Here’s our weekly aviation business briefing for the week beginning Monday 16 October 2017.
Welcome to our weekly aviation business briefing for the week beginning Monday 16 October 2017.
Air Berlin confirmed last week that it is to suspend operations from Saturday 28 October 2017. The airline has already suspended long-haul operations. Its frequent flyer programme TopBonus, which operated as a separate legal entity, had also closed. Flights operated by NIKI will continue. easyJet announced late on Friday afternoon that negotiations are still underway for it to acquire a substantial part of Air Berlin’s operation at Berlin Tegel airport. Lufthansa is due to acquire a substantial number of Air Berlin aircraft and its subsidiaries Niki and LG Walter. It is now something of a given that the Air Berlin brand will not survive. Oneworld has yet to announce when Air Berlin will leave the alliance. For legal reasons, it may not officially leave the alliance until some time after it has suspended operations (this was the case with former member Mexicana). Continue reading “Aviation Business Briefing – Monday 16 October 2017”
Here’s our weekly aviation business briefing for the week beginning Monday 9 October 2017.
The big story last week was of course the collapse of Monarch (Financial Times) which now joins bmi British Midland, Flyglobespan, XL Airways, and Zoom in the great airline graveyard in the sky. The Civil Aviation Authority fielded an impressive rescue to operation to bring passengers back to the UK. As of Saturday 7 October 56,000 Monarch customers have returned to the UK.
It now falls on KPMG to complete the administrative process. As no buyer could be found, it is near certain that the Monarch brand will not take to the skies again.
Here’s the first of our weekly round-up of aviation business news, published every Monday at 07:00 UK time.
A major theme in European aviation this year has been another wave of consolidation in Europe. This time it has been forced by Air Berlin, Alitalia and Monarch entering into administration procedures. easyJet, International Airlines Group, Norwegian and WizzAir have all been identified as potential buyers for Monarch’s short-haul business. However, the main value to these airlines will be its slot portfolio at London Gatwick. Full details of the Civil Aviation Authority’s plans to bring stranded passengers back to the UK are on its website.
Air France KLM is to acquire a 31% stake in Virgin Atlantic and will operate a transatlantic joint-venture with Delta Air Lines.
Air France KLM, Delta and Virgin Atlantic have today announced a significant series of transactions which will see Sir Richard Branson’s Virgin Group cede control of Virgin Atlantic.
Virgin Atlantic is currently 49% owned by Delta Air Lines and 51% owned by Virgin Group.
Air France KLM is to acquire a 31% stake in Virgin Atlantic for £220m, reducing Virgin Group’s ownership of the airline to 20%. Sir Richard Branson is to retain the position of President.
Separately, Delta Air Lines and China Eastern will each acquire a 10% stake in Air France KLM for a combined sum of €751m.
Virgin Atlantic will retain its name. In order to preserve all of its flying rights, it remain a majority UK owned airline with an Air Operating Certificate in the UK. (Quite how this will be achieved has not been disclosed.)
In addition, Virgin, Delta and Air France KLM are to operate a combined transatlantic joint-venture between Europe and the United States. At present Delta has separate transatlantic joint-ventures with both Air France-France and Virgin Atlantic.
Operating a combined joint-venture will mean that Virgin will codeshare on Air France KLM’s transatlantic routes from Paris and Amsterdam and allow reciprocal earning of frequent flyer miles and recognition of frequent flyer benefits. Virgin and Air France KLM will also benefit from access to each other’s corporate customer bases.
There are a few unknowns:
Nothing has been said about whether Virgin Atlantic will join the SkyTeam alliance of which Delta and Air France KLM are members.
When Delta acquired a 49% share in Virgin Atlantic there was a significant restructuring of its route network with routes to Tokyo, Cape Town, Mumbai, and Vancouver suspended. Virgin has also suspended Accra, Nairobi and Sydney. This has left only Dubai, Shanghai, Johannesburg, Lagos, and Delhi as non-US long-haul routes from London. It’s not clear whether these will remain or be removed in favour of codeshares from the respective hubs of KLM and Air France.
The press releases refer to co-location at key hubs to improve connectivity and achieve cost savings. One of these is London Heathrow. Currently Delta and Virgin Atlantic fly from Terminal 3. Air France and KLM operate from Terminal 4. Consolidating all operations in one terminal would make sense, but would involve a lot of upheaval.
It’s also not clear whether Virgin’s frequent flyer programme “Flying Club” will remain in the long term or be merged with Air France KLM’s “Flying Blue”. Today’s release refers to an enchanced frequent flyer partnership. However, a combined flying programme could be a powerful rival to the British Airways Executive Club and Avios currency, particularly given that KLM has a substantial presence at UK regional airports.
Whilst today’s announcement has been heralded as positive news, it has to be noted that Virgin Atlantic is forecast to make a loss this year. Furthermore, with Virgin suspending London Heathrow – Chicago it was arguably struggling to compete against its transatlantic rivals.
As for Sir Richard Branson, this does effectively mean the end of his ambitions in the aviation industry. Whilst the Virgin name will remain, he will no longer control the airline. The Virgin Group has disposed of many businesses over the years, but it had always maintained that it would keep control of Virgin Atlantic, this business most closely associated with his public persona.
British Airways gains a new Chief Executive Officer this week as its current CEO Keith Williams, who has occupied the role since January 2011, has retired.
Keith will be replaced by Alex Cruz. Alex was previously CEO of Vueling, the Low Cost Carrier with its principal hub in Barcelona and smaller hubs around mainline Europe.
Alex’s appointment is an internal move as both British Airways and Vueling are (along with Aer Lingus and Iberia) part of International Airlines Group (“IAG”). The two airlines do co-operate with codeshares on each other’s short-haul flights.
What are we to make of this move and what does it mean for the future of BA?
This post is perhaps for students of aviation rather than the travelling public at large, but it is something worth noting in any event.
We have written much in recent years about British Airways’ International Airlines Group (“IAG”) sibling Iberia, and the wildly divergent financial performance of the two airlines since the formation of IAG four years ago in 2011.
Since Iberia started to report very heavy losses in 2012, IAG has taken a number of steps to improve the performance of Iberia.
This has included a complete overhaul of its senior management by a new CEO and (after bitter and unedifying industrial action with some rather unpleasant anti-British sentiment) reaching new collective agreements with its pilots and other staff working groups.