Lufthansa decided to stop subsidizing budget imbalances at british midland and decided to sell it offer to British Airways’ parent company, which valued bmi’s slots at Heathrow. Lufthansa also made the decision to close its Italian subsidiary.
Now Lufthansa has come back to the table and reconsidered its position on bailouts: according to LufthansaFlyer, they’re going to provide financial support to (wholly owned) Austrian Airlines along with an imposition of austerity measures.
Lufthansa, 100% stakeholder in Austrian, has indicated its willingness to help Austria’s national carrier as it struggles through challenges in it’s business. Austrian has plans to potentially replace a portion of it’s 737 fleet with new Airbus A319′s and A320′s but can not finance the transaction without outside assistance. Austrian has indicated that Lufthansa would be willing to help, so long as it can demonstrate its ability to improve its operating costs structure.
Jaan Albrecht, the new head of the airline since November 1, 2011 (previously the CEO of Star Alliance Services) indicated that Austrian’s objective is to reduce costs by Euro 200 million in 2012. This should translate into profitability for the year. They hope accomplish this by staff cuts and route reductions.
I suppose in this drama the former head of Star Alliance running the airline is sort of like bringing in new leadership from the IMF or World Bank?
Aren’t airline alliances basically political organizations in addition to their financial relationships? Kralev’s book talks about managing membership like it’s the UN.
Lufthansa might have an interest to eventually acquire Austrian and make it a feeder carrier to Germany. Just like they’re doing with Swiss in Switzerland.
Financing the planes is probably a safer and more cost effective way than actually buying the airline. At the end, Lufthansa might own Austrian’s planes and Austrians value be peanuts..