Originally Posted by naharragt
Yeah, I guess. But not too convenient for travel to London, I believe. Is THAT correct?
From a lot of the rest of the country, EI was not much of an alternative either (it required endless changes, then poorer service in recent years). Two points: 1. As the BA issue explains, alliances aren't everything. 2. EI has said that it will maintain some BILATERAL partnerships. It remains to be seen whether that will include AA or not. If it does, what's the difference? (Perhaps no EQMs?) What's the big problem with flying AA to Europe (if that's who you collect miles with)? Please do not say "fares", because if so, that's EXACTLY why EI is leaving OW! |
Originally Posted by naharragt
Yeah, I guess. But not too convenient for travel to London, I believe. Is THAT correct?
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Originally Posted by sdsearch
...2. EI has said that it will maintain some BILATERAL partnerships. It remains to be seen whether that will include AA or not. If it does, what's the difference? (Perhaps no EQMs?)
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At the time I was recently booking flights through London to JNB, AA did not have any award seats. That left only Aer Lingus. Thus I went with Aer Lingus. As it turned out, AA finally loaded some award seats on the flight I originally wanted. So, I agree taking AA when using AA aawards makes sense if possible. Now, from what the above posters say, it seems I would still be able to use my awards on Aer Lingus. As far as the five or six other carriers available for crossing the pond, they don't fly from Boston and/or they don't go to LHR. Am I right about THIS?
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This article is interesting. The unionized labor force is a constituency that EI has to placate, but does it really make sense for the carrier to take itself off the auction block? AF/KL looks to have strong financials right now; I could certainly imagine this group seeking to merge into EI. |
Originally Posted by ContinentalFan
AF/KL looks to have strong financials right now; I could certainly imagine this group seeking to merge into EI.
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Originally Posted by NickB
Why? What would be in it for them? Ireland is a minor market, with low margins on point-to-point thanks to FR, and AF own Cityjet, an Irish airline, which runs 7 daily DUB-CDG flights for them (and a few other secondary routes). I really can't see what interest they might have in EI. It is not like the odd SNN-CDG flight is going to bring in millions in AF coffers.
EI runs many more flights that just DUB/CDG ;) It depends on what EI wants to do as a company. There was some discussion of the issue on another thread. EI is in good shape. It's financials are reasonable. I like its long-haul market. It's not a major player, but is does have a complementary route structure. So far, the AF/KL merger seems to have worked well. It won't be the last. The European industry is too fractious--and has too much government involvement. There will be more mergers; IMHO EI will be a target. If the Irish government became agnostic on this issue, I would expect it to happen in the next 12 to 24 months. |
Originally Posted by ContinentalFan
EI runs many more flights that just DUB/CDG ;)
So the only reason for acquisition would have to be a purely financial one. But if I had the spare cash to put in a financial investment, I don't think that EI, or indeed any airline, would be my first choice. I would imagine that if AF were to acquire a flag carrier, it would be OK before Ei, whenever OK comes up for sale. |
Originally Posted by NickB
Of course, but this one (and DUB-AMS) are the only ones of strategic interest to AF/KL. And EI is not enough of a competitor to AF/KL to justify absorbing it to eliminate it. EI would also be extremely difficult to integrate into AF/KL and would probably have to remain as a distinct airline operating under a distinct LCC-ish model, allowing for no synergies. Why on earth would AF want to saddle itself with a relatively risky investment, given the FR threat at DUB? EI have a number of valuable slots at LHR, but I don't think that either AF or KL need those slots themselves.
So the only reason for acquisition would have to be a purely financial one. But if I had the spare cash to put in a financial investment, I don't think that EI, or indeed any airline, would be my first choice. I would imagine that if AF were to acquire a flag carrier, it would be OK before Ei, whenever OK comes up for sale. EI is a small airline serving an equally small country, granted it has quite good coverage of the United States, but without any flights to Asia, I would not call it a serious long-haul contender. As for AF/KL absorbing it, I don't understand why they would bother with such a DUB focussed airline that cannot provide any feeder for it onto its own network? As a point to point airline, I think was previously mentioned that only 6% of EI pax are continuing on another OW airline, there really would be no benefit for AF/KL to buy it. |
Originally Posted by NickB
Of course, but this one (and DUB-AMS) are the only ones of strategic interest to AF/KL. And EI is not enough of a competitor to AF/KL to justify absorbing it to eliminate it. EI would also be extremely difficult to integrate into AF/KL and would probably have to remain as a distinct airline operating under a distinct LCC-ish model, allowing for no synergies. Why on earth would AF want to saddle itself with a relatively risky investment, given the FR threat at DUB? EI have a number of valuable slots at LHR, but I don't think that either AF or KL need those slots themselves.
First off, as part of a larger group, there are inherent economies of scale--lower costs for a variety of things. If I were sitting in the corner office of AF/KL, I'd value EI on its FCF including savings that the new entity may garner from being part of a larger group.
Originally Posted by NickB
So the only reason for acquisition would have to be a purely financial one.
Originally Posted by NickB
But if I had the spare cash to put in a financial investment, I don't think that EI, or indeed any airline, would be my first choice.
The fact that there is currently little overlap between or among the companies is actually a good thing; as I said somewhere else, the systems are pretty complementary. EI has gained tacit knowledge in what it takes to (a) compete with a cut-throat discounter and (b) deal with erstwhile militant unions. To the extent that any or all of these skills are transferable, the knowledge is useful to any company in today's world of aviation where the pace of competition will undoubtedly quicken with the onset of an open skies. Neither EI nor AF/KL is a static entity. I think you allude to the following, but in a combined entity, what's to stop AF from buying more equipment to EI and picking off lucrative US/EU routes? EI offering service from, say, Dallas to Madrid seems strange, but the day is coming fast when we'll see things like that happen. I love you LCC-ish comment, because that's what EI has got. Sure they've pulled costs out, and to some extent they market on price; however, the carrier is sitting on the fence right now. It has benefited from competition with FR--more than, IMHO, any carrier in Europe. It looks to be in a reasonably strong position right now.
Originally Posted by NickB
I would imagine that if AF were to acquire a flag carrier, it would be OK before Ei, whenever OK comes up for sale.
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Originally Posted by ContinentalFan
Hold on there, I don't think you're taking the optimal perspective on this issue.
First off, as part of a larger group, there are inherent economies of scale--lower costs for a variety of things. If I were sitting in the corner office of AF/KL, I'd value EI on its FCF including savings that the new entity may garner from being part of a larger group. On the face of it, there's nothing wrong with that idea. Get a good price and reap a dividend in the form of the FCF. Anyway this thread is becoming very OT, and starting to remind me of my days at uni :D |
Originally Posted by bensyd
FCF is all well and good but what about ROE for the merged entity? I think the shareholders would be more worried about a dilution in ROE rather than free-cash post aquisition. And buying EI would require a fairly decent sized equity issue, or debt issue. I'm not upto speed on AF/KL financial position, but I would guess that like most airlines they are not swimming in cash.
Anyway this thread is becoming very OT, and starting to remind me of my days at uni :D Which shareholders: EI or AF/KL? I'd focus on EI, since the impact on the AF/KL may not be as large. I think the ROE may improve. I mean, the only two things that would impact ROE are shareholders equity and earnings. Changes in goodwill may mess things up a little. I have played around with the numbers on a spreadsheet; of course, it's hard to predict what would happen in an actual merger! Ultimately, the shareholders of EI would expect a return on their investment to part with shares. AF/KL is sitting with $3 billion in cash and $3 b in receivables; the total current assets totals out at $10 billion. Operating and net income are growing nicely, as is cash flow. It seems to be in good shape! |
Originally Posted by ContinentalFan
... Ultimately, the shareholders of EI would expect a return on their investment to part with shares...
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Originally Posted by number_6
The Irish government has stated that it will keep a controlling interest in EI when EI is privatized. Precisely to prevent any such transactions occuring in the future.
Originally Posted by number_6
They canceled the privatization in 2004 in part because of these concerns (along with catching the former management with their hands in the cookie jar, deliberately running down the airline in order to reduce the valuation so they could buy it on the cheap). There is a rich history of machinations at EI involving all 3 parties (management, labour and government).
I have been reading a lot about the carrier recently. People have definitely been 'naughty'! Perhaps the government in Ireland is different ( ;) ), but in the US, I have noticed that politicians don't always have a strong commitment to past statements. |
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