with its Star Alliance partners in the Italian market. Air France-KLM will hold a minority stake in the reorganized Italian flag-carrier.
  • SAS / Spanair
    Given the earlier speculations and shared Star Alliance interests, a partial or majority stake exchange or merger could still happen between Lufthansa and SAS or SAS subsidiary Spanair.
    Update (02FEB2009): SAS has sold its 80.1% stake in Spanair for €1 ($1.31), leaving SAS with the remainder. This practically rules out Lufthansa buying the Spanish carrier, but would still offer the possibility for a stake in SAS.
  • LOT Polish Airlines
    The Polish government is planning to sell all or at least part of the national carrier of Poland that has been in Star Alliance and has been cooperating with Lufthansa for quite some time.
  • TAP Portugal
    We don’t know about TAP being up for sale, but would not be surprised if Lufthansa would simply buy the fellow Star Alliance member that would give them a much larger presence in South-America.
  • CSA Czech Airlines
    I wouldn’t bet on such a tie-up, but given the aggressiveness of the Germans, if and when CSA will be up for privatization, they may join the tender process, just in case…
    Update: Lufthansa had not turned in an offer for CSA.
  • Regional carriers
    There are a number of regional flag-carriers of smaller European countries that could theoretically be of interest to Lufthansa next year, such as those Star Alliance associates on the Balkans (Croatia Airlines and Adria Airways) or any of the small carriers in the Baltic states.

If Lufthansa will keep its course and will continue to be shopping around Europe for airlines in 2009, we’ll be here to keep you updated! And of course the other two major European players (Air France-KLM and British Airways) will also have to speed up their consolidation plans if they want to cooperate with any airline in Europe, before Lufthansa buys them all…

by balint01

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Lufthansa And Swiss Cooperate With myclimate.org

myclimate logo

myclimate, is a Swiss non-profit foundation well known as a leading provider of carbon offsetting measures combating climate change. Since 2002 climate conscious consumers have the possibility to make compensation payments to myclimate for man-made CO2 emissions and in this process are supported by an emissions calculator. Any volunteer contributions made are used to fund myclimate protection projects. These projects comply with the highest quality standards and contribute to the reduction of greenhouse gas emissions.

Lufthansa Logo  Swiss logo

At about the same time as the Qantas group announced their similar, separate green program, only two weeks ago myclimate launched a new initiative together with Star Alliance members Lufthansa and Swiss International Airlines. The airlines now offer their passengers the option to use myclimate’s offset solutions by adding the voluntary option to their website. There are dedicated websites set up for Lufthansa (http://lufthansa.myclimate.org/EN) and Swiss (http://swiss.myclimate.org/EN) enabling passengers to make donations for environmental protection after calculating their share of pollution based on their departure, transfer and destination airports. The branded websites include a slightly modified calculator that actually takes into account the fuel efficiency of the fleet of each airlines. I have made a trial, if I use the standard myclimate.org website’s calculator, for a return flight between Budapest and Frankfurt on economy class (business and first produce more emission according to the calculator…) I end up with 0.376 t of CO2 emission, while if I use the Lufthansa branded website (as Lufthansa has a more fuel efficient fleet than the industry standard), for the same return flight and same distance flown (1668 km) the result of the calculation equals only 0.278 t of CO2, which means a difference of -27%. If I would change planes in Zürich (and fly with Swiss, using the Swiss branded calculator) it would of course be a longer distance of 2183 km, with 0.482 t of CO2 emitted, which means 73% more emission than if I would have flown directly. Actually both branded websites show the same results for the same querries, with the same lower than average amount of emission levels.

Both airlines have chosen dedicated projects which they support from the money their passengers will pay to offset their emissions from their flights. Lufthansa and Swiss support two projects in Karnataka and Bihar in India, where emissions are reduced through the production of electricity from agricultural waste instead of coal and diesel.

René Estermann, managing director of myclimate has said: “The commitment of these two airlines will hopefully soon contribute to a significant increase in the number of air passengers who volunteer to offset their CO2 emissions. It is another small step in the right direction, namely to give CO2 emissions a value.” The above mentioned return flight which I used as an example for the trial (BUD-FRA-BUD) would suggest that I volunteer EUR 3 per flight for offsetting my share of pollution, which would be a total of EUR 6. Just flying between Zürich and New York (and back) for example would generate 1.238 t of CO2 and would require the passenger to pay a compensation of EUR 25.

Just an interesting calculation: if a business man flies to Frankfurt from Budapest twice a month (except for the Christmas period and summer holidays), the generated annual CO2 emission would be 0.278 t * 22 = 6.116 t (! equaling the weight of about 5 average size car from the Volkswagen Golf category!), and this amount of CO2 could be offset by paying a fee of EUR 132. I wonder if there are any companies that are environmentally committed so much that they are willing to pay for the offsetting of all (or at least part of) the CO2 emissions of their employees that is generated while sending them back and forth around the globe countless times every year?

by balint01


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