I guess they'll have to change the name of the airline now.

How about LuftBlau? Or more accurately, how about
DüsenmaschineBlau?

And then what's next? Will there be pressure to overturn the ownership laws for US airlines? Will Hugo Chavez buy American (via Citgo) and will China buy United? And what happens to the CRAF? Can you imagine our senators and congressmen flying the DCA shuttle operated by IranAir or Dubai Ports? So many questions, so few answers.:confused:

It's interesting how this news of LH's stake has raised so much wild speculation. Lufthansa is acquiring a 19% stake, I think it's pretty clear that's it, at least for now. They were looking for a bargain, given the absurd exchange rate situation. My feeling is they ascertained that once JBLU gets through the current liquidity crunch they're going to provide LH with a pretty good return (in addition to any advantages garnered by exchange rate fluctuations).

As far as integration, it's far more common in Europe for carriers to hold stakes in other carriers and not wholly acquire them or fold them into the acquiring's entity's business.

Even in cases where a European airline is the majority shareholder, they have maintained a separate brand and strategy, such as LH and LX or AF and KL.

As far as JBLU basics, once they get through this liquidity crunch I think they're going to be doing very well. RASM's are excellent for an LCC, costs are under control, and if they can increase the LF slightly, I think they will be doing great.

I think your mistake is in interpreting "land of the free" too literally.....

It does, however, look like the US is trying to re-write Economics 101 at present. If the country runs a huge foreign trade defecit, then these are the obvious consequences.

IIRC at present LH can't legally take the stake beyond 25%, so there's a little scope for further investment. 19% or 25% doesn't buy you control, but it does buy a lot of influence.

So far as KL & AF or LH & LX are concerned, they may have separate brands, but don't for a minute imagine the managers in The Netherlands or Switzerland can head off in any direction not approved by the parent company.

Another cross holding I'd point to is BA's 10%(?) ownership of IB. That has led to arrangements like revenue and/or profit pooling on some UK~Spain routes. FWIW BA has announced that it won't be increasing it's ownership of IB, and the TPG/BA/+ alliance has pulled out of acquisition talks for IB. It sounds like that fell apart because other Spanish owners placed too high a value on IB in a falling market, plus it got increasingly difficult to raise the debt for such a "fully valued" acquisition. Time will tell if IB can survive and prosper on its own.

One possibility with the LH/B6 deal is LH is worried about the future of its obvious partner, UA. Will UA survive the next downturn intact? Will it end up merged with a SkyTeam member? Perhaps LH figures by buying into B6 now are a good price it puts itself in a good position to preserve what it wants, ie the connecting traffic, if UA should melt down. And if UA doesn't LH can probably unload its B6 stake with a profit, or at least having not lost too much.

Luthansa: It is not about the money
 

According to the LH press conference, their investment is not just to be a passive investor. They see a big gap in the Star Alliance's New York presence and B6 can fill that gap. Look for much more cooperation with LH and other international Star carriers in the future.

http://www.thestreet.com/_yahoo/news...&cm_ite=NA

Of course it is not just about the money.
Even though, in the end, it is. :D

Please note the following quote from the above piece:

Lufthansa CFO Stephan Gemkow commented on the financial value of the transaction, saying JetBlue "has been undervalued and the dollar has been relatively weak, and it will stay like this for a long time."

I agree wholeheartedly that JBLU is undervalued. They're going through a liquidity crunch but otherwise its basics are very solid, especially under the able stewardship of Dave Barger.

The reporter (Ted Reed) also quoted the CFO of LH: "We wanted something of strategic importance for the two companies."

The specifics will be worked out in the future, he said, but he believes JetBlue will make a good partner.
This grand aqcuisition is anounced just few weeks after LH anounced that it discontinues its flights FRA-DTW. Well, it has to fly into some metropolitan destination in the US to give it the needed cachet. The reason LH flew to DTW is the presence of Daimler-Benz brass at Chrysler's headquarters. Somehow LH's Mayrhuber believes that he'll succeed where Daimler-Benz CEO failed (and lost millions).
Recall that airplanes just like SUVs propels themselves on expensive fuel. The implied notion that jetfuel (or car fuel), is cheaper in JFK than DTW is an amusing idea.
Further, TWA Fan 1 says on B6, quote: "They're going through a liquidity crunch but... ". Implying that everything else is just fine with B6.
He reminds me that liquidity crunch is the immediate problem of every major banking concern in the US and Europe (including Citi of NYC and Deutsche Bank in Frankfurt-am-Maine). The financial stocks went south as of lately. And that is the general direction of the AMEX airlines stock index (-15%) and JBLU (-25%) in the last 90 days.

Now, now. The liquidity crunch at JBLU is only marginally connected to the current debt crisis gripping the world's banks, inlcuding the supposedly very conservative UBS which was obliged to sell a major stake to the govt of Singapore.

The major direct causes for the B6 cash crunch are the price of fuel (the B6 business model assumed $25/barrel petroleum) and too much growth.

Nothing can be done about the price of fuel, but in a way that's a virtual non-issue, at least in the long-term, since this will affect every competitor of B6 sooner or later (once hedges expire) and so will not provide any competitive disadvantage.

Regarding the undisciplined growth, this has been halted under the leadership of Dave Barger, but even here, the debt has resulted in real assets, routes, a major hub at JFK, a new T-5, etc. Plus, B6 has excellent customer ratings. RASM's are outstanding, costs are relatively low. The only issue in my mind is the need to boost LF's (overbooking?)

All in all, nobody has a crystal ball, but I think the issues at B6 are not nearly as dire as they are made out to be...

Now as far as that sub-prime crisis: If it ends up sending the world into a recession, sure that won't be good for anyone, including jetBlue or the corner dry cleaner...but I believe central banks will never allow this to escalate beyond a blip.

Actually, crises like these, if managed properly, often end up creating growth, because they substantially lower the pressure created by the high cost of housing. The resulting drop in the price of property frees up a lot of pent up economic activity...

The issue isn't one of competitive advantage. If B6 doesn't have money to pay debts they go bankrupt. That isn't a competition thing - it is a cash flow thing. It doesn't matter how other carriers are hedged except that it may prevent B6 from raising fares in some markets, though in most cases other carriers match B6's fares, not the other way around. If B6 raised fares $10 across the board I don't think it would have a negative effect on their load factors and most competitors would gladly raise their fares to follow suit.

And who put together a business plan assuming $25bbl oil? It hasn't been that low for a VERY long time. More to the point, why hsn't anyone fixed the plan based on the realization that oil isn't ever going to be that inexpensive again :confused:

Oil was at or under $25/barrel for most of the 90's and the business plan was put together in the late 90's...Of course, much in B6's business model has changed since then.

As far as not having enough money to pay the bills, that never stopped anyone from continuing, especially not in the airline business. NW, UA, DL, US, and even your beloved CO filed for bankruptcy twice and all have emerged and are still going concerns earning profits...

In the case of JBLU, though, the crisis is due largely to acquiring too much debt because of frenetic growth. That growth has been greatly disciplined under Dave Barger and the net result is that jetBlue ends up with a lot of attractive assets.

Look, in the worst case, they declare bankruptcy, just like every airline except AA, and they keep going.

I don't think it will get to that point because, although their cash on hand is very low, their debt is also relatively small and mostly secured.

Just 'cause they do it doesn't mean it is right.

Operating a business on a plan based on conditions that do not exist and have not existed for 5+ years is not a responsible way to manage a company.

I'm not sure why it is my beloved CO either. They are my primary carrier, and I mostly enjoy it over there, but I'm no apoligist for their problems. You should've seen me attack the co.com programmer at the DO while we were on the bus and he asked for comments about the site :D :cool:

I also fly NW, DL, AA, UA and even B6 when the timing/routes/fares are right. I don't like the TrueBlue program at all for a myriad of reasons, but that has nothing to do with this thread - I've posted those comments in the other threads discussing them.

FRA->DTW is not discontinued. There are 12 weekly flights on this route and no change has been announcemed for the summer 2008 time table.

Declaring bankruptcy is not a matter of right or wrong, it's a last resort necessity. As painful as bankruptcy is it sure beats liquidation.

Regarding the JBLU business model, this was the initial business model, one that has obviously changed over the years...

TrueBlue is very limited but it has the advantages of not having any "EasyPass" awards and always plenty of reward inventory...as you know I gly a lot of B6 and I usually use 6-8 transcon award tickets a year...

I agree that it is a last resort. The right/wrong comment focuses on operating a company based on a plan that is obviously flawed, such as $25 oil. You are the one who suggested that this is the reason for B6's cash crunch ;) That the carrier hasn't managed to adjust to the change in reality is unfortunate. In most other industries, companies that declare bankrptcy never recover so well. For some reasons airlines are considered sacrosanct in the USA so they can't be allowed to fail despite their inability to operate under normal business rules. So if JetBlue were to declare bankruptcy they'll find a way out of it, though investors will still get hosed, and the government will ensure that they don't suffer too badly. The one thing I'm not sure of in B6's case is that they don't have union contracts they can renegotiate to reduce their costs, so that would be tough. I assume that most of the debt is secured by the aircraft, and most airlines have trouble operating without those, so that would be an interesting issue for B6 to face.

That's 600-800 TrueBlue points if I'm calculating correctly, right? That means you're flying ~30 r/t "long" flights purchased online, or spending a lot of money on the JetBlue AmEx card. That much travel/spending would be worth top level elite, so you're looking at ~300K RDMs on other carriers (150K BiS+ 150K bonus miles). The 300K miles would get you 6 transcons in slEasyPass or many more with standard rewards, or some number in between depending on your redemption pattern. The Carribean redemptions cost more on the other carriers, but you'd still probably come out ahead. Or you could buy a J RTW reward, something that you could not get from B6.

I am not in love with the legacy programs at all, but I do think that they are better than what TrueBlue offers.