volta

From personal experience, LH is most expensive for TATL flights. Since May, am flying at least once a month and LH, except once in August, is always most expensive airline. Virgin and BA have much better pricing (very often more then 1k price difference) for same schedule.

Lack

I don't think "Gulf and Bosphorus state" airline play much of role in Europe to North America travel.
And that part of the network actually used to have pretty good results on LH balance sheet so the notion of higher fare should have some merit.

FD1971

Are you sure about the "results on LH balance sheet"

Out of personal interest, do you have a background in management?

Helps me understand some of the comments of certain contributors.

Lack

Yes, I'm sure although a bit of clarification might help - I've meant the results of TATL network were actually improving on a per month/quarter/year basis as far as I remember and thus positively contributing to the balance sheet. Sorry about not being clear previously, I see how you could raise an eyebrow.

Rambuster

Looks like Delta Management knows what they are doing!
http://news.delta.com/delta-posts-historic-3q-profit

Look at their operating margin!

On separate news:

LH had an increase of personnel
Cost of 8.2% year on year for Jan-Sep period!

NA-Flyer

If they do then you should say Ciao to LH & BA

N1003U

It is amazing what one can do with old, written-off assets, cheap fuel, service focused on revenue-generating customers, but at the same time not blatantly insulting low-margin customers.

Yes this seems an ongoing cost problem, and LH seems to be handling it with the same finesse as they are handling the revenue side.

I am, however, still willing to give LH some credit for an OK quarter, regardless of whether it is due to management actions or random external events...

Edit: interestingly, DL also seems to have had an 8% increase personnel expenses year-to-date, and they boosted profit-sharing payouts by about a third vs. the same period last year, and yet on flat revenue, they managed to boost cash flow...

FD1971

You forgot one (minor) factor..., a refreshing round in the Chapter 11 pool.

No airline in the history of aviation has managed to lose more money in a single financial year without filing for Ch.11, it is still Delta with a loss of $5 billion (3 from ops.) a couple of years ago.

I wonder what all the Nekkies did during this year, I am pretty sure they worked for Delta.

GBM.flights

1 bio less in the fuel bill and +1.5 bio from currency in the revenue will deliver less than 1bio in the bottom line. Nothing to brag about but enough to disguise the issues for a couple of years.

gum

Thanks for the numbers, GBM.flights! Appreciated.

Just let's take a short glimpse into one additional fact:

According to the group overview of the interim report of Q3/2015 the cargo load factor was down 3,4 % points to 65,8 %! IMHO that is a firt hint to a possible soft-landing of the economy having the growth rates behind (for the next years).

http://investor-relations.lufthansag...R-2015-3-e.pdf

This will also could mean a further tendency to the melting down of passenger fares and cargo rates.

Given the additional self-destruction tendency during some collective bargaining rituals end of this week I see a weak month (and quarter) for Lufty. I don't understand why the confrontational course is continued.

N1003U

Point taken, but in Delta's case it was a rather short and very shallow swim (I don't think anyone involved would call it refreshing), and in the end nearly all were made whole (except the common shareholders and a a few very junior debt holders--the most subordinate investors--which is how fair market systems generally work ). In retrospect, it really was a fairly minor factor.

It is not clear to me that everyone really understands what corporate bankruptcy is. Certainly not the people who think it is some form of subsidy. In the corporate sense, it is the process of taking assets away from managements who have demonstrated a lack of ability to manage those assets, and either selling them off or using them a partial debt payment (so-called "Chapter 7", if you are talking about 'murrican law), or giving them to someone else who is more responsible, who can pay off the old creditors and while still trying to keep the asset base intact. (Chapter 11).

These sorts of processes are recognized and common and used worldwide to resolve the effects of people who make too many poor financial decisions. For those in LH-land, I think a similar process is described somewhere around §218 or so in the InsO.

However, for those who would imply (sometimes quite cynically) that it is some kind of unfair competition, I would ask: how? Investing in and doing business with others always has risks, and sometimes those risks don't work out. But at the end, a bankruptcy is not much more than a legal resolution between (in this case private) parties when one or more involved is unable to perform their obligations. It is when significant amounts of money are repeatedly injected, with no realistic expectation of the money being returned, that one could start to suspect a subsidy is present (AB, AZ, anyone? I guess we'll see how they work out as feeder networks for the smaller of the ME airlines )

In the case of LH, if one wants to follow the line of logic that bankruptcy is some kind of subsidy, it seems to me LH got their hands on some operations a few years back from a small Alpine operator at a really good price, conveniently after a court in said Alpine country arranged for the repair of the operator's capital structure. Hmmm...imagine that...benefitting from a bankruptcy process.

...Some other time, if anyone else here is so inclined, we can also explore the role that doofus consultants (some of whom are still working for LH Group) played in landing LX in bankruptcy in the first place by advocating some pretty stupid strategy...

That was then. This is now.

As so often pointed out (I heard someone use that line somewhere, I thought I would steal it), accounting gains and losses don't mean nearly as much as cash flow (there is supposed to be a correlation between accounting numbers and cash flow, but there often isn't when it really matters ). As long as there is sufficient cash flow, one can always work on the other problems. That LH cut back on capital spending plans and has quietly tapped into the commercial paper market tells me they were starting to get nervous before summer bookings picked up.

There was a time when Delta's employees were so happy with their employer that they bought a 767 and gave it to the company (unfortunately, those days are long gone)--is that considered an unfair subsidy?...

oliver2002

The sad part is that US businesses use ch 11 quite extensively. Defaulting on loans and starting afresh has became part of life, even in personal finance. Obviously it takes two to tango so the lenders/investors are to blame too... just like with the current DB fiasco where managers delivered what the stock market wanted to hear and got their bonuses, but now that they are gone the card house is collapsing. AA did the same, but didn't buy new aircraft, for example. When they had to, the cards fell and US took them over.

N1003U

Edit: defaulting on a loan is not the same thing as not being discharged from the debt. Bankruptcy courts just decide how to the resolve financial non-performance. Sometimes that does mean discharging the debt, or a part of it, but that is as much risk sharing by creditors as anything else. Banks like fees and interest payments, and some are even willing to take chances to get them...

Um, last time I looked Chapter 11 doesn't discharge debts...it re-organizes them so that the likelihood they will get paid is maximized. What you describe sounds more Chapter 7, which is typically really bad for a business, if it even survives.

Yes, there is a fine line between efficient use of capital and negligence, which in the USA is a line we (fortunately, IMHO) are still free to explore. Thus there is also a booming legal business representing (or at least purporting to) shareholders.

The personal finance laws in the US are gradually being reformed to address some of the excesses of the past couple of decades.

If one wishes to explore the abuse of Chapter 11, then a looking into the US auto industry is a bit more appropriate. I got bitten by that personally. It is tough when petitioners in the process include the US government, somehow their interests tend to be extremely well represented...

N1003U

So, now that UFO has announced a week-long strike, has anyone seen any estimates of potential impact, financially speaking? It can't be good for the 4th quarter numbers if it really happens.

More generally, how to resolve this? Entrenched union with decent bargaining leverage against airline with non-competitive labor cost structure? Tough problem.

gum

How to resolve this:

... an extensive PR campaign informing about the facts of this strike.

Additional court action can be started later.

The first thing would be to inform the customers of Lufty who is really responsible for that strike. @:-)

Like a remuneration table stating what an average flight attendant (starting his career), the higher Purser ranks earn and especially how many paid lay-over days or hours are granted after an intercont. segment.

This is a reality check for all hard working passengers who spent their or the employer's money for tickets.

A half-page newspaper campaign would completely turn the public opinion away from the UFO campaign.

And clearly show that they like to pro-long the privileges from the last century and the golden age of flag carriers.

The financial impact of a one-week strike:
- Traffic revenue will be down 3-5 % for that quarter. Due to the fact that the "return" segments after the possible one-week strike are also not booked
- The average revenue per seat kilometre will be down for one to three weeks (due to the fact that time sensitive high-yield payers ("Vollzahler") change their timetable and routing to competitors)
- Persons on sick leave in Nov./Dec. will be higher. Noone can communicate to GAs and ground staff to work even when not 100 % ok and on the other hand having demanding cabin crew.
- Leases and financial costs continue during a time of weak revenue
- Some percent of frequent customers annoyed and not easy to win back
+ People will see some great Meilenschnaeppchen due to activities to lure back the customers.

Therefore after the suicide attack on 3/24/2015 and the pilot strikes this event is the next stumbling block for the management.

And it will clearly show how odd the actual situation in Germany is - to risk a company just for that issues.

That's just my opinion hoping for a faster compromise.