Earlier today, Air Berlin had done what most of us were expecting for some time when they filed for Bankruptcy protection. The filing came primarily as a result of Etihad’s withdrawing of any more funding to help keep the airline viable. Etihad had been a major stakeholder in ‘AB’ since January 2012.
The bankruptcy leaves Air Berlin in shambles as it is now left to scramble to either reorganize, sell off units, or simply cease operations. As it stands now, the German government has stepped in with a €150 million bailout that will keep Air Berlin operational for 3 months. During this time, ‘AB’ will be able to run as normal a schedule as possible, and ensure the employment of its 7,300 workers. This is especially important since we are in the midst of holiday travel season in Europe.
During this period, Lufthansa will continue business as usual as it relates to the 38 aircraft that it sublet from Air Berlin earlier this year in an effort designed to help AB regroup their operation.
Over the next weeks and months, suitors will emerge hoping to take over important gate space at airports where Air Berlin operates. Of course, with Berlin and Dusseldorf being the main hubs for AB, I suspected a heated bidding war to arise between the likes of Easyjet and Ryanair as they hope to make further inroads against Lufthansa on LH’s home turf.
Ryanair is already whining about LH having an unfair advantage due to all this happening in Germany, but Ryanair whines because it is what it does best when it doesn’t get its way.
Lufthansa has stated that it expects to compete successfully for the Air Berlin business due to its ‘home field’ advantage and its existing relationship with Air Berlin. In fact, LH is already in talks with German and Air Berlin officials to craft a way forward that minimizes the impact of a complete shut down of Air Berlin.
Call it luck or brilliance, but Lufthansa appears to have played Air Berlin perfectly. LH did not spend much time, money, or manpower to take on Air Berlin directly with their Eurowings unit. Instead they saw the writing on the wall several months ago and waited patiently for their opportunity to arise. Along the way, they offered help to support their fellow ‘countryman’, knowing full well that AB did not have a chance at survival and that Etihad would pull it’s life line from Air Berlin. Now in the end, Eurowings is most likely to be the biggest benefactor and should see an exponential increase in size and presence in Europe’s Low Cost Carrier market. Much to the chagrin of RyanAir, Easyjet, and others.
US Homeland Security announced on Sunday that it has lifted restrictions that prevented passengers from boarding with their electronic devices on Etihad flights that depart for the USA from Abu Dhabi.
Homeland Security confirmed that the airport and airline now meet stricter screening requirements and have immediately been removed from the list. I suspect that Abu Dhabi was the first to meet the criteria because Etihad already has customs and immigration pre-clearance in place for US bound passengers. It is the only airport in the Mid-East with this capability.
The remaining 9 airports/cities including Amman, Kuwait City, Jeddah, Riyadh, Istanbul, Cairo, Casablanca, Dubai, and Doha remain on the banned list. It appears as though many of them will be removed in the coming weeks as Homeland Security confirms security compliance from these airports.
As I mentioned last night, a press conference was held this morning in Abu Dhabi between by the leadership of Lufthansa and Etihad Airways as they announced an expansion of their relationship.
If you remember from yesterday, I wrote about Lufthansa assisting Etihad’s MRO operations as well as Lufthansa’s LSG Skychefs catering business to start providing catering for Etihad flights. Here are additional details:
The deal for the aircraft maintenance and catering is worth $100 million. The catering part of the agreement includes a 4 year contract by which Lufthansa will provide all of the catering services for Etihad flights in 16 cities through Europe, the Americas, and Asia. LSG Skychefs will be Etihad’s largest supplier of on board catering outside of Abu Dhabi (Etihad’s home base).
The MRO part of the deal includes a ‘Memorandum of Understanding’ that will see Lufthansa Technik and Etihad work as a team to provide a variety of maintenance services to Etihad’s fleet as well as Etihad’s partner airlines such as Alitalia and Air Berlin.
Also part of today’s announcement was the fact that there will be expansions to this relationship as time goes on. It was noted that there may be additional agreements covering passenger services and cargo.
A new part of their cooperation that was announced today stated that Etihad will move its operations in Munich and Frankfurt to terminals where Lufthansa flights operate from. For Munich, this means no longer will Etihad have to suffer in the dreary Terminal 1. They’ll be moving their operations to Terminal 2 and Satellite Terminal 2. In Frankfurt, this means that Etihad will now fly from Terminal 1, whereas perviously they were operating out of Terminal 2.
This makes all the sense in the world because of the new codeshare arrangements that have been created between Etihad and Lufthansa. It would make for bad logistics if passengers had to travel between terminals and go through multiple security checks to get to their codeshare flights.
And no, there was no announcement about Etihad joining Star Alliance.
Ahead of an announcement expected from Etihad and Lufthansa tomorrow from Abu Dhabi, details are starting to emerge regarding a deepening relationship between the 2 carriers.
Building on recent developments including Lufthansa’s take over of certain Air Berlin aircraft and routes in order to reduce the burden for Etihad (A large stake holder in AB), it appears now that Etihad is set to further seek Lufthansa’s assistance as it tries to re-sort itself.
Coming from various news outlets, including Bloomberg, it appears that Etihad is set to transfer their MRO operations (Maintenance / Repair / Overhaul) to Lufthansa Technik. Additionally, Etihad will transfer their catering operation to Lufthansa’s LSG Skychefs. There is also the potential for the relationship to expand to include Lufthansa handling much of Etihad’s security and ground services in certain parts of the world where both airlines are present. I expect we’ll find out the timing of these transactions during tomorrow’s event.
There has also been some chatter regarding the potential of Etihad joining Star Alliance, but that seems to be a bit of a stretch at this point based on Etihad’s involvement with other partners that are in direct competition with Star Alliance. But one never knows what can be announced.
There may be more to the announcement tomorrow, so you may see a follow up to this post.
Yesterday I shared the news breaking from the Italian media regarding a potential blockbuster deal that would join Lufthansa and Etihad.
Fortunately, it appears that the sides were not in any serious conversation regarding combining themselves into some strange Eur-Abic airline.
Unsubstantiated rumors from the Italian yellow press (specifically Il Messaggero) suggested that Etihad was prepared to take as much as a 40% stake in LH. Maybe ‘Il Messaggero’ just needed the page hits for their website revenue so they threw something out there to gain some attention.
This time, sources I deem reliable quashed such a notion as unrealistic due to the obstacles involved in such a combination.
At least I was on the record from yesterday’s post casting my own doubts and not running any ridiculous ‘What If’ scenarios that were running rampant on the Interweb.