Patience is a Virtue: KLM & Its Pilots Reach Agreement
1 Shortly after negotiations between KLM and its pilots union seemingly reached an impasse, the pressure from the government has pushed the two sides to magically agree to a wage cut for pilots that will allow the Dutch government to move forward with a bailout package for the airline.
The pilots union agreed to a wage freeze through the life of the loan program, which is scheduled to last until 2025 or when air travel demand returns to pre-pandemic levels, whichever comes first. (So… we’ll just assume 2025.) KLM will receive a €1 billion loan from the Dutch government in addition to €2.4 billion in guarantees for bank loans.
Without the cash, the future of the 101-year old airline was very much in doubt. Despite €1.7 billion in losses in Q3, KLM is confident that the loan from the government combined with the reduced labor costs and a divorce from that mess that calls itself Air France (ok, that last part is really just wishful thinking) will allow the airline to navigate through these troubled financial times and continue distributing Delft houses in business class for the foreseeable future.
IAG Remains Interested in Purchasing Air Europa For Cheap
2 With cuffing season upon us, IAG — led by British Airways and Iberia — is poking around the finances of Air Europa to see if it is still ripe for acquisition.
IAG had originally agreed to purchase Air Europa way back in July of 2019 (nearly 100 years ago…or so it feels) for $1.15 billion. Because the deal hadn’t closed when the pandemic hit, IAG revised its offer, dropping it by nearly half down to $580 million this past July. That remains the current offer on the table, but it’s rumored IAG is willing to throw in an old 747 or two if that’ll seal the deal.
The Spanish government authorized a $555 million loan to Air Europa on Tuesday which has thrown a wrinkle into the current negotiations. IAG is currently waiting to see the full loan package and what conditions are attached before it will commit to going through with the purchase of the airline.
Those conditions include siestas for all staff — requiring the plane to be on autopilot for at least 60 minutes while the pilots rest — regardless of flight length. Additionally, IAG also is looking to secure one free annual flight for each of its staff to Ibiza on Air Europa as part of the conditions of the sale.
Mesa Receives $200 Million CARES Act Loan
3 Mesa Air has entered into an agreement with the US Treasury to receive a $200 million loan. The airline has borrowed $43 million right now and can take as much of the remaining $157 million that it needs between now and the December 15 deadline.
The agreement has two covenants — a minimum collateral coverage ratio and a minimum liquidity level. It also prohibits Mesa from paying dividends during the period until the loan is paid back. In addition, Mesa will be required to complete all its chores, cannot have anyone over after school until its homework is completed, and must drive its little sister to piano practice on Wednesday and Saturday afternoons.
Garuda Indonesia in Mergerpalooza
4 The Indonesian government is merging nine tourism entities under its control into one large conglomerate with hopes that this will improve performance. The move includes practical moves like merging Garuda Indonesia and Citilink — Garuda’s LCC subsidiary — and some far stranger moves including airports, hotels, a deparment store, and an ancient Buddhist temple. It’s rumored the new holding company will be called Allegis.
Garuda Indonesia president Irfan Setiapautra is in favor of the move, not because it makes business sense but because he expects the airline will receive more funding from the government and will be able to lower costs in the new arrangement. This comes a week after the airline cut 700 jobs due to a lack of air travel demand.
U.S. officials are monitoring this closely, intrigued by the idea of mashing unrelated companies together and hoping costs get reduced. Just imagine a merger between, say, JetBlue, The Mall of America, Mandalay Bay, Newark Airport, Seattle’s Space Needle, Nordstrom, the Hyatt Regency in Oakland and a Hilton Garden Inn in Murfreesboro, TN. So much synergy.
Aeromexico and LATAM Agree on Codeshare
5 Aeromexico and LATAM have come together to codeshare on flights to a combined 93 destinations throughout Mexico, Colombia, and Brazil.
The two airlines had been forced to couple brought together by Delta — a longtime Aeromexico partner that has also signed a JV partnership with LATAM — and they will now work together on routes throughout Latin America. As part of the agreement, LATAM will move its operation in Mexico City from Terminal 1 to Terminal 2, which is where Aeromexico operates.
In addition to a codeshare partnership, both airlines have also agreed to work together on a betting pool for the 2022 FIFA World Cup. The airlines will take payment from other Skyteam member airlines with entries costing $100 and the winner getting 50% of the prize pool. The other 50% will go to pay off creditors in LATAM’s and Aeromexico’s respective Chapter 11 bankruptcy reorganizations.
Airline Potpourri
- Austrian Airlines has introduced a new train route from Graz Central Station to Vienna Airport as a part of its “train to plane” program.
- flydubai will begin 2x-daily service from Dubai to Tel Aviv on November 26 thanks to the opening of relations between the two countries.
- Gulf Air is resuming service to Male (MLE) in the Maldives with 2x-weekly service from its Bahrain hub starting December 12.
- TUI Airways UK will not operate flights from England or Wales through December 2.
- Volotea announced it had a load factor of 90.1% in Q3 with 2.4 million passengers, a 23% drop from Q3 in 2019.
- YTO Cargo Airline has begun 3x-weekly freighter service between Hangzhou (HGH) in eastern China and Singapore (SIN). Despite its name, it isn’t flying to Toronto.
Andrew’s Moment of Levity
I taught a wolf how to meditate. He’s aware wolf now.