Munich Airport

airberlin flies deeper into the red despite oneworld and Etihad ties

The airberlin-Etihad Airways rumor mill has been working overtime in recent weeks with German publication Manager Magazin reporting that Etihad CEO James Hogan is seeking to replace airberlin Group CEO Hartmut Mehdorn as soon as possible due to the continuing poor financial performance of the company and the slow pace of restructuring. Abu Dhabi-based Etihad increased its shareholding in Air Berlin PLC from 3% to 29.21% in Dec-2011, becoming the company’s largest single shareholder.

airberlin reported a consolidated net loss of EUR66.2 million in 2Q2012, a 53% deepening of the EUR43.9 million deficit posted in the year-ago period. The company intends to sell eight aircraft to help cut debt by EUR300 million by the end of 2012 and improve its liquidity position and equity ratio. airberlin’s shareholders equity amounted to just EUR101.3 million as of 30-Jun-2012 and the equity ratio stood at just 4% as compared to 11.2% on 30-Jun-2011.

airberlin is focussing on positioning Düsseldorf as its hub for North America

airberlin is making a big push at Düsseldorf International Airport through growth in its trans-Atlantic network with a new twice weekly service to Las Vegas McCarran International Airport. Germany's second largest carrier is also elevating its seasonal route to Los Angeles International Airport to a year-round service and increasing frequencies to Miami International Airport to six times per week in winter 2012. The expansion of airberlin’s services to North America from Düsseldorf intensifies competition with the carrier’s arch rival Lufthansa, which also operates a hub at Germany’s third largest airport, but has limited ambition to develop its long-haul network there.

Lufthansa operates three hubs in the country and it concentrates the majority of its long-haul flying in Frankfurt and in Munich. It operates to 70 non-stop passenger destinations from Düsseldorf, of which only four are long-haul: Chicago O’Hare, Newark, Toronto Pearson and Miami International. The latter service is suspended in summer 2012, leaving it with just three intercontinental routes from the airport in summer 2012.

Emirates responds to airberlin-Etihad alliance with capacity and equipment upgrades to Germany

A significant initial outcome of last year's airberlin-Etihad alliance is the capacity increase airberlin and Etihad have implemented over the past week between Germany and Abu Dhabi. Emirates has responded with its own capacity increases, the fact of which is unsurprising. What is interesting is how Emirates had operated to the restrictive and limited German market with A340-300s, which it is in the process of disposing. Emirates in recent times had largely confined the A340-300, with older and less premium interiors, to secondary markets, but the rapid increase in competition in the form of airberlin-Etihad is seeing Emirates deploy its more competitive Boeing 777-300s.

airberlin joins oneworld alliance, but its full potential will not be immediately realised

The oneworld alliance on 20-Mar-2012 is welcoming airberlin as its 11th member, but the carrier's full potential will not be immediately realised.

airberlin's advantage is a continental European base, which oneworld lacks and barely had prior to the Feb-2012 collapse of Hungary's Malev. But the hub can only be utilised if oneworld carriers serve it, and so far they have been coy about adding services, preferring instead the country's –  and one of the world's – leading financial centres, Frankfurt, much to the disappointment of airberlin.

From airberlin's accession, oneworld will gain market share, but not only are SkyTeam and Star Alliance expanding as well, they are adding members in key growth markets. airberlin this week brings 38 new destinations to oneworld's network, although they are primarily leisure points and not the corporate destinations that bolster airline yields. The airline has evolved, with additional costs, from a low-cost carrier to a hybrid one targeting the corporate sector, but has yet to see a yield uptick.

Lufthansa responds to Air Berlin at new Berlin airport, but success far from guaranteed

As Berlin's airport fragmentation ends with a new airport to open in Jun-2012, Germany's two biggest carriers are pursuing different strategies for the long-awaited airport, yet the strategies are forcing each other to respond. Air Berlin dominates short-haul traffic from the capital yet has high costs and low yields, indicating its transformation from LCC to hybrid carrier has not been followed by the market, whose premium passengers remain with Lufthansa, who has long been under-represented in Berlin, Germany’s largest city.

Air Berlin is banking on traffic feed, in particular from its oneworld members, to boost profitability, an outcome that may prove to be elusive as carriers continue to favour Frankfurt with its financial centre and accompanying premium traffic. Lufthansa will defend its market share from Air Berlin's chance of success with an equally ambitious measure: slashing costs by a third to better compete on short-haul traffic while continuing to ignore Berlin's long-haul traffic opportunities that Air Berlin has seized on. Each carrier wants the success the other has achieved, but neither are on a firm path to realise their ambitions.