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Airline Finance News - Europe.

Oct 4, 2009

Aviation and shipping should cut their respective carbon dioxide emissions to 10 and 20 percent below 2005 levels over the next decade, the European Union is likely to propose at global climate talks this week. EU diplomats said the cuts might be linked to a tax on fuel to generate billions of dollars of revenues to help poor countries cope with climate change -- a key contribution to finding a global climate deal by December. "We are concerned about the slow international negotiations and are keen to shift gear," said an EU diplomat involved with the proposal. "This is a concrete measure from the EU side in order to contribute to this step-up." After fine-tuning the proposal, the EU will present it at a meeting in Bangkok where climate negotiators from up to 190 nations will try to revive momentum towards a deal to replace the Kyoto Protocol from 2013. Aviation and shipping are not covered by Kyoto, the global climate change treaty agreed in 1997. Britain, Ireland, France, the Netherlands, and most eastern European states have already indicated support for a cut of 20 percent or more to shipping emissions, compared to 2005 levels, according to a document seen by Reuters. But seafaring nations including Malta, Cyprus, and Spain favour easier reductions. There is also debate over the base-line year. Sep 28, 2009

Air Europa

Spanish airline Air Europa is to strengthen its UK team as sales and traffic on its new London route continue to improve. Colin Stewart, Air Europa's UK general manager, said his three-man commercial team was stretched and would need to grow in order to target both business and leisure customers. Mr Steward told ABTN his ultimate goal would be to follow the example set by other Air Europa offices which have grown their teams in line with demand. "They have people focusing on business, people focusing on leisure and others focusing on groups. That's ultimately where I want to go, but that will take time and we're monitoring that," Mr Stewart said. Mr Stewart said that he was also looking to move the team's headquarters in the coming months though nothing has yet been confirmed. He said the team would naturally be reviewed during this "period of transition". Month-on-month sales on the London Gatwick-Madrid route have improved since it began in March this year. But Mr Stewart admitted that the winter months ahead would be hard for Air Europa, Spain's second largest airline, and the industry as a whole. Sep 28, 2009

Airbus, Singapore Airlines

Airbus parent EADS CEO Louis Gallois told Reuters yesterday that the company has been in discussions with Singapore Airlines about pushing one of the carrier's A380 deliveries from December to January, which would lower the manufacturer's 2009 A380 delivieries from 14 to 13. Sep 30, 2009

American Airlines

American Airlines and fellow OneWorld alliance partners British Airways and Iberia face fresh European Union antitrust hurdles as they look to extend their pact to include coordinated schedules and prices. The airlines had planned to deepen the pact to take advantage of the U.S./EU "Open Skies" agreement, with the focus on routes between the United States, Mexico, Canada, the EU, Norway and Switzerland, but European Union regulators said the latest plan may violate antitrust rules on restrictive business practices. Alliances are seen as a lucrative alternative to mergers and large-scale investments. The three carriers have applied for U.S. government antitrust immunity for their transatlantic pact. The European Commission, which in April launched a probe into both the three Oneworld members and the Star Alliance, made up of Air Canada, Continental Airlines, Lufthansa and United Airlines, said it had sent a charge sheet to the three Oneworld members. Oct 2, 2009

Austrian Airlines

Austrian Airlines Group is increasing the number of potential layoffs as a result of its acquisition by Lufthansa. CCO Andreas Bierwirth told the Austrian Press Agency that "the total workforce could be reduced to 6,000" by the middle of next year, as opposed to the originally planned 6,500. "In several areas, it is necessary to reduce the workforce more than planned." As many as 300 of those jobs could come from Austrian's Vienna maintenance operation. "AAG has to operate profitably when ticket prices are down," Bierwirth said. Sep 28, 2009

Austrian Airlines, Lufthansa

Austrian Airlines Group said it will present its "Austrian Airlines Next Generation" plan on Oct. 6 in Vienna. "We'll announce the concept and strategy for how the company will be integrated into Lufthansa, where help is needed from LH and so on," a spokesperson said. Oct 1, 2009

British Airways

British Airways announced that it will charge for seat reservations, a move that Unite, the UK's largest aviation union and the largest union representing workers at British Airways, says is causing the airlines to suffer from an identity crisis. Unite believes this move tarnishes the carrier's image further and is yet another misguided attempt to mimic low-cost airlines. Unite warns hefty charges - around GBP60 to book an aisle or window seat - for passengers already paying premium prices wishing to select seats on-line or sit together as families will drive customers away from BA. Steve Turner, Unite national officer for civil aviation, described the announcement as "complete madness from a management team rapidly losing its way and undermining the proud standing of British Airways as the UK's national flag carrier. Sep 29, 2009

British Airways

British Airways is starting a business-class-only service from London to New York tomorrow, may eliminate some short-haul flights to restore earnings. OThis is an airline that really has to bite the bullet on short-haul, looking long and hard at what itOs costing and whether they can ever get a decent margin out of it,O said Howard Wheeldon, senior strategist at BGC Partners LP in London. OSome U.K. and European routes have a very limited future.O Fares between European countries have declined as discount carriers Ryanair Holdings Plc and EasyJet Plc grab market share. Trips such as London to Paris, the route where British Airways pioneered the first international air service in 1919, may be among the first to go because of the shrinking profit margins and the impact of the competing Eurostar high-speed rail service, Wheeldon said. British Airways is already the biggest carrier between Europe and the U.S. The business-class-only experiment from London City airport will help Chief Executive Officer Willie Walsh determine whether the company can fill planes with people flying to and from the U.K. capital alone, or if it still needs a substantial European network to feed passengers from around the region onto long-haul flights. Sep 28, 2009

British Airways, American Airlines

"This alliance between British Airways and American Airlines is a monster monopoly which, if given the go-ahead, will allow these dominant carriers to increase their stranglehold at Heathrow," -- Virgin Atlantic CEO Steve Ridgway. A pact to cooperate on schedules and prices between British Airways, American Airlines and Iberia may have violated EU antitrust rules, European Union antitrust regulators said Friday. The airlines, part of the Oneworld alliance, had planned their transatlantic tie-up to take advantage of the US/EU "Open Skies" agreement, with the focus on routes between the United States, Mexico, Canada, the EU, Norway and Switzerland. The European Commission, which in April launched a probe into both the Oneworld alliance and the Star Alliance, said it had sent a charge sheet to the Oneworld members. "The Commission's statement of objections concerns agreements... regarding the coordination of the parties' commercial, operational and marketing activities in relation to passenger traffic on transatlantic routes," the EU executive said in a statement. Virgin Atlantic on Friday said the antitrust concerns were justified. "This alliance between British Airways and American Airlines is a monster monopoly which, if given the go-ahead, will allow these dominant carriers to increase their stranglehold at Heathrow by setting prices and agreeing schedules," Virgin's CEO, Steve Ridgway, said in a statement. The Commission, the EU competition watchdog, said its investigation into the Star Alliance was continuing. Oct 2, 2009

British Airways, Bmi

Willie Walsh, the chief executive of British Airways (BA), expects to complete the airlineOs merger with Iberia before the end of this year. Mr Walsh has also expressed an interest in buying bmi, the former British Midland, from Lufthansa, although no formal talks have been held. The BA boss was speaking aboard BA001, the new business-class only service launched on Tuesday, from London City airport to New York. His bullish outlook for the talks between BA and Iberia, the Spanish flag carrier, comes despite 14 months of difficult negotiations in which the two sides have hit numerous roadblocks. Related Links Mr Walsh said: OI would hope that it could be done by the end of the year. ItOs gone on for far too long to be honest but that has not distracted us from what needs to be done.O Among the problems facing the two carriers is BAOs pension fund deficit, which is thought to have doubled in size to about [pounds sterling]3 billion. The carriers have also struggled to agree the corporate structure and how much each set of shareholders will own in the new company. In a wide-ranging discussion, Mr Walsh also held out the possibility that BA could bid for bmi if Lufthansa, the German flag carrier, decides to sell. Sir Michael Bishop, bmiOs former controlling shareholder and chairman, exercised an option that forced Lufthansa to buy his stake for about [pounds sterling]220 million earlier this year but the Germans are understood to be considering their options. They are believed to have invited a number of airlines, including BA, to look at bmiOs accounts but no decision has been made on what to do next. Mr Walsh said: OIf Lufthansa is looking to sell we would be very interested in buying it. We believe we could make a credible offer. Lufthansa wants to evaluate all options and I am not going to signal what I would be willing to pay. If Lufthansa are willing to sell, we are willing to talk.O However, any bid by BA for bmi would face regulatory hurdles because the combined airline would control over half of all landing slots at Heathrow, the worldOs busiest international airport. BA would also struggle to raise the [pounds sterling]500 million that Lufthansa is likely to ask for bmi. Sep 30, 2009

British Airways, Iberia

British Airways today said there was a chance it could close a merger deal with Iberia by the end of the year. BA's ceo Willie Walsh told reporters talks with the Spanish airline were progressing despite having gone on for so long. Mr Walsh said the size of BA's pension deficit, a stumbling block to negotiations, was still a significant issue, the Financial Times reported. But he said he believed the deficit would not prevent a merger despite concerns raised by Iberia. Mr Walsh also confirmed his interest in making an offer for fellow British carrier bmi. But there has been no indication that talks with bmi's current owner Lufthansa have started and BA has refused to comment further. Speaking onboard BA's inaugural London City-New York JFK flight today, Mr Walsh told reporters it would possible to do both the Iberia and bmi deals. Earlier this month BA dismissed reports that it was in talks with Lufthansa over ownership of bmi. Sep 30, 2009

CSA Czech Airlines

Only one bidder has put in an offer for CSA Czech Airlines, it was confirmed after the deadline of September 30 passed. The sole bidder is understood to be a consortium of Travel Service, a Czech charter airline company, and Iceland Air Group Holding. After Air France KLM dropped out of the bidding in August, no other potential buyers have come forward, despite an extension of the deadline by the Czech Republic government. The government is seeking to sell off the airline which was once valued at around EUR 195m. But the consortium has reportedly offered only amp;euro;58m with the proviso that the government pays EUR 41m to cover a hole in the airline's accounts. In return the consortium would take over the airline's other debts, said to amount to more than EUR 133m. www.czechairlines.com Oct 1, 2009

Etihad Airways, Airbus

Etihad Airways completed its first European export credit agency-guaranteed transactions covering USD 233 million to finance the purchase of two A340-600s. In the first deal, HSBC Bank, acting as the mandated lead arranger, lender, facility agent, security trustee and hedge provider, will furnish financing valued at USD 122 million to the airline over 12 years. The second USD 111 million agreement was signed with Landesbank Baden-Wuerttemberg, which acted as mandated lead arranger, lender, facility agent and security trustee. Debt placement for this deal was undertaken by SkyBlue Capital LLC. Both loan facilities are guaranteed by the UK ECGD with re-insurance provided by France's Coface and Euler Hermes of Germany. Oct 2, 2009

Flybe, Lufthansa, Bmi

Flybe has approached Lufthansa about buying parts of bmi, Mike Rutter, its chief commercial officer, confirmed today. Mr Rutter told ABTN at the World Low Cost Airlines Congress in Barcelona, that Flybe was an "acquisitive airline" and parts of bmi could be a "potential fit". He said the parts of bmi, now 80 percent owned by Lufthansa, in which Flybe, the UK's biggest domestic carrier, was interested were its regional operations and domestic operations out of Heathrow. Bmi, which its former chairman Sir Michael Bishop sold to the German carrier this year for a total of GBP 223m, owns 12 percent of the slots at Heathrow. Mr Rutter said the approach to Lufthansa was not connected to a similar inquiry by BA. Sep 29, 2009

IATA

IATA today released its assessment of traffic data for August 2009 showing an improvement in continued falling demand compared with July, but fares continue to be depressed. The association estimates international traffic for August fell 1.1 percent year-over-year, which is an improvement over the 2.9 percent drop posted in July. Decreases in freight demand also slowed in August, dropping 9.6 percent year-over-year compared with an 11.3 percent decrease in July. IATA explains carriers have cut daily aircraft utilisation to better match capacity with demand. Using the Boeing 777 widebody as an example, the association estimates average daily hours globally for that specific fleet type fell 2.7 percent through the first eight months of 2009 to 11.1 hours per day. However, the association warns that "spreading fixed asset costs over fewer hours in the air pushes up unit costs". Along with the rising unit costs resulting from lower utilisation carriers also face challenges in raising fares as IATA estimates average fares continue to be depressed. Premium fares fell 22 percent year-over-year in August with prices for economy tickets dropping 18 percent. Sep 29, 2009

IATA

The decline in air passenger volumes is continuing to slow, figures from the International Air Transport Association (IATA) revealed today (September 29). Results for August showed demand down 1.1 percent year-on-year compared to the 2.9 percent decline seen in July. Despite the improvement IATA's director general and ceo Giovanni Bisignani said airline profitability remained "ever distant" with lower frequencies pushing up unit costs. IATA said airlines in August had lowered aircraft utilisation to match demand, resulting in improved load factors. Fares last month also "continue to be depressed", down 22 percent for premium travel and 18 percent in economy class year-on-year, the Association said. Mr Bisignani said: "Fares have stabilized, but at profitless levels. Meanwhile cost pressures are mounting from reduced aircraft utilization and rising oil prices. The industry is not out of the woods yet." Passenger demand factoring in seasonal differences had improved on the March 2009 "low point," IATA said. But demand was still 5 percent lower than in May 2008 when passenger traffic first showed a decline, the Association added. Sep 29, 2009

Iberia

Spain's Iberia is ready to explain its pact to cooperate on schedules and prices with British Airways and American Airlines to the European competition authority after the watchdog expressed antitrust concerns, a spokesman said Friday. "The EU is saying that they see a series of matters that need to be resolved. We're looking forward to sitting down and looking for remedies," the spokesman for Iberia said. Earlier, the EU said the airlines' pact may violate EU antitrust rules. Oct 2, 2009

JAT Airways

JAT Airways said yesterday that its fleet was grounded owing to a strike by JAT Tehnika mechanics that service its aircraft. The mechanics reportedly are protesting the airline's failure to make payments to JAT Tehnika in a timely manner. "We are negotiating and expect to find a solution," a spokesperson for the Serbian carrier told Reuters. "Our debt to JAT Tehnika is USD 1.5 million and we never disputed that. We are a month behind in paying it." JAT Tehnika has 900 employees. Oct 2, 2009

Lufthansa

With effect from November 1, 2009, Lufthansa-related UK holding company, LHBD Holding Limited (LHBD), will take over a further 20 percent stake in British Midland PLC (bmi). These shares are currently held by the SAS Group (SAS). Consequently LHBD will hold 100 percent in bmi. Under the terms of the agreement, LHBD will acquire the 20 percent stake for approximately GBP 19 million. Furthermore, Lufthansa will pay SAS another GBP 19 million for the cancellation of its rights resulting from the shareholder agreement dated 1999. Should Lufthansa decide, on the background of its strategic analysis, to sell bmi completely or parts of the company, SAS will under certain conditions receive an additional payment, within the next two years. Oct 1, 2009

Lufthansa, UTair

Lufthansa Consulting signed a deal with UTair to identify new network growth opportunities for the Russian carrier, starting in July and due to be completed in September. Sep 29, 2009

SAS Group, Bmi, Lufthansa

SAS has held a 20% stake in the UK based British Midland PLC. According to the Core SAS strategy with focus on the Nordic home market this stake has been set out for divestment. LHBD Holding Ltd. holds 80% of the shares in bmi since July 1 2009. LHBD is a UK-based company, in which Deutsche Lufthansa AG holds a 35% stake. On September 30 the SAS Group has reached an agreement with Lufthansa and LHBD to sell SAS 20% stake in bmi to LHBD. Under the terms of the agreement LHBD will acquire the 20 % stake for approximately MGBP 19 million. Furthermore Deutsche Lufthansa AG will pay SAS another MGBP 19 million for the cancellation of its rights resulting from the shareholder agreement dated 1999. In total SAS will receive a cash consideration of MGBP 38 resulting in a capital gain of approx MSEK 420. SAS will receive an additional payment from Lufthansa if further value in bmi can be realized within a period limited to 2 years. Following the transaction, SAS will remain with a maximum exposure of MGBP 19 within a period limited to 2 years, in case of material adverse financial development of bmi and lack of financial support from Lufthansa. SAS has been a shareholder in bmi since 1989 and SAS will continue to cooperate with bmi through its Star Alliance membership. Oct 1, 2009

Saudi Arabian Airlines, Airbus

Saudi Arabian Airlines took delivery of its first A320, acquired under a long-term lease agreement with ALAFCO. It will deploy the aircraft from Riyadh to routes in the region as well as to Europe and to the Indian subcontinent. Oct 2, 2009

TUI Travel

TUI Travel PLC, Europe's largest travel operator, Tuesday said it plans to raise GBP490 million to refinance its shareholder loan with parent TUI AG and warned its winter booking volumes remain lower than last year. TUI also said it would cancel almost half its orders for Boeing Co.'s delayed new 787 aircraft. TUI Travel raised GBP350 million by issuing to international institutional investors senior unsecured convertible bonds due 2014, which will convert into about 7% to 8% of shares on maturity. The conversion price has been set at 349.3 pence per share and carries a 6% coupon. It also will arrange a further GBP140 million in revolving credit facilities, maturing in June, 2012. TUI Travel is deferring the final repayment of GBP150 million of the TUI AG loan to April 30, after net debt passes a seasonal peak. TUI Travel's existing shareholder loan from TUI AG currently amounts to GBP900 million and is due for repayment by Jan. 15, 2011. TUI AG has agreed to waive in part previous terms that require TUI Travel to repay the loan if new external financing is raised. TUI AG, which holds a 51.6% stake in TUI Travel, won't participate in the convertible bond but intends to purchase a sufficient number of TUI Travel's shares to avoid dilution of voting rights. TUI Travel expects TUI AG to buy about 2.5% of existing stock. TUI Travel Chief Executive Peter Long said: "The financing measures announced today allow us to commence repayment of our shareholder loan in a pro-active manner and will also allow us to continue to take advantage of attractive M&A opportunities." It announced it has spent GBP55 million entering into a strategic venture with tour operator Sunwing to strengthen its position in the Canadian market. It will take a 49% interest in the venture. Sep 29, 2009

Welcome Air, Air Alps

Welcome Air, a small regional carrier based in Innsbruck and owned by Swiss Lions Air Group AG, is in the process of taking over Air Alps, an independent Austrian regional that is 76 percent owned by BZS Holding, a consortium of several Italian companies. Air Alps connects regional airports such as Bolzano, Rimini and Parma with Rome Fiumicino and also flies between Perugia and Milan Malpensa. It operates the flights in cooperation with Alitalia. Air Alps currently operates five 31-seat Dornier 328 turboprops. Sep 30, 2009

ZZ AirGuideBusiness 091005

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Publication:AirGuide Business
Geographic Code:4EUAU
Date:Oct 5, 2009
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