Lufthansa interest
 

interesting!

http://dealbook.blogs.nytimes.com/20...ke-in-jetblue/

even more interesting is my shares are up 30% right now....wowza

I think it is great news for jetBlue. It will give them more financial stability and could open up a wide network of connections with Star Alliance carriers.

if B6 joined *A, that would be awesome. i'm a loyal UA flier, but i'm working on getting B6 as one of my clients and i would love to fly them from the employees i know and what they have told me about B6.

It's official..LH is taking 19% stake in B6!

Wonder what this means for operations (Connections to internationals destinations in Europe) possible codeshares? if any?

Official press release--conference call at 430PM EST
 

Press Releases

Lufthansa to Make Equity Investment in JetBlue; Will Buy Up to 19% Stake For $7.27 Per Share
NEW YORK and FRANKFURT, Germany, Dec. 13, 2007 (PRIME NEWSWIRE) -- JetBlue Airways Corporation (Nasdaq:JBLU) and Deutsche Lufthansa AG (Xetra:WKN 823212) today announced an agreement for Lufthansa to make a minority equity investment in JetBlue. This transaction represents the first significant investment by a European air carrier in a U.S. point-to-point air carrier.

Under the terms of the agreement, which has been approved by the Boards of both companies, Lufthansa will purchase in a private placement approximately 42 million newly issued common shares of JetBlue, or 19% of JetBlue's equity after giving effect to the issuance. Lufthansa is acquiring the shares at a price of $7.27 per share, or a total of approximately $300 million, representing approximately a 16% premium to yesterday's closing price of $6.25.

The agreement provides that a Lufthansa nominee will be appointed to the Board of Directors upon the closing of the transaction. The Lufthansa nominee will be a Class II director and will be up for election at JetBlue's annual meeting in 2008.

"We are very pleased to become an investor in JetBlue," said Lufthansa Group Chairman and Chief Executive Officer Wolfgang Mayrhuber. "Our investment reflects the confidence we have in JetBlue's quality, growth potential and management team. This investment presents Lufthansa with a compelling opportunity to invest in the U.S. point-to-point carrier market as the industry continues to evolve. The transaction links two airlines with international reputations for quality, innovation and a service culture."

"We welcome this significant endorsement of JetBlue's franchise from one of the most respected leaders in global aviation," said Dave Barger, JetBlue's CEO. "The agreement reaffirms our belief in JetBlue's disciplined growth plan and will also improve our balance sheet and give us greater financial flexibility as we move into 2008."

Both airlines also look forward to exploring potential opportunities for further cooperation for the benefit of their customers. No specific areas of potential cooperation have been agreed upon.

JetBlue shareholder approval is not required in connection with the transaction, which is subject to regulatory review and approval, and is expected to close in the first quarter of 2008.

Note for journalists

JetBlue will conduct an investor conference call today, December 13, at 4:30 p.m. Eastern Time. A live broadcast of the conference call will be available via the internet at http://investor.jetblue.com.

Tomorrow, 14 December 2007, 12 hours (CET)

Press conference at the Lufthansa Aviation Center (http://lac.lufthansa.com/de/index.php), Airportring, at Frankfurt Airport with Lufthansa Chairman and CEO Wolfgang Mayrhuber, Lufthansa CFO Stephan Gemkow and Dave Barger JetBlue-CEO;

The press conference will be available on the internet: click www.lufthansa.com/group

To ensure trouble-free admission to the conference, please bring your invitation, your press ID and an official photo with you.

About JetBlue Airways

New York-based JetBlue Airways has created a new airline category based on value, service and style. Known for its award-winning service and free TV as much as its low fares, JetBlue is now pleased to offer customers the most legroom throughout coach (based on average fleet-wide seat pitch for U.S. airlines) and is the first U.S. domestic carrier to introduce complimentary in-flight e-mail and instant messaging services using an onboard wireless network. JetBlue is also America's first and only airline to offer its own Customer Bill of Rights, with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control. Visit www.jetblue.com/promise for details. JetBlue serves 53 cities with up to 550 daily flights. With JetBlue, all seats are assigned, all travel is ticketless, all fares are one-way, and an overnight stay is never required. For information or reservations call 1-800-JETBLUE (1-800-538-2583) or visit www.jetblue.com.

The JetBlue logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=795

About Lufthansa

Deutsche Lufthansa AG is a global aviation group with about 400 subsidiaries and affiliates. The Group operates in five business areas, centering on its core passenger transportation business. In 2006, the Lufthansa passenger airlines carried around 53.4 million passengers. The other business segments are Logistics, MRO, IT Services and Catering. The entire fleet of the Aviation Group comprises around 500 aircraft. Together with SWISS International Airlines and the regional carriers, flying on Lufthansa's behalf, the Group operates more than 770,000 flights for its customers yearly. The Lufthansa Group currently employs more than 100,000 people. Revenues in 2006 totalled about 19.8 billion euros.

CONTACT: Deutsche Lufthansa AG
Klaus Walther, SVP and Head of Corporate Communications
+49 69-696-2999
[email protected]

JetBlue Airways Corporation
Todd Burke, VP Corporate Communications
+001 718-709-3080
[email protected]

Will this hurt UA Lufthansa alliance? Might not all be upside

Good news. B6 will most likely become a M&M partner (and might eventually become a *A member and adopt M&M as its FFP), so we'll soon be able to earn and burn some miles.

I also wonder if B6 will be the first US carrier introduce the European Business Class concept of moving curtains (and blocked middle seats).

Next step...Lufthansa buys UA's Asia routes and gives them to jetBlue...now that would be a major annoucement.

In the long run, that might be possible.
As of now, B6 is a domestic point2point carrier w/o F or C class.

Very interesting.

I doubt B6 will join the *A - but you could be sure LH and B6 will codeshare on flights from BOS and JFK.

Problem with us joining *A is the lack of cabin class reciprocity, can't imagine that happening. However - an interline agreement becomes possible...

In order to feed pax to and from *A flights, B6 will have to introduce a C class product (and interline *A pax and luggage). If that happens, I'm pretty sure it will look like LH's European C class: same seats, moving curtain, middle seat blocking, great service and lounge access.

I think it is a little early to speculate about B6 joining Star, but if they did I wouldn't mind accumulating some UA miles on B6. :)

Why do you say that? How would it be any different than connecting to a Star plane that doesn't have a C cabin (RJ, for example)?

I don't think LH's goal is to replicate the worst experience possible (buying full-fare intercontinental F, then ending up in a middle seat in the last row of TED). Many high-yield LH elites have been complaining about that, but UA couldn't care less.

Anyway, introducing a moving curtain C with a blocked middle seat costs almost nothing and can be introduced in an instant. And THAT will lure European business travellers (you know, those high-yield guys that actually pay for their tickets because their FFPs don't participate in the American upgrade carnival) to connect to B6 instead of UA or US. Of course this doesn't rule out a transcon C à la VX at a later stage.

Maybe this is the first step toward UAL buying the rest of B6?

UAL is unlikely to buy any airline--but may get bought out. LH is looking out for its own interests and not UAs. Better to have the USA overcovered then be left without a US partner after a merger.

maybe this is the first step towards B6 buying UA ;)

I gotta say that if B6 joined M&M that would be a huge plus for me as I already fly LH and *A internationally and hang on to my NW status strictly for domestic purposes...

... having said that, JetBlue still doesn't go where I usually go, with the exception of SLC, so it's not like I would be able to "switch" completely.

Pod cast...
 

Anyone else worried by the quote in the Yahoo piece that says:
If B6 can't meet their debt obligations they're in BIG trouble. They've already sold off old planes while taking delivery of new ones to push off maintenance costs and LH can't buy more of B6 in the short term because of ownership rules. I don't see this as a good sign for B6 at all.

Plus, I don't see them in *A (EI had to leave their alliance when they switched to the B6 model) plus the whole cabin reciprocity thing that was discussed on here recently.

Time will tell, but I'm not all that optimistic for B6 on this one.

S.

I guess the rumors about LH nosing around our JFK hanger and MCO facilities where actually true. I was reading the email as I sat in Bangor for 5 hours today on a diverted flight. Very Interesting!!

I posted months ago about the impending debt crisis at B6; doesn't surprise me that jetBlue went looking for some new cash to tide it over.

When you grow much faster than you should, you often run into real cash crunches.

Too bad B6 didn't raise this cash a year ago when the stock was trading for $16-$17 a share instead of today when it briefly touched $5.99.

With the current economic conditions and the price of oil, most all of the US airlines are going to be hurting financially in 2008. Having a strong, European airline with lots of cash behind them that is a long term investor is a great asset. Lufthansa has invested a lot in Swiss and took them from the verge of liquidation to being a strong carrier again. They have taken the slow and steady approach gradually expanding on Swiss's strengths. They could have invested in UA or some other carrier. Putting their money into B6, I think is a much better investment. There are lots of potential benefits and they do not compete on a single route.

We all know how cyclical the airline industry is. B6's stock is well below its highs while other airline's stocks have not gone down as much. B6 has new planes which are valuable, an excellent route system from BOS and JFK, a new terminal coming at JFK. For the most part, it also has happy customers which is certainly not the case with most of the legacy carriers. LH/LX will also be looking at open skies to expand in the US-Europe market and B6 can help bring more passengers to them. B6 will also be able to capture revenue from LH passengers.

This is much better scenario than an unfriendly takeover coming from an investment fund looking to make a quick buck and dump the stock at the first opportunity or a US airline which does not have B6's interests at heart.

This is the future now.....first major inroad from a European carrier....LH leads the pack...BA buys into AA vs LH buys in to JetBlue....now who has the vision....and is it not about vision.....no risk, no gain....

You do realize that TED isn't representative of United's entire domestic mainline operation? United actually has two cabins of service on mainline routes, and many hub-hub flights connect with widebody international equipement, which offer 3 classes of service. Sorry, but none of "those high-yield guys" are going to want to sit in a coach cabin when they can sit in domestic F, let alone Economy Plus (which Ted does offer).


How are they unlikely to buyout another airline? $5.1 Billion in cash? A FF program worth $8 billion if sold? Looks like they are in a pretty strong position to me. Who's going to but them out? Delta? Please, sfozrhfco, don't play those jokes.

It's unfortunate that you were unable to understand my previous post. Anyway, I tried to say that B6 will have to introduce a C class product in order to attract the high-yield crowd connecting from abroad. And you do realize that B6's standard seat pitch is quite similar to E+ (and better than most European C class products).

But feel free to ignore this post, again. :) No harm done.

In any case, I think we are getting ahead of ourselves. These things take time. First of all, the transaction needs to be approved by the Americans. I don't expect any announcements of operational changes before that has happened.

What do they spike the drinks with on B6?

"This is the future now?" :D

IIRC, KLM has a stake, albeit a small one, in NWA.
Did that stake prevent NWA from going into bankrupcy?
Did that stake prevent KLM from being acquired by AF?
Neither AF/KLM nor LH, BA have a source of petro-dollars - unless they are acquired partially by EK, (Khazach-Air, Aeroflot...) or a sovereign wealth fund.
So the future/vision is sooty.
For today it seems reasonable move.

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: