Study Group: Airline Industry Experts (EU)

GLG News^SM Analyses by this Study Group's Leading Experts(?)

Both AF-KL and Air One look as second-best partners for Alitalia, LH would have been the best

December 12, 2007

Analysis by:David Jarach, Managing Partner,

Analysis of:Air France, Air One lead charge for Alitalia; Lufthansa opts out | www.atwonline.com

At the end of the process, only AF-KL and tiny Air One have remained as the alternatives for the Italian Government to go ahead with Alitalia's sale. It is however quite doubtful that any of the two ones are really good partners for the troubled Italian carrier, given their historical strategic fit (AF-KL) and their limited business range (Air One). Lufthansa, that decided to stay out, would have been the real best-in-class choice to turnaround the Italian carrier, provided a full support from politicians and unions that eventually the German carrier was probably not able to get.

Increasing complexity for European LCC industry

August 30, 2007

Analysis by:David Jarach, Managing Partner,

Analysis of:Are European low-cost carriers entering maturity in their revenue and profit generation? | www.ft.com

- profit warnings from European LCCs leaders (Ryanair, Easyjet, Air Berlin) evidence increasing difficulties in shareholders' value generation in the cluster of the airline industry; - on the other hand, smaller players, like Vueling, are expanding their losses; - consolidation looks as reasonable to offset overcapacity, stop a downward pressure over yield and to rejuvinate economies of scale;

Alitalia case as a minor actor in a major European airline industry shakeout

July 23, 2007

Analysis by:David Jarach, Managing Partner,

Analysis of:Italian Government has to find another solution for Alitalia | www.ft.com

After the collapse of the Alitalia's sale process, with the last one of original 10 bidders having abandoned the game, it's now time for tough choices for the Italian Government. The past months showed that there is really little financial interest on the international market for Alitalia, most definitely as the Italian airline faces strong structural inefficinces due to union powers, mismanagement and an obsolete fleet asset. Although the Italian carrier has still some liquidity into pockets, cash will be burst as on December next. The most likely solution will be a direct negotiation by the Italian Government, which still owns 49.9% of Alitalia, with some players like Air France, Lufthansa, TPG or Air One. As Air France is currently implementing a bid for Spain's Iberia, Lufthansa may surprisingly bid the first one to be contacted, most definitely as the German carrier has proved effective in managing a multi-hubbing strategy with its Frankfurt, Munich and Zurich hubs.

US Military budget improves Boeing profitability

May 7, 2007

Analysis by:David Jarach, Managing Partner,

Analysis of:Boeing earnings 12% above expectations | www.bloggingstocks.com

- Boeing is performing better than direct competitor Airbus in the civilian market, where B777s and B787s are winning competition over the A350 and where B747ng is also promising better than A380;
- In the military market, Boeing is benefiting from improvement of US military budget;
- MRO business and aircraft conversions (from passenger to cargo, i.e.) is also growing as well.

USAirways Seem to Force the Issue

January 10, 2007

Analysis by:Andrew Dickson, Manager Director,

Analysis of:USAirways Increases Offer to Buy Delta Air Lines | online.wsj.com

•  The management of Delta is holding on, but the Delta creditors need to get paid, regardless of who the management is.

•  Consulting with Gordon Bethune (former Continental CEO) probably led to a move of putting in the highest offer by USAirways, and concluding that this has been taking too much time already.  Doug Parker has an airline to run.

•  Spending up for Delta, USAirways will have higher debt service, and needs to achieve its efficiencies.

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