[Hippocampus]

“Further PWC BMI’s auditors are questioning the possibility of IAG be able to run it as a going concern.”

This is not strictly correct. The auditors stated that the successful sale of the company was fundamental to the company being a going concern. If the sale does not complete by 31 March then either Lufthansa or IAG will have to provide further interim funding for bmi to continue trading and neither are under an obligation to do so.

If there is a long drawn out enquiry there is every possibility that the airline will simply be shut down.

[Henkel.Trocken]

I’ve wondered recently if LH might shut BD down and then auction the slots rather than put in more money as BD was the cause of the LH group making a loss last year and they must have an end to it.

That would make everyone happy except of course the BD staff but Branson would be able to put up his money and buy all he could possibly need – if of course he has the money….

LH might even do better out of a slot auction than they would from a sale to IAG.

[RichHI1]

Hippocampus comments based on FT statement “PwC, BMI’s auditors, said in January that several uncertainties surrounding the airline “may cast significant doubt over the ability of the company to continue as a going ­concern”.”
As you say if their headline is correct and IAG deal will scrutinized heavily with a demand for additional concessions from IAG then it will amount to the same thing.

[RichHI1]

I am unclear what the status of the slots is.Whilst the value of the slots whilst extant can be included on balance sheets, if the airline is closed down then are the slots assets to be sold or do they revert to be re-asssigned?

http://www.acl-uk.org/default.aspx?id=14

Also Henkel, one might obseve tha the UK players might not be so happy if there were to be outbidded by other carrriers from such places as the Gulf States, Asia.or Latin America.

[Hippocampus]

It depends on how the airline is closed down.

If Lufthansa simply cut bmi adrift and refused to provide further funding to leave it to go into administration then the slots would be surrendered and go back into the pool.

If Lufthansa sought an orderly (or as orderly as possible) close down then it could sell off the slots to the highest bidder.

The “known unknowns” with either of these options are the negative PR fall out from the close down of the airline with consequent impact on employees and customers and the cost of shut down from surrendering aircraft leases etc in the case of an orderly shut down.

By far the best option for all is a sale to an established group like IAG.

[RichHI1]

I think everyone would welcome a solution that provides the least financial loss to investors and the least job losses to employees. However as you observed if the EC demand higher concessions from IAG, where do you see the cut off point?

It would be obviously in IAG’s interest to position any bid collapse as the fault of the European Commission and avoid negative publicity themselves.

[Hippocampus]

What, in my view, would be acceptable to IAG is:

a) Providing slots to any willing entrant for routes where there will be a loss of competition

b) Agreeing to provide rival long haul operators feeder traffic on BA’s network at a particular rate

What wouldn’t be acceptable is simply a significant surrender of slots. It wouldn’t be worth the cost of acquisition and integration to IAG.

If the Commission proceeds to a full enquiry then I think IAG and LH will keep bmi going. I don’t see either side simply walking away having got this far.

[LPPSKrisflyer]

If there is a long enquiry, I doubt LH will keep funding BD and IAG would be taking a huge risk if they were to fund.

I don’t doubt that LH would make an orderly exit.

If the slots go to auction then it will be for the highest bidders to win or lose. LH won’t mind who gets them and I doubt really be bothered whether BA or VS get them or not, in fact they may prefer that BA don’t get them so some sort of first round that gives priority to *A carriers is not beyond the bounds of possiblity.

[LeTigre]

A slot auction would actually be pretty good for airlines like KE, QR and Hainan, etc., who want slots at Heathrow, it would be the first, fair, slot auction at Heathrow for years.

Bring on the competition, I can’t wait!

[Hippocampus]

If the slots went to auction, BA would be the biggest beneficiary.

One of the reasons LH could not turn bmi around is that the vast majority of its slots are only really suited for short haul operations, namely early departure slots and late arrivals. For long haul operations you need the exact opposite.

Consider that last year bmi sold 8 slot pairs at LHR and six of them went to BA. The remaining two went to Qatar and United.

BA has such a large portfolio of slots at LHR it can make use of any slot pair by changing schedules and doesn’t have the timing and aircraft utilisation concerns of inbound operators.

Also bear in mind that unlike other European hubs LHR has two home carriers offering fully flat beds on all long haul business class flights (unlike Amsterdam, Frankfurt and Paris) and is the first point of call for new aircraft and products for inbound operators, so there is plenty of competition.

[LPPSKrisflyer]

Actually you will find that BD’s slots are spread fairly evenly throughout the day. They have quite a high number of early morning arrival slots, around ten and a similar number of late evening departure slots. An afternoon arrival and early evening departure might suit e.g. TG if they wished to add a third service to BKK of KUL for MH.

If the slots go up for auction who knows who the bidders will be.

Funny but FRA seems to be doing rather well on new aircraft types, when is the first 787 due to arrive in London?

[canucklad]

Don’t know much about it. But having spent. Time queing for take off is an A319 slot different from a ” heavy slot”. Ie you can squeeze 2 BD A319. Departures into same timescale.as a 747 departure. Could this be more relevantt at peak times?

[Hippocampus]

Out of the total portfolio of bmi slots IAG is expected to acquire (56) 10 is a small proportion and to attract business travellers you need arrival slots early in the morning, not in the afternoon.

History has shown that even on the most lucrative LHR routes, if you don’t have the right slot timings for business travellers, the success of the route is far from guaranteed.

[PeterPR]

Following some posts on this thread I thought it might be worth passing on a tweet I got from bmi today:

“Due to inaccurate media statements, we’d like to confirm that we’ll be flying our summer schedule, you can continue to book with confidence.”

[LPPSKrisflyer]

What BD think and what LH think may of course be two different things and BD are well known for dropping routes at very little notice.

I often use the SIA arrival from SIN at about 15.00 as a business traveller. Needs vary greatly Hippocampus, we don’t all want early morning arrivals so slots throughout the day have uses too.

I don’t think there are any early morning arrivals from places like LAX, SFO or YVR and those routes attract business travel too.

I still favour an auction as the best way forward.

[Author]

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