Traveloguy

With LH now looking at getting involved in the AZ soap opera, I do have to ask the question of whether:

a) Should LH be allowed to control most of Europe's airlines (now that they appear to be getting involved with BD, SN, SK/JK, OS and now AZ) from a pure competition aspect? Why aren't the competition authorities not more involved?

b) Does LH really have the funds to get involved with all these deals?

Alliances are one thing as they are fairly loose, but ownership is taking it to the the next stage. With that in mind, from a customer point of view I would expect it best to have 3 large Euro carriers rather than what is starting to look like 1 mega carrier (LH/LX et al) + 2 large carriers (AF/KL & BA/IB).

Interested to hear this forum's thoughts.....

flysurfer

I'm not aware of any imminent deals regarding SK, AZ and OS.

SN and BD are likely deals, but those aren't completed. In the case of SN (the most advanced deal as of now), the transaction is pending approval of, you guessed it, competition authorities (among others).

It's very hard for competition authorities to get involved with deals that do not yet exist.

NA-Flyer

I see that LH is doing what SWISS AIR did in the past and caused its collapse and disappearance; They buy all these little airlines in Europe trying to switch LH group to a mega carrier control the Skies all over Europe.

I think this strategy will not be successful in the long run even with the german innovation. I advise all my fellow members in miles and more not to keep large balance in their account and always use the miles.

DFW-SEN

Hmmm right. The good old Swiss Air and Lufthansa are very comparable in terms if size, network, financial health, alliance affiliation etc....... Very sound analysis of the situation.

Cheers, S

GlobalSights

I am not sure if LH would be that much bigger (if at all) than either of its two major rivals even if all of the contemplated deals are realised. It might just match them in size. Of course it depends on which criterion one chooses for the comparison - likely number of passengers carried but I am no expert here.

supermasterphil

So far, LH just plays a role in the discussion about all those airlines to take over but as flysurfer and others might have said, none of the deals are really completed yet. SN is not such a big deal, I mean we are talking about 65 million Euro here for the first step.

So for the rest of the crowd, Lufthansa is just one of the players considered for the takeover. Granted, Lufthansa looks like the best (or most likely) option in most cases but it doesn't mean that they will actually end up taking over that airline. Assume that not LH will takeover OS and AZ but AF/KL. Now the OP's concern should turn out the other way.

For example, I'd say LH doesn't have an interest to take over the current AZ, they might be interested in legal rights that AZ has but not in the entire mess. Their interest should be to see them entirely go down the drain and getting themselves some longhoul birds real quick for their own Air One and take over the most profitable nonstops out of Italy. For the rest of the traffic, they try and feed passengers into FRA, MUC and ZRH.

Hell knows what happens to BD. One thing is for sure, it won't be BA to take over The other thing is that LH can't take over (for antitrust reasons) all airlines currently on the list but I trust the bunch of guys who run LH currently (when it comes to economical decisions) that they will do well and pick the good stuff if they get the chance. So far, they have proven that they understand their job.

SmilingBoy

From a competition perspective, there are really two aspects:

- on the one hand, competition on non-stop routes might decrease where the merging carriers overlap.

- on the other hand, having a bigger network allows you to increase the overall efficiency of your network, use bigger planes etc, which lower the cost, which will partly passed through to consumers.

I think these mergers are sure to lower prices on routes where there is no direct overlap, and lead to either increased or decreased prices on the overlap routes, depending on which of the effects above is stronger.

Finally, you shouldn't forget that LH, BD and SK essentially already run a JV on their overlap routes so it could be said that no competition would be removed if LH merges with BD or SK.

Traveloguy

Surprised your not aware of the deals (OS, AZ and SK) as they are being discussed in the press almost every day.

DFW-SEN

There is a big difference between a deal and scoping an opportunity.......

Cheers, S

flysurfer

I would be very interested in reading at least one article in the media describing a deal that has been closed between LH and OS, AZ or SK.

Rambuster

Seconded. To date there are only reports of LH talking or having an interest in OS, SK or even AZ !

BD on the other hand is a financial opportunity which needs to be taken. Asset stripping is one option here.

My recommendation would be to stay away from anything AZ related. This company has the plague onboard ! The employees and unions there have probably never faced market reality ever ... difficult to change these attitudes with any kind of take-over/asset deal with CAI.
The reality is: They all need to be fired as soon as possible!
This would be the best market consolidation for all other players.

DownUnderFlyer

The point this forum is trying to make is that LH talks to a lot of airlines at the moment. But other than the SN deal, nothing has actually been signed.

I think it is very unlikely that LH will buy (and be allowed to buy) all of those carriers they are currently talking to. But by joining the negotiations they get good insights into their competitors cost structure, management etc. Plus they might be able to influence the process so those airlines don't end up with AF or BA.

Once a deal has been signed, the national and EU competition watchdogs will spring into action but before that has happened there is not much they can do.

LH is not the biggest airline in Europe so even if they buy 1 or 2 smaller ones it will not make them a dominant player yet.

FD1971

Swissair's execution of the strategic approach recommended by McKinsey turned out to be 10-15 times more expensive than the maximum amount approved by McKinsey for such a move. Considering the amounts Swissair paid for flying crap, 65 down for a solid stake in SN Brussels looks like a steal, considering the yields ex BRU, a market too small for the big boys and very secure in terms of EU travel budgets.

Northern Italy is certainly the filet piece of Italy and MXP has capacity. LH's bet so far, operating a couple of long range flights and route the rest via its hubs paid out big time with Switzerland and Scandinavia so for, if it works from a market that can sustain potentially a few more long haul markets is the question now

Average age of AZ mainline pilots is pretty high, LH will very likely offer pay-out packages and decrease the average costs of the cockpit significantly in a few years, if they should go ahead

DownUnderFlyer

Great info! ^ Can you share where your insider knowledge comes from?

Traveloguy

I was referring to potential deals otherwise particularly point b would not be pertinent.

OS had 5 potentials which I believe has been shortlisted to 3. I'm sure Travelbuzz will point you in the right direction as well as the usual sources such as airwise:

http://news.airwise.com/

Note the word potential, not to be confused with actual.