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Germany’s aviation sector is comprised of many airlines; the national flag carrier Lufthansa (Deutsche Lufthansa) is the largest airline in Germany and one of the largest in Europe. Its main hubs are Frankfurt am Main Airport, Munich Franz Josef Strauss Airport and Düsseldorf International Airport. Deutsche Lufthansa Group is a global aviation group with subsidiaries Lufthansa Regional, Lufthansa Italia, Austrian Airlines, British Midland (bmi), SWISS and Germanwings with further stakes in Brussels Airlines, JetBlue and SunExpress. Air Berlin is Germany’s second largest airline, which also owns LGW (Luftfahrtgesellschaft Walter mbH) & LTU International. TUIfly is the third largest airline in Germany.
Air navigation service providers for German airspace are conducted by DFS (Deutsche Flugsicherung GmbH) and EUROCONTROL, whilst the Federal Agency of Aviation (LBA - Luftfahrt-Bundesamt) is the government regulatory body responsible for developing and maintaining aviation safety standards, as well as certifying airlines, airports and training devices.
Airports in Germany
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The recent decision by Lufthansa to end its codeshare agreement with Turkish Airlines (THY) came as a surprise to most observers. Talks between the two carriers over the past 18 months had been seeking closer co-operation, a prospect that had even been discussed by the respective heads of government of Germany and Turkey.
However, the strong growth of THY in Germany has led to imbalances in their relationship. In particular, THY now has a strong presence in secondary German cities away from Lufthansa’s Frankfurt and Munich strongholds. This has undermined Lufthansa’s strategy of funnelling Asia-bound traffic from secondary markets via its hubs as THY increasingly offers an alternative connection via Istanbul.
With fares that Lufthansa cannot match, one of the world’s biggest networks and a product that continues to win plaudits, THY has become a formidable competitor to Lufthansa and its group companies in spite of also being a Star Alliance partner.
United Airlines plans a realignment of its Pacific operations centred on increasing direct flights rather than stop-overs in Tokyo as the weakness in Japan’s currency has dragged down the carrier’s results in those markets for most of 2013. United is also building a strategy to directly serve non-traditional gateways to China as competitive capacity increases have also pressured the carrier’s Pacific performance.
The adjustments are freeing up some aircraft for redeployment into new markets from United’s Houston Intercontinental, Washington Dulles and Chicago hubs for new service to Europe, which perhaps seems like a safer option at the moment even as the region is on an at-best slow trajectory to economic recovery.
The success of these planned network shifts necessarily depends on execution, an area where United has faced challenges with respect to the merger with Continental. Now, getting it right will be central to the airline's Asian strategy.
A beleaguered United Airlines has outlined ambitious goals for its investors that entails an annual cost cutting scheme of USD2 billion and a pledge to begin returning cash to shareholders by 2015.
After battling operational, revenue and cost challenges during the last couple of years, United has no choice but to crystallise a plan to improve its performance in the medium term. Its target of rewarding shareholders is likely to be a competitive response to Delta Air Lines, who recently outlined plans to return USD1 billion to its shareholders during the next three years.
Additionally, United believes it can increase pre-tax earnings by two to four times during the next four years. Taken together it is tall order for a company that is still trying to deliver on its merger synergy targets. Now that United has declared those goals, the challenge is to deliver a successful execution, something that sceptics might have a right to be weary of.
Air Astana plans more rapid growth in 2014 but Kazakhstan airline market shows signs of slowing down
Air Astana is planning another year of double-digit capacity growth in 2014 as the Kazakhstan flag carrier expands its 767, A320 and E190 fleets. The carrier will focus on further expansion in the CIS and Central Asia region, but new 767-300ERs will also enable some capacity growth across its long-haul network.
ASK growth of 15% is expected for 2014, following 16% growth in 2013. But Air Astana plans to slow down expansion in 2015, ending a period of five consecutive years of expansion at a pace of approximately 15% per annum.
Market conditions have become less favourable in 2013, impacting load factors and profit margins. The prospect of increased competition, including the possible opening of Kazakhstan’s domestic market to Russian carriers, clouds Air Astana’s medium to long term outlook.
Etihad's announcement that it was buying 33.3% of Switzerland-based Darwin Airline was made on the first day of the Dubai Airshow and was easily lost in the fury of orders announced that day.
Darwin only flies aircraft with 50 seats, less than the number of premium seats that will be on many of the 350-plus widebody aircraft Gulf carriers ordered at the airshow. But the announcement is significant, and three reasons stand out.
First, for Etihad the carrier will "connect the dots" in Europe for itself and partners, linking hubs but also tertiary cities, which have largely been passed over by Gulf carriers. Many of these cities are served by the Lufthansa Group. This gives rise to the second significant impact: on Europe's legacy carriers. Gulf carriers changed their long-haul business while European LCCs decimated short-haul. Regional traffic was always typically a burden, and will come under further pressure following Etihad's announcement. Third is that Darwin Airline will re-brand as "Etihad Regional", and Etihad openly states Darwin is only the first carrier to use this new brand. As the industry still digests Etihad's partnership and equity strategy, Etihad promises to change another component of aviation – and raise the stakes in the liberalisation of the industry, especially by stamping its name on a European carrier.
Airberlin delivered a 14% year-on-year increase in EBIT in 3Q2013, recording a positive quarter for the first time this year. The quarter also saw airberlin’s first reduction in unit costs (CASK) this year, reflecting good progress in the cost-cutting aspects of its Turbine restructuring programme.
However, the quarter also saw airberlin’s weakest RASK performance of 2013 and profits were not sufficient to restore a positive equity position to its fragile balance sheet. As a result mainly of a weak pricing environment, it has abandoned its previous FY2013 target for a breakeven EBIT result and set a softer target for year-end net debt reduction.
Airberlin CEO Wolfgang Prock-Schauer told analysts on the 3Q conference call that the relationship with Etihad was for the long term and that it “gives us time really to restructure the company properly”. This commitment looks likely to be tested again soon.