Lufthansa to purchase bmi

by Grant Martin on

Lufthansa (LH) finally decided to pull the trigger today and purchase British Midland Airways, or bmi. The German carrier, who already has a 20% stake in the company will be taking over a majority share and absorbing the airline through the beginning of next year.

The merger had several strategic purposes. Primarily, as we’ve been seeing all this past summer, airlines have been keen to hook up to save on crazy fuel prices, operations and labor costs. Delta and Northwest are pulling the same hijinks in the States, and we’ve been hearing all sorts of crazy rumors about Continental and United and American. So in a way, it’s sort of a natural progression for the industry.

The other big advantage of to the acquisition is that now LH will have a larger share in landing slots at Heathrow, one of the world’s most sought after airports. This greater share will leverage the airline better against British Airways, who have the lion’s share of spots, and hopefully increase transatlantic revenue.

Conversely, from a miles perspective, many are considering this merger as the unfortunate loss of another great frequent flyer program. bmi’s Diamond club has always been one of the most generous, easy to qualify for programs, and as it gets usurped into Lufthansa’s Miles & More program, many are mourning the loss of their easy upgrades and lounge access around the globe. I suppose all good things have to come to an end.

Southwest and Air Tran to join forces?

by Grant Martin on

With merger and oil mania upon us, these days you can’t rule out any strange airline pairing. Just this week, Bob Fornaro, CEO of Air Tran mentioned in a conference call that they would be totally open to code-sharing and working with Southwest airlines in the future.

Does this mean that Air Tran and Southwest are up to something? As two of the largest low-cost carriers in the industry, their partnership could establish a dominant force in the domestic airline market and their complimentary routes could reinforce each other’s business. As Ray Neidl of Calyon securites is quoted in the article, “Crisis breeds strange bedfellows and the current economic malaise may be the incentive for them to do something even though they are competitive in some markets.”

Actually, from Fornaro’s verbage, it sounds like more of a cry for help than anything. I’m sure Air Tran has taken a big hit just like every other airline that has suffered in the last six months and would love a boost from Southwest’s business. Wouldn’t you want to buddy up with the only profitable carrier in the United States?

Despite Fornaro’s mewing, Southwest is being mum about the whole business and veritably shrugged off AirTran’s suggestions in this USA Today article. I suppose if you’re calling the shots you can make bedfellows with whomever you chose.

Alitalia may start canceling flights — can’t afford fuel

by Grant Martin on

Alitalia has been going through a bit of a rough patch of late. Even before the fuel crisis this past summer, Italy’s national airline was already struggling with poor service, unhappy unions and terrible management. Now, with costs going through the roof the airline is in some serious financial trouble.

Through the course of the summer, Alitalia has been looking for ways out of it’s tangle. For a while, we thought that Air France and KLM, the French and Dutch Skyteam partners, were going to usurp their counterparts, until unions and politicians weighed in on the deal and the buyers decided to back out.

Since then, the Italian government has been arguing about a few different options including a government takeover, but none have really matured to the point of stability.

Which brings us to Monday morning, which, after months of squabbling and mismanagement, has led to the airline still without strong leadership, with angry unions and with not enough fuel to fill its airplanes. According to the BBC, unless the airline comes up with some some significant cash or a strategy today, they “cannot guarantee” flights into the week.

As of this morning the airline is still in talks to be taken over by a Italian consortium of companies (including Benetton?) and merge with AirOne with plans to cut over 3,000 jobs, but nothing has been finalized. Keep an eye on your Alitalia flight if you’ve got one booked in the next week. It could be a rough week.

10 tips for smarter flying


British, American and Iberia Airlines to sign cooperation agreement

by Grant Martin on

The UK’s British Airways, American Airlines and Spain’s Iberia this morning announced that they would soon be cooperating on flights between North America and Europe while they would also start to collaborate and expand on other routes together in the Oneworld Alliance.

Are the airlines merging? No. But aren’t they already all part of the Oneworld alliance? Yes, they are. What the airlines have agreed to is tighter collaboration among their operations. Ground operations, codeshares and mileage programs will be better integrated to ensure seamless operation among carriers (read: keep passengers hooked in the alliance), while costs and overlapping spending will be reduced.

It’s important to note that the airlines will continue to operate independently, similar to the Continental and United collaboration announced earlier this year. What’s not clear is whether they will be collaborating on pricing. As Virgin Atlantic, the main competition, sulks about the conglomerate having over 50% of the landing slots at Heathrow, many have noted the potential for monopolistic pricing among the new bedfellows.

So will prices actually go through the roof? Technically, less competition in the market suggests that prices may have the potential to rise — but there are still plenty of carriers and entry points into the EU. American, British and Iberia may soon have a good handhold on Heathrow (Sorry, Virgin), but Amsterdam, Gatwick and Frankfurt are still wide open, so with a little bit of creative routing you don’t have to call of your summer vacation.

Several Oneworld airlines are filing for antitrust immunity to get the ball rolling on the cooperation agreement — should this get approved, expect to see small changes in operations over the course of the year.

British Airways and Iberia to MERGE

by Grant Martin on

Word coming in from Australia’s The Age is that British Airways plans to merge with Spanish national carrier Iberia in light of the tightened economy and fierce competition. The two are said to be in advanced talks in preparation for a merger, though several reports from the wire proffer conflicting reports about how complete the deals is.

Surprisingly, the European Union has already granted the two carriers permission to merge, in a process that is astonishingly faster than that in the United States (case in point, Northwest and Delta).

Operationally, the merger wouldn’t be outrageous; BA already owns a large part of Iberia, they are both in the Oneworld Alliance and both have a strong presence in Western Europe. And the unity of the two carriers would make BA a stronger player in the EU and transatlantic market…

At the very least, perhaps BA will enlighten Iberia a little bit on how to make their airline a little bit less of a crap bag. I have flown on IB several times in the past few years and am still dumbfounded at the poor quality of service on the carrier.

Details on the entire event are starting to come into focus as data stream into the interwebs — we’ll let you know how and if the merger works out.