Lufthansa yesterday closed on a transaction that allowed it to acquire 20 Air Berlin aircraft, Air Berlin’s ‘NIKI’ subsidiary as well as AB’s LG Walter operations. The deal amounted to $210 million Euro (approx. $250mm USD).
In return, Lufthansa agreed to protect all jobs that were affected specifically by this deal. In other words, LGW and NIKI employees do not need to fear for their jobs.
In his comments, LH Boss Carsten Spohr indicated that Lufthansa would infuse over $1 Billion Euro into the Air Berlin acquisitions which will cover updates and upgrades to the aircraft, as well as future aircraft acquisitions for LH’s LCC Eurowings, which is where all the Air Berlin assets will be assigned to going forward.
Several large parts of Air Berlin have yet to be sold. It appears that Easy Jet and Thomas Cook / Condor will also benefit from the liquidation of Air Berlin, though no specific deals have been announced. Ryanair has apparently been blocked out of any chance to benefit from the Air Berlin garage sale.
During this recent shopping spree, Spohr also suggested that Lufthansa would very much be interested in Alitalia. Though he firmly denied any interest in acquiring the struggling carrier in it’s current form (which is basically as bad as Air Berlin’s condition), he did suggest that Lufthansa would be very interested in helping the Italian gov’t create a ‘New’ Alitalia. I thinking ‘Lufthalia’??
While Air Berlin navigates bankruptcy through the German legal system, it has announced that cuts to under-performing long haul routes will take place almost immediately. The decision comes as a result of a dramatic fall-off in bookings that has taken place since the bankruptcy announcement.
As far as I can tell, here are the canceled routes:
Berlin – Abu Dhabi will be canceled beginning September 17.
Berlin – Chicago will be canceled beginning September 30.
Berlin – Los Angeles will be canceled October 1.
Berlin – San Francisco will be canceled October 1.
Dusseldorf – Boston will be canceled October 1.
For now flights from Berlin to Miami and New York (JFK) remain unaffected as do flights from Dusseldorf to Boston, Fort Myers, Orlando, New York, and Miami. Also unaffected at this point are flights from Dusseldorf to Cancun, Los Angeles, San Francisco, Punta Cana, Puerto Plata, Varadero, Curacao, and Havana. I suspect these aforementioned routes won’t stay on the timetable for long but at this point AB plans to operated them as scheduled.
It is widely expected that Lufthansa will come away with a significant stake in Air Berlin after negotiations are completed between the German government, Air Berlin, and Lufthansa. It also appears that Easyjet will stand to benefit from certain Air Berlin assets as well. At this point it appears that Ryanair is the odd man out and will not be a benefactor of AB’s bankruptcy.
Over the past 2 days, Lufthansa has been in formal talks with Air Berlin’s leadership regarding the sale of Air Berlin’s assets to LH. Though other bidders are expected to crop up including Ryanair, Thomas Cook and Easyjet, it appears that the battle for Air Berlin may be over before it even begins. While AB is publicly saying that it is possible that more than one suitor may be involved, it appears unlikely that a serious threat would be posed to LH’s chances at this point.
Already with an advantage thanks to the wet lease agreement currently in place for 40 AB aircraft, it looks as though Lufthansa will have little problem in taking over the lease on 90 of Air Berlin’s 140 aircraft, including the ones already under LH’s control.
Lufthansa is in solid win-win position at this point. Not only does it come through as a ‘Champion’ for keeping a German airline German, it will exponentially increase its Eurowings presence in Europe and the rest of world by immediately rebranding the AB birds into Eurowings and expanding their route network.
With German elections looming next month, it is also a fortunate public relations coup for the German gov’t by taking on an active role in bridging a €150 million loan to AB to remain solvent while the details of an LH take over are ironed out. Unlikely that the German gov’t at this point would support a sale of one of their flag carriers to Ireland’s Ryanair or an equally unattractive option in Easyjet, Thomas Cook, or others.