High oil depresses value of airlines – No news there – but a bit of a pain if you are trying to sell one – or give one away….

Victoria
By Victoria April 17, 2012 21:23

High oil depresses value of airlines – No news there – but a bit of a pain if you are trying to sell one – or give one away….

As Lufthansa continues to struggle in its efforts to offload BMIbaby, the market is starting to discount the financial gain that will be brought from the sale of BMI. In fact some see the whole process as being such a potential burden in this market that BMIbaby could simply see operations folded.

Intro Aviation has ended talks to purchase BMIbaby after Lufthansa rejected a non-binding offer and charter airline ACL has also walked away. Intro Aviation will most likely resume talks again once IAG runs the show.

However, under the terms of the IAG deal agreed in December, which is due to complete this week, IAG would pay £172.5 million ($274 million) for BMI. At the same time IAG is said to have negotiated a significant discount on the terms of the BMI deal should Lufthansa fail to find a company willing to take-on BMIbaby. It all looks like bad news on the way for the leased BMIbaby fleet of 737s and Lufthansa but good news for IAG.

Meanwhile over in Portugal: Several international operators have expressed an interest in purchasing TAP, its chief executive Fernando Pinto said today – attracted by its routes to South America and Africa. “I cannot give names but what I can say is that the privatization is generating great interest,” Pinto confirmed.

Portugal’s government has promised to privatize TAP and must do it sooner rather than later as Spin is moving towards a bailout and Portugal will be right behind it for bailout number 2 if Spain were to go down. So Portugal has a window of opportunity that it should take. Of course we know that Emirates, Etihad, Qatar and IAG could fund a purchase and TAP, like the rest of us, knows full well that IAG must get the airline if it wants to control the Atlantic in the future. Hence a good premium looks likely at the moment as all airlines and investors look to Brazil as the market of the future.
TAP covers 75 routes in 34 countries. Pinto added that it will be up to the Portuguese government to decide if it wants to privatise the whole company or just part of it.

Victoria
By Victoria April 17, 2012 21:23
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