IB oneworld days numbered?
 

It's being reported on both the BA and LH boards that Lufthansa and Iberia have reached verbal agreement on a takeover deal. Haven't seen anything yet about BA's response to this.

If the deal goes through, it will be a significant coup for LH and *A, who at a stroke will have another sizeable chunk of Europe sewn up and will have a replacement for Varig in the Europe - South America market.

Looks like the shape of oneworld may be about to change again.

I'd be very sad to see IB go, but let's not panic until a deal is done. For those who can read German, the article in der Spiegel is here:

http://www.spiegel.de/wirtschaft/0,1518,476501,00.html

Important bits that have not been mentioned in the other threads so far are the last paragraph is that IB shareholders want to use LH to bid up the price TPG is willing to pay. Moreover, der Spiegel also reports that Mayrhuber characterized the current IB share price as "clearly too expensive" in a very recent interview. You can read it here:

http://flyertalk.com/forum/showthread.php?t=680271

A short translation of Mayrhuber's words: looking at the development of earnings [at IB] and its share price, it's clear there is a speculative element. The current valuation is not supported by performance.

I have no idea what's really going on, but based on this information I'd be hesitant to regard this as a done deal.

You can get a poor translation by using this website:
http://babelfish.altavista.com/tr

Maybe they're just trying to make BA pay a premium. Apparently BA has up to 40% right of refusal on any bid. More on other buyers here:
http://www.forbes.com/business/feeds...fx3592250.html
http://observer.guardian.co.uk/busin...052169,00.html


P.S. I just heard some Iberia radio ads for the first time (for the new BOS-MAD route). They even mentioned that you can earn AA miles on their flights. So it's odd to think they'll suddenly leave for *A.

LH is also in talks with BCN airport to create a major hub there -- so they have had their eyes on Spain for a while. BA can block any takeover (that was the point of its 10% holding in IB), but might find it too expensive now (given its costs from having the highest baggage loss rate of any airline in 2006, and the gearing up for T5).

I thought that AA had almost a 10% share of IB stock as well. And doesn't IB have a % of BA stock ?

IIRC AA sold its share in IB to BA.

Which was a mere 1% of IB thus upping BA's stake of 9% to 10%. :)

From my perspective as an SFO-based AA person, losing IB would be a big loss since we'd be down to just AA for mileage accrual across the Atlantic (and MA, I know, but that's a single flight from JFK).

I hope neither happens and IB stays as it is right now.

Steve

MA also has daily YYZ-BUD service, but is just now getting its 3rd longhaul plane, so tiny fleet is an understatement.

Only 2 years ago nobody wanted to fly IB TATL, now it is "preferred" over AA? How times change. The LH involvement seems to be primarily to inconvenience BA or force some other concessions in a negotiated settlement. More legalized blackmail than a real takeover bid.

And Finnair. I will believe IB goes to LH when I see it. I, too, hope that IB stays. Even though they aren't the best airline, they are an alternative.

RJ has the YUL-AMM and the ORD-DTW-AMM, but maybe that's a little too far over the atlantic.

I've always found AY connections to Spain (and southern Europe?) to/from HEL to be really poor. So not really an option for replacing IB.

Other options? for the time being:

AA-codeshare flights on SN metal to BRU (at one time from JFK and/or ORD?).
AA-codeshare flights on EI metal to DUB (still there from JFK, BOS and ORD?).
maybe AA-codeshare flights on TK metal to IST if going to E. Europe (still there from JFK and ORD?).

My bad; I forgot about Finnair; mainly because they almost never seem to come up when I am looking at European trips.

I was discounting YYZ-BUD a bit mainly because it takes 2 flights from the Bay Area to get to YYZ. I think I'd bite the bullet on AS's high F fares SFO-YVR first... :)

Steve

can't see the TK / AA codeshares lasting long once TK become a full member of *A

It would appear that three consortia are poised to submit bids for Iberia on Monday, including Texas Pacific Group. LH and BA are believed to be considering their options.

http://business.timesonline.co.uk/to...cle1652515.ece

Wasn't Texas Pacific group involved in the 1st US Airways bankruptcy exit financing? And are they not also involved in the QF takeover?

Yes, they are involved in lots of takeovers now -- QF, IB, AZ and a couple of others too. With a long history of making tons of money at the edges of the system, going back 15 years. They now have over USD 30 billion under management, so can afford to have lots of deals going on at once.

If we lose IB, do we get Spanair from S*?

Both LH and IB CEOs claim no talks in process. TPG's offer is 3.6E/share. IB closed the day at 4.11E

Link

LH buys IB and moves to oneworld. :cool:

Apax and Gestair consider making a bid.

Link

I wish!

My experience with JK is very positive.

Hello

I have decided to post to clarify some questions regarding the Iberia selling process .

First: the most credible source of information is Sepla , Iberia's pilots union , www.sepla.es , http://www.seplanews.com/ .

2 months ago the pilots said that IB managment informed them that several bids were made to IB shareholders and because of that the negociations regarding salary , productivity improvements and the new long-haul plane decision will be postponed until later this year , once the new shareholders take control of IB .

IB managament informed them that the spanish core-shareholders Caja Madrid , BBVA , El Corte Ingles , and others wanted to sell . They were initially financial investors that expected to sell in 2-3 years after privatization in April 2001 , but 9/11 came and they have been forced to wait until now .


This financial investor offered multiple times it's stake to BA , but no agreement was reached regarding price .

The actual process started in May 2006 when BA CEO said ..." a IB merger is not on BA's agenda ..." after a meeting in Madrid with IB managment.

Since them the Spanish banks have been looking for buyers , and have found several ....

Sepla revealed that a pre-agreement had been reached with Lufthansa at 4 Euros/Share for around 30% of IB's capital on hands of Spanish Banks .

"Lufthansa tiene apalabrada con Iberia una oferta a 4 euros por título"(in english , Lufthansa has a pre-agreement for Iberia at 4 euros per share )
http://www.sepla.es/news/archives/009099.php

Source: SEPLA-EFE . Sepla is the Iberia pilots union .

You must remember IB shareholder structure:

40% Core Shareholders
60% Free floated in the market


Core Shareholders

BA and AA 9.95%
Caja Madrid 9.63%
BBVA 7.03%
Logista 6.45%
El Corte Inglés 2.89%
Other Spanish banks

Market

IB shares has raisen more than 100% , from below 2 Euros/Share to 4 Euros/Share in 9 months.

It's mandatory to report to the market authority the accumulation of more than a 5% of IB shares.

Last month State Street Bank reported surpassed the 5% limit on behalf of a 3rd party.

Last week, Apax Partners announced that have surpassed a 5% of IB shares .

Daily trading of IB shares raised from a 2% of IB's capital daily to more than 5% daily. Huge movements of IB shares in the last months.


In the meanwhile Texas Pacific Group , http://www.tpg.com/ , aproached IB . Everybody here believes that Texas Pacific came along with BA , so a succesfull TPG offer would mean IB stay at Oneworld , associated with BA .

However in the last week the Spanish govement warned that they don't want a Hedge Fund adquiring Iberia . The right opposition party shared the concern via it's economy speaker . This prompted that last thurday , IB managment asked TPG for the name of the necesary Spanish partner and if the offer came linked with an airline ( unofficialy , BA ) .

Sepla has said that they prefer an industrial partner over a Hedge Fund ... in other words , the extremly powerfull pilots unions favors the Lufthansa bid over the Texas Pacific Group bid ... .


Inside IB , the CEO Conthe favors BA while the CFO ,and chief strategist , Dupuy De Lome favors Lufthansa .

Both IB and LH CEO's denied the same morning ,that any "formal" meger talk were taking place between IB and LH , obviously the formal merger talks will be announced in the joint press conference that will de facto announce the merger.

LH CEO has been trying to cool IB shares with comments that IB shares were to expensive , etc ... last minute intentions to get a cheaper deal from minority shareholders ( unofficialy at 3.90 ).

In the next 2-3 weeks it's expected TPG to make a formal bid . When the first formal bid will be launched , in the next 30 days additional bids should be made , the Lufthansa bid plus perhaps some last minute surprise .

By the end of May , beginning of June the winner will be know , but few people here doubts that it will be Lufthansa plus a new Spanish Investor.

The Spanish investor is rumored to be ACS , the biggest european construction company that in the last week has adquired a 25% of Germany's #1 construction company Hochtief . ACS has 3 billions Euros at his disposal from a live credit line for adquisitions .

http://www.grupoacs.com/index.php/en/

ACS owns 20% of Clickair along with Iberia .

The other rumored Spanish partner for Iberia is Grupo Marsans, www.marsans.es , owner of Aerolineas Argentinas , Air Plus Comet .

Marsans CEO , Gonzalo Pascual , is the current Spanair president . Last thusday Marsans confirmed press reports that Gonzalo Pascual was in Germany ... without giving further explanations.


Numbers also favors the LH option for IB .

66% of Iberia passenger on intra-european routes out of MAD are transit passengers most of them to the long-haul south american routes . Only 33% of IB passengers out of MAD airport arrive or depart from Madrid .

European country of origin of LatAm routes:

1) Germany
2) Italy
3) France
4) UK

LH control #1 feeder market of IB long-haul routes , and has a deep foot on the #2 Italy . In contrast , BA only controls the #4 market.

There are significant german comunities in Argentina , Brasil , Chile , plus an increasing mutual comercial interest .

BA show lack of commitment for the Oneworld alliance . BA flights to Spain wouldn't move to new T5 at LHR , plus multiple others examples .


IB and LH fleets are similar . LH is #1 A-340 operator , IB is #2 . Both companies have large , rather modern fleets . In contrast BA has an old 747 fleet with some planes reaching the 20 years . Few weeks ago 5 BA 747 went technical simoultaneously , causing havoc on BA's long haul schedule ... we must remember this .

Given the deep links of IB with LAN , its reasonable to think that LAN would follow IB steps into Star Alliance .

Spanair shouldn't been any kind of a problem . SAS has put the "FOR SALE" on Spanair for years , without anybody interested ... . Hundred of millions of Euros of losses at Spanair . When Iberia launched Clickair , the chief Spanair pilot recruiter leave Spanair to lead Clickair pilots . Senior pilots and FA are leaving the Spanair boat and aproaching Iberia . By the way Spanair no longer operates long haul routes . The few they operated , the last ones to China , were a complete disaster .

While reading on this forum I have read from multiple posters that "Iberia don't deserve to be on the Oneworld Alliance" , ".. i book on iberia.com only to fly on BA metal on the codeshare ...." , "..avoid Iberia like the plague .. " , etc ,etc ... well , the desire of lots on this site will be fullfilled ... by June LH will take control of IB .

Obviously IB will swith to Star Alliance , http://www.staralliance.com , as soon as possible .

Anybody know what is the minimun warning period for an airline to leave oneworld ?

The combined LH-IB will be the biggest airline in the world based on revenues of more than 20 billion euros . More than 80 Millions passengers per year .

The combined fleet is awesome .

LH-IB Hub network

FRA... LH
MUC... LH
MAD... IB
BCN... XG
VLC... YW
ZRH... LX


LH CEO said last week that they expect 1 Billion Euros of operating results for 2007 . IB expected 250 Millions for 2007 , before the additional 100 Millions of extraordinaries coming from the Amadeus , www.amadeus.net , re-financing operation . By the way both IB and LH uses Amadeus , as both of them along with AF created the system .


It makes much more sense for IB an alliance with LH than with BA .

You must be joking.

Thanks al200 for your very interesting post

I found several points particularly fascinating - that country of origin information for transfer pax at MAD made interesting reading , would you have the actual numbers of transfer pax from those 4 countries as well as the ranking ?

I have added a couple of comments below with regards to parts of your post


Spanair shouldn't been any kind of a problem . SAS has put the "FOR SALE" on Spanair for years , without anybody interested ... . Hundred of millions of Euros of losses at Spanair . When Iberia launched Clickair , the chief Spanair pilot recruiter leave Spanair to lead Clickair pilots . Senior pilots and FA are leaving the Spanair boat and aproaching Iberia . By the way Spanair no longer operates long haul routes . The few they operated , the last ones to China , were a complete disaster .

I didn't realise that JK ever operated to China , I thought that was UX ?



Anybody know what is the minimun warning period for an airline to leave oneworld ?

Things moved very quickly when CP was taken over by AC - according to the Oneworld website the announcement was made 14 March 2000 that CP would withdraw effective 1 June 2000 , a timeframe of a little less than 3 months from the announcement to the termination of membership .


http://www.oneworld.com/ow/news/details?objectID=1558

I'm not going to bother to critique all statements from our 'cultural differences' poster but he should be aware that AA left IB's share register last year. Seems there are quite a few other statements he posts as fact are also clearly fiction.

BA says it's considering a consortium offer for IB.

http://news.bbc.co.uk/1/hi/business/6582579.stm

No surprise there......

Personally I think most of us need to take a deep breath and wait to see what happens. The IB story has a lot of legs left in it and we really are still only at the beginning.

I believe i read somewhere that if IB is taken over by an offshore company that they lose landing rights or something along those lines (can someone corroborate), if so, doesn't it mean that a 49% stake is the most that a consortium or companies can reach.

Also, if LH were to buy them, would there be somesort of rebranding move, or would the fleeting IB remain IB....

Hope I got it correct from my last lecture about aviation... The question of landing rights can be a tough issue. For IB, it all depends from the bilateral agreements between Spain and the third countries IB flies to (this does not affect European and all other flights which operate under an open market/open skies agreement).

Let me make an example to clarify: if Spain and Country X have an agreement that regulates flights between the two countries and this agreement includes limitations based on nationality (i.e. only Spanish and Country X carriers can fly these routes), then the takeover could become a problem. If more than 50% of IB is taken-over by BA/LH and therefore IB becomes a British/German company, it might lose the flight rights that are sealed in this kind of agreements (since IB wouldn't fulfill the nationality requirement anymore). The Spanish government would in this case have to renegotiate a new agreement with Country X (and all other countries with similar agreements) to avoid the loss of such rights for IB. Technically, I think it's a question of introducing the so called 7th freedom in the bilateral agreement (i.e. the right to carry passengers between two foreign countries without continuing service to (or originating service in) the carrier's own country). Hope some of the experts can help on this last point.

This is exactly what is happening in Switzerland too. LX hasn't officially been taken over by LH yet (shares are being held in a trust), since the Swiss government is negotiating new bilateral agreements to prevent LX from losing these rights when it becomes a German company.

Ownership rules aren't necessarily a problem. Witness the APA takeover proposal for QF.

the LX situation is slightly different as Switzerland is not in the EU ( although IIRC there was some sort of peculiar arrangement where the old SR was counted as an EU carrier so that it could take over the old SN )

For airlines from EU member states things are slightly different don't forget that over time the individual bilaterals between EU member states and other countries are being amended as they come up for renegotiaton to prevent discrimination on a carrier basis - for example last year the New Zealand - UK bilateral was amended to state that any EU carrier can operate UK-New Zealand services , it may take a few years but eventually these sort of agreements will be in the majority and then ownership will be less of an issue so long as it remains within the EU.

Incidentally , how did JK manage a few years ago when they ran a small number of longhauls ops ( IAD , HAV and EZE IIRC ) because they are majority owned by SK which is definitely not a Spanish customer - the bilaterals didn't seem to stop them then .

Updates from the pink paper

and thomson

Many have already been renegotiated already.

The nationality clause allows the other party to object to the designation of an airline which is not owned and controlled by nationals of the other party, but they do not have to. Cuba and Argentina were probably not bothered that JK was controlled by SK and did not feel the need to object. Ditto with the US. The US has generally not been too bothered about this issue, as long as the country the controlling airline comes from has an open skies agreement with the US. Had JK been controlled by BA rather than SK, then the US would most certainly have objected to JK flying to IAD.

I thought you really meant the pink paper and wondered why they would cover that story.:D To me, the FT is salmon rather than pink.:)

According to Pearson, the owners, the FT is pink.
http://www.pearson.com/index.cfm?pageid=14

Apparently BA has signed on/will sign on with TPG's bid... Of course, we all know how their Qantas Bid worked out...

Link

And IB turned a profit in Q1

Link

BA confirms its bid:

The Guardian

Financial Times

OK, this is very strange. Iberia completely ignored the bid today during the shareholders' meeting apparently-no discussion of it whatsoever.

Link