Scrooge McDuck

LH used to have LH Italia and they stopped it as they lost lots of money on it. Taking AZ is not necessaritly wise as AZ already had some kind of re-start and it did not make it a profitable business. AZ's problems with work unions, over-staffing, ... is not easy to solve - if possible at all. So, why burn lots of money and management effort on AZ when both might be better used somewhere else in th LH group. Besides, taking AZ might really have some problems with European antitrust rules as AZ as AZ will be much larger than the remaining AB and AZ will have to move from SkyTeam to *A. AF/KL will heavily resist.

Moving AB from OW to *A is not so much of a problem as AA is already rather dissatisfied with AB. If LH will take any kind of AB, then a move to *A makes a lot of economic sensse and does not really hurt OW.

TPJ

[QUOTE=Scrooge McDuck;27650446]LH used to have LH Italia and they stopped it as they lost lots of money on it. Taking AZ is not necessaritly wise as AZ already had some kind of re-start and it did not make it a profitable business. AZ's problems with work unions, over-staffing, ... is not easy to solve - if possible at all. [/rQUOTE]

AZ is losing EUR 0.5 million a day. Do you really think LH can either pay for these loses (from what other business units make) or make AZ a profitable business? I do not think so... Yes they were successful with SN, but I think it was because SN merged with low cost Virgin Express (even before LH stepped-in) and adopted VX business practices. I do not see it happening - AZ already merged with profitable Air One and is still losing money.

Phoenixtinct

Sorry but I have to disagree - unlike *A and ST, OW has a problem with European coverage. Yes, you have some IAG airlines and Finnair for Western Europe but AB is the only OW airline providing Eastern European coverage. Yes, they are not a typical OW member and I'm not quite pleased with them as well but I'd rather have them in OW than not. *A has a bunch of small European airlines and LH itself provides good connection options, ST has TAROM , OW only has AB and to an extent, Niki. Now, I read that the plan was to fold Niki into a JV with TUI but leave AB standing even though it may not be in its current form, so can't agree that a move from OW to *A is not so much of a problem. It definitely is but if it's a matter of viability, of course, everything should be done to preserve as much as possible of AB/Niki even if that means selling it to a competitor. Don't understand the BoD of EY - surely, all the investments made by Hogan couldn't have happened without their approval, so to now get rid of him as a scape goat doesn't make sense.

Scrooge McDuck

Correct me if I am wrong, but my understanding is that Niki is merged with TUI and will mainly serve holiday charter business. There is not much left for OW from Niki. AB will lease quite a number of their planes to the LH group which leaves a pretty much stripped AB which intends to keep business travellers across the Atlantic - in competition to AA - and some other long distance flights. There is not much traffic left within Europe AB will serve.

Wtravel

SN probably also had and has the advantage of relatively stable business/fares, given European Union administration travel to/from Brussels...

Wtravel

Not quite. If one does the math based on what has been communicated so far, it seems AB would be left with an own fleet of 40 A320 family aircraft and only 17 long-haul A330s (plus the Q400s), so they would still have to operate a substantial number of European (feeder?) flights as AB. It is also questionable if that kind of network and scale can be operated in a sustainable stand-alone manner. Realistically they would need to be embedded in something bigger European, and that is where LH comes in again. For LH it is probably just a question of structuring a possible deal in a way that they can limit their exposure.

Phoenixtinct

That's what I'm aware of as well - the plan was and probably still is to lease all non-DUS and non-TXL routes to LH/EW and focus only on hub flying. Those long haul flights have to be filled somehow. It's not worth having an airline for a few destinations in the US. With all the Norwegian, WOW and other competition, I doubt that the market is that lucrative on its own. But time will tell what ends up happening with that LH deal.

Dieuwer

How about letting AZ just go bankrupt.

MeltingAlf

They might indeed, but that would leave a very big hole in Italian intercontinental routes.

If that's the case, and since QR is about to take a 49% stake in Meridiana next month - we might just see Meridiana emerge as the chief Italian carrier by the end of next year.

ralfkrippner

IMO this is the only possible way with all the legacy issues that AZ brings like workforce/union burden.

Of course everything that might be profitable if done in a way compatible with todays airline market/competition might rise again out of the ashes as a new airline or a business unit of one of the big european or MEA-players.

ralfkrippner

Well, what's left of AB if you subtract
- non DUS/TXL routes (EW)
- holiday/beach-routes (TUI)
- longhaul routes (LH/EW)?

Just a few routes from DUS and TXL to central and eastern european destinations without own longhaul feeder traffic and probably without OW-feeder traffic (AA not interested in AB codeshares anymore) and probably without the EY-business onward to AUH.

I don't think that this is enough to keep AB alive.

ralfkrippner

Todays news from german news magazine Der Spiegel:

Rumors about EY to suggest a trade:
- EY to set AB debt free
- EY to pay some addtl. cash
- AB to be sold to LH for 1 EUR
- EY to get about 10% of LHs shares

A similar trade may be possible for AZ, as Der Spiegel reports.

LHs reaction to the reports: We've quite some job to do with the integration of 38 AB jets and the opening of an EW base in MUC; anything else is pure speculation.

MeltingAlf

It would be good to know eventually if EY to get 10% of LH through additional cash expense or in return for AB/possibly AZ assets.

Though admittedly 10% of LH is pretty a big amount, for someone like LH that seems to be resisting the ME3 so hard. Maybe LH wants to recruit EY to its side.

Scrooge McDuck

I don't want to speculate on the LH reaction, but from the EY side this makes quite some sense as this would imply a *A membership sooner or later. The additional traffic would compensate the EY losses in the time to come.

flying_fozzy

I think there a good number of this parish that would be very happy if EY joined a serious global alliance. They will obviously have to get their $h!t together on many fronts though.