by Lufthansa Flyer | Oct 11, 2016 | Brussels, Eurowings, Featured |
A few days ago, Lufthansa Group’s CEO, Carsten Spohr, outlined Lufthansa’s vision for Brussels Airlines and the role that they will play now that Lufthansa Group has decided to acquire all remaining shares of the airline that is does not already own.
The initial announcement stated that Brussels will be integrated in Eurowings, which serves as Lufthansa’s ‘Low Cost Carrier’ product. The recent comments by Spohr suggest that Brussels will continue to operate under its current branding and logo, except for a small footnote stating that it is ‘A member of the Eurowings Group’.
For now it appears that routes and equipment will remain largely unchanged since LH wants Brussels to maintain its dominant position in Belgium and in essence create another fortress hub for Eurowings. Another reason to keep things unchanged at SN for now is the extensive route network it has in Africa and how that can be leveraged for additional benefit to Eurowings. What has not been clarified is how any overlap may be handled as far as route network and staffing is concerned. Additionally, there has been no announcement as to how (if at all), Brussels role may change as a Miles & More / Star Alliance member.
What also has not been clarified as yet is the status of their outstanding Business Class product. I suspect for the near term things will remain unchanged, but it would not surprise me if the product is not ‘adjusted’ to be brought more into the Eurowings LCC model as far as equipment and pricing is concerned. In my opinion, it would be foolish to tamper with SN’s winning formula in Business Class, but my opinion doesn’t really matter in Frankfurt.
A long standing concern for Eurowings has been its viability in a very competitive LCC market in Europe. However, with recent developments such as wet leasing a substantial amount of Air Berlin aircraft along with their routes, and the recent developments with Brussels, it appears that EW has taken a quantum leap that should make it a serious contender in the LCC space.
by Lufthansa Flyer | Sep 29, 2016 | Air Berlin, Corporate, Eurowings, Featured |
What we knew would happen for weeks has become official. Lufthansa has entered a Letter of Intent with Air Berlin to assume a wet-lease for 40 Air Berlin aircraft, complete with Air Berlin crews to operate the flights. The aircraft will enter service on March 26, 2017, coinciding with the beginning of Lufthansa’s Summer timetable. 35 of the aircraft will be repainted to the Eurowings livery, while the remain 5 will fly under Austrian’s colors. Specifically, the lease involves 29 Airbus 320 and 11 Airbus A319 aircraft.
The decision was made after Lufthansa approached Air Berlin with an offer to help reduce some of the stress that Air Berlin is under due to mounting losses. Of course LH was not completely altruistic with the offer since there would be a substantial benefit to Eurowings, both in the growth of the fleet and the reduction of competition in the German LCC market.
Lufthansa will operate the aircraft on existing Air Berlin routes except those that serve Dusseldorf or Berlin. Air Berlin will continue to operate out these major hubs. However I do expect that a few tweaks will be made to the timetable to take into account existing routes already being flown by Eurowings.
Under wet lease agreements, the operating airline pays ‘rent’ for the aircraft and assumes all other responsibilities for the aircraft including maintenance etc. Any profits or losses remain with the airline leasing the aircraft, obviously in this case it is Lufthansa.
The ‘Letter of Intent’ announcement came from the Supervisory Board of the Lufthansa Group. The board held a regularly scheduled meeting on Wednesday (28 September) to discuss various proposals and strategy initiatives. Another major announcement that came from the Board was the approval for the Lufthansa Group to purchase the remaining 55 percent stake that it did not already own in Brussels Airlines.
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.
