by Lufthansa Flyer | Sep 27, 2016 | Air Berlin, Etihad, Eurowings, Featured, LCC, Lufthansa |
Over the past few weeks it was quite obvious that Air Berlin was in ‘perilous peril’. News starting coming from Germany that Etihad was no longer happy with their stake in Air Berlin and was even looking at ways to divest of their ‘mistake’. At the top of most headlines was the fact that Lufthansa was prepared to take advantage of AB’s weakness and takeover aircraft and routes while Air Berlin restructured their operations.
With the latest news from Germany on Monday, we now gain clarity and confirmation of what has been discussed previously.
People in Europe were waking up to headlines that Air Berlin indeed will be restructuring operations in an attempt to return to profitability. Leading the list of changes is the elimination of over 1,000 jobs and reduction of its fleet of 127 aircraft to only 70 by the end of this year.
To dovetail this announcement, Lufthansa has been planning for this and had previously offered to assume control of 40 of Air Berlin’s aircraft and operate most of the Air Berlin routes that do not serve Dusseldorf or Berlin, both of which are major AB hubs. LH will ‘wet lease’ the aircraft and crews from AB and will operate them under ‘Eurowings’, LH’s Low Cost Carrier unit. What this means is Air Berlin is guaranteed to receive ‘rent’ for the aircraft, but Lufthansa gets to keep profits, or absorb losses.
In addition to the aircraft that Lufthansa will take over, it appears that Air Berlin will also sell 17 of their birds currently owned by ‘Niki’ to TUIFly. ‘Niki’ is an Austrian based subsidiary of Air Berlin.
The timing of the implosion of Air Berlin couldn’t have happened at a better time for Lufthansa. At the top of LH Group’s priority list for 2016 was to make sure that Eurowings would be set up for success and become accretive to Group’s balance sheet. So far success has been muted for a variety of reasons including the fact that the fleet is a bit undersized, uber aggressive competition from competitors, and a change in consumer sentiment in Europe that has fewer people thinking about travel.
With the injection of 40 aircraft, new routes, and broader coverage Lufthansa has the opportunity to make Eurowings what it is supposed to be, which is a low cost option for passengers to travel to destinations not usually served by mainline carriers. At this moment, Eurowings only has 33 aircraft in the fleet making it difficult to reach their goal. With the influx of 40 new aircraft, crew and hundreds of new flights, EW will have literally doubled in size over night without much effort or substantial risk.
Eurowings now has the opportunity to finally meet the expectations that everyone had for it. However the expectations may have doubled as well!
Lufthansa Group’s Supervisory Board is scheduled to meet Wednesday, September 27 to review and vote on the proposal for bailing out Air Berlin. It’s expected to be approved unanimously so expected another announcement in the coming days that confirms what we already know.
by Lufthansa Flyer | Sep 10, 2016 | Air Berlin, Eurowings, Featured, Lufthansa |
What has been rumored and speculated for the past several weeks is set to become fact and reality. Lufthansa is poised to take over 40 of Air Berlin’s aircraft at at the same time take over approximately one-third of Air Berlin’s routes.
The decision is expected to be made at the upcoming LH Supervisory Board meeting scheduled for later this month and it is fully expected that the board will rule in favor. The timing works out well because this will allow Lufthansa to time the ‘take over’ of the routes and aircraft with the beginning of the Winter Timetable that takes effect on October 31. These flights will operate under LH’s Eurowings LCC division, and no, the aircraft will not be repainted to match EW or LH liveries!
This does not affect Air Berlin’s operations in Dusseldorf or Berlin. Flights to and from those cities will continue to be operated by Air Berlin.
Why is Lufthansa willing to do this?
Well, it’s basically taking a bullet for Air Berlin and trying to build out Eurowings at the same time.
Air Berlin is bleeding money faster than it can make it, and it’s Mid-Eastern overlord, Etihad, is becoming growingly impatient with operating results after making a substantial investment into AB’s business. If Air Berlin continues its current path, it faces no option other bankruptcy and being thrown on the pile of other failed European LCC airlines.
Lufthansa almost has no choice but to enter this unholy alliance with Etihad to help save Air Berlin. Otherwise, should Air Berlin disappear, the vacuum that would be created would suck in competitors such as Ryanair, EasyJet, Norwegian, etc. to fill in the void left by Air Berlin. Lufthansa is simply playing defense to protect their own market. As strange and unorthodox as it may appear, it is actually LH’s only choice if it doesn’t want to see even more foreign competitors flying in and out of German airports. At the same time, Eurowings is not big or successful enough to take on any void left by AB, so Lufthansa needed to step up and help cushion what appears to be the imminent failure of Air Berlin.
Should AB fail, at least Lufthansa is there to catch the pieces and immediately increase the size of Eurowings with the demise of AB. Lufthansa has said all along that Eurowings would be used to absorb other Euro LCCs should any of them be at risk of failure. Air Berlin will simply be the first airline to test LH’s experiment.
by Lufthansa Flyer | Jul 20, 2016 | Air Berlin, Airlines, Corporate, Etihad, Featured, Lufthansa |
In news out of Germany in the last several hours, it appears that Lufthansa is a little bit more than serious about acquiring routes and aircraft from a struggling Air Berlin.
In a potential deal between unlikely bedfellows, Lufthansa is in discussions with AirBerlin’s main stake holder, Etihad, about the prospects of acquiring upwards of 40 aircraft and a majority of routes that are not operated in or out of AB’s hubs in Berlin and Duesseldorf. The acquisition would also include the crews for the aircraft.
Air Berlin currently operates 148 aircraft, so any acquisition would be a major one, since it would cut Air Berlin’s fleet by 27%. But this kind of a deal would also take the sting out of AB’s balance sheet which has hemorrhaged $1.29 BILLION in losses over the last 3 years.
The aircraft and routes would be assigned to Lufthansa’s Eurowings ‘Low Cost Carrier’ division and would immediately grow market share by eliminating the AB competition on the routes. This also plays well in Lufthansa’s plan that seeks to grow Eurowings by 25-30% in the coming year.
The one fly in the ointment will be the anti-trust fears that Germany and the EU will have. Historically, Germany and/or the EU have not looked favorably at deals that potentially reduce competition in the marketplace. But on the other hand, the real threat exists for the loss of thousands of jobs and the failure of an airline.
Not that the EU has made any good decisions lately, but here’s a chance for them to not screw something up! 😉
It would also be a welcomed jab at the ME3 who have been dumping capacity into Europe thanks to their subsidized operations, but I digress…….
