SAS raises $75 million from Heathrow slot sale – Virgin uses its slots as collateral
SAS raises $75 million from Heathrow slot sale
Scandinavian Airlines (SAS) has sold two pairs of London Heathrow slots to an undisclosed buyer, raising $75 million from the transaction.
Before the sale, SAS had the sixth largest Heathrow slot portfolio with 19 daily slot pairs. This has now been narrowed to 17 pairs, although under the deal SAS can continue to use the two pairs for up to three years.
“Even after the transaction, SAS will continue to offer a strong and comprehensive network between Scandinavia and London Heathrow. The intention is to maintain the seat capacity to/from London Heathrow through the use of larger aircraft on remaining departures,” SAS said.
SAS, which operates from London Heathrow to Copenhagen, Oslo, Stockholm and Stavanger, will post the proceeds of the sale to its second quarter results.
This is not the first time SAS has sold off part of its Heathrow slot portfolio. In 2015, the airline sold a pair of slots to Turkish Airlines and—in a separate transaction—transferred a pair to an unnamed major carrier.
On 30 March 2012, the purchase of BMI by IAG was approved, subject to the condition that the combined group divest itself of 12 daily slots and lease two daily slots at Heathrow airport. The acquisition was completed on 20 April 2012, and the BMI fleet and routes were integrated into the British Airways schedule throughout 2012.
In 2015 Aer Lingus were the 3rd largest airline at Heathrow in terms of slots with a 3.3% share of the available pool.
IAG has about 54% of Heathrow slots. The 2nd highest % of slots is Virgin Atlantic.
Boosting its cash, Virgin Atlantic raised a further £32 million in January 2017 via a further bond deal that uses its take-off and landing slots at Heathrow as collateral, taking the total value of the loan notes it has issued since 2015 against Heathrow slots to £252 million. http://www.cnbc.com/2017/03/27/reuters-america-virgin-atlantic-braced-for-losses-in-2017-as-headwinds-pick-up.html
Scandinavian Airlines raises $60 million from Heathrow slot sale
IAG keeps 42 pairs of slots at Heathrow out of the 56 acquired from bmi
BA’s parent company, IAG, has to give up 14 pairs of daily take-off and landing slots at Heathrow, in order for its take-over of bmi to be approved. BA gains 56 pairs of slots per day, so without the 14, is gaining 42 pairs, which will be used to expand BA’s operations at Heathrow with new destinations and more schedules. Seven of the relinquished Heathrow slots must be sold to operators providing flights to Edinburgh and Aberdeen. IAG must also provide competitors with access to seats on its UK and European services, allowing airlines such as Virgin to book journeys for passengers who wish to transfer on to its long-haul flights. Completion of the sale of bmi by Lufthansa is anticipated to take place around 20 April. Walsh said IAG would operate bmi’s published schedule in the short-term but soon expand IAG’s long-haul network, announcing new destinations in Asia.
British Midland International provided domestic and European feeder traffic into Heathrow Airport in partnership with Virgin until it was purchased by British Airways’ parent company International Airlines Group in 2011. The Lufthansa-owned airline had faced heavy annual losses of more than £100 million. Under the terms of the takeover, IAG had to relinquish some former BMI domestic slots at Heathrow. Virgin Atlantic purchased enough slots in 2012 to enable it to launch a domestic service on 31 March 2013, under the “Little Red” brand, operating a total of 12 daily services from London to Aberdeen (3), Edinburgh (6), and Manchester (3). The airline wet-leased four Airbus Airbus A320-200s from Aer Lingus, operating with Virgin Atlantic livery, under a three-year contract.
In September 2014, it was reported that Virgin was considering closing its domestic brand after suffering heavy losses, with Civil Aviation Authority figures confirming an average seat occupancy level of just 37.6% in 2013.The 12 daily pairs of take-off and landing slots at Heathrow cannot be sold to be used for long-haul routes.
On 6 October 2014, Virgin confirmed that the Little Red service would cease; flights to Manchester ended on 28 March 2015 and flights to Edinburgh and Aberdeen ended on 26 September 2015.
On 13 April 2015, Virgin Atlantic incorporated a new subsidiary – Virgin Atlantic International Limited (VAIL). In November 2015, VAIL obtained its own Air Operators Certificate and Operating Licence, and commenced operations with two former Virgin Atlantic Airways Limited operated Airbus A330-300 aircraft taking over routes previously operated by Virgin Atlantic Limited between London Gatwick and Barbados, St Lucia, Antigua, Grenada and Tobago. These flights are operated on behalf of Virgin Atlantic.
Upon incorporation as an AOC holder, the majority of Virgin Atlantic’s landing slots at London Heathrow Airport were transferred to VAIL, allowing Virgin to access the value of the carriers slots by ‘mortgaging’ them through open investment from capital markets, the first time in Europe a company has used airport take-off and landing slots to generate money in this way.
Air France / KLM have recently sold to Oman Air – with their pair of daily slots selling for as much as $75 million.
Vecernji List announced that Croatia Airlines has nine pairs of weekly slots at Heathrow with the intention to sell them soon. The Croatia Airlines administration say they have chosen to do so because the Zagreb – London route has realized losses, even though the average occupancy of the aircraft is around 75%. These losses amount to, say, between one and three million euros a year, and occur because the competition on this line makes it hard to get better prices for tickets.
The Croatia Airlines administration explained that the sale of slots is set out in the restructuring program and that they are on the move as they need about $30 million for capital maintenance. The sales of these slots will, they say, cover part of these costs.
Which airline will negotiate this and what the amount will be, Croatia Airlines did not want to reveal because negotiations are still ongoing. According to some information, a buyer could be Ireland’s Aer Lingus with an amount around 17 million euros. The value of the slots vary on the time of day, with them usually most expensive in the morning.