Later today Air Berlin will operate the last flight under its own branding, from Munich to the German capital's Tegel airport.
Part of the Oneworld carrier's approximately 140-strong fleet will continue to operate: Austrian leisure subsidiary Niki will serve Mediterranean destinations; 13 Air Berlin Airbus A320-family jets are to fly under an existing wet-lease agreement on behalf of Eurowings; and regional unit LGW has also been recruited to serve Lufthansa's budget division. But 80-90 Air Berlin aircraft will stay on the ground from tomorrow, Lufthansa Group chief executive Carsten Spohr estimated during a briefing on 25 October.
Earlier this month, the Star Alliance carrier group agreed with Air Berlin to acquire LGW, Niki and further A320s via a deal under which a total of 81 Air Berlin aircraft will join Eurowings' operation – though acquisition or lease.
Air Berlin's history dates to 1978, when it was established as a US charter carrier a by a former Pan American pilot. Flights to West Berlin were then restricted to airlines from France, the UK and USA. Following Germany's reunification in 1990, Air Berlin's ownership changed and it became a German company.
The airline operated charter flights to Mediterranean destinations, concentrating on flights from smaller, regional airports across its home market. This established Air Berlin's brand, and when it began direct seat sales to passengers on scheduled flights, the carrier became known as the "Majorca Shuttle". By the end of 2003, Air Berlin was Germany's second-largest airline by passenger numbers.
Majority shareholder Joachim Hunold had bigger things in mind, however. First, Air Berlin purchased a stake in Niki, the airline of Austrian Formula 1 veteran Niki Lauda, which later became a wholly owned subsidiary. Air Berlin subsequently acquired Munich-based low-cost operator DBA – which had previously been a British Airways subsidiary and which increased Air Berlin's domestic network – as well as Dusseldorf-based leisure and long-haul operator LTU, which had become available after the demise of previous parent Swissair.
LGW was added to the list to expand Air Berlin's presence in the regional market. The turboprop operator became an exclusive airline partner first and was eventually acquired by Air Berlin earlier this year. Swiss leisure carrier Belair became part of the group too.
Air Berlin was both a driver and beneficiary of airline consolidation in the DACH region spanning Austria and Switzerland as well as Germany. Lufthansa, meanwhile, acquired Swiss, Austrian Airlines, now-defunct UK carrier BMI carrier, and an initial stake in Brussels Airlines – increased to full ownership in late 2016 – and also established its first budget division Germanwings.
By the end of 2011, Air Berlin's fleet comprised 170 aircraft, and the carrier had more than 9,000 employees. But it admits that its "fast growth aggravated the structural problems" and that "an indistinct market position, highly seasonal business and high operating costs regularly led to negative and highly unsatisfactory results".
Since 2007, the airline has posted just one net profit – in 2012, when it sold its frequent-flyer programme to then-new shareholder Etihad Airways. Last year, the airline's operating loss more than doubled to €667 million ($773 million). Air Berlin says it has lost around €25 million per month since its initial public offering in 2006, racking a cumulative loss of some €3 billion.
Multiple restructuring programmes were launched to reduce costs, but they failed to return the airline to profitability. Air Berlin says "high financial strains as a result of unfavourable financing deals in the past, high ongoing expenses due to excessive aircraft leasing costs, and a complicated and costly distribution system" created "unnecessary" annual costs of around €300 million.
However, the airline's expansion coincided with the rise low-cost carriers. Ryanair and EasyJet arrived in Germany and expanded their presence, in particular over recent years as Air Berlin became under increased pressure. Meanwhile, Lufthansa launched a dedicated low-cost platform – initially under the Germanwings brand and more recently under the expanded Eurowings umbrella.
Etihad Airways became Air Berlin's largest shareholder in 2011, with a 29% stake, and kept the German carrier afloat. But the UAE carrier's investment was part of a strategy – also involving stakes in Alitalia, India's Jet Airways and Virgin Australia – to gain market access and funnel long-haul traffic via its Abu Dhabi hub.
Air Berlin gradually withdrew from its former main business of operating leisure flights to Mediterranean destinations from regional airports. Under its latest restructuring programme – unveiled just over a year ago – Air Berlin concentrated on scheduled services to Berlin and Dusseldorf in order to feed long-haul flights to North America and Caribbean destinations. Leisure flights to southern Europe (except Italy), Turkey and North Africa were earlier this year transferred to Niki as part of a plan to merge that carrier with tour operator TUI's German-based operation as a standalone business under a new ownership structure. But the plan did not come to fruition.
When Etihad withdrew its financial support in August, Air Berlin was forced to file for insolvency. A €150 million bridge loan backed by the German government was facilitated to keep operations going while interested parties had a chance to submit acquisition bids for the airline. The Lufthansa deal was struck, and both EasyJet and Thomas Cook's German subsidiary Condor are in talks to acquire parts of Air Berlin, says the Oneworld airline.
Lufhansa chief Spohr says that he expects flight interruptions across Germany over the coming months, as Air Berlin's vacated capacity will not be compensated by other carriers straight away. Lufthansa foresees that a decision regarding its acquisition of Air Berlin assets will be made by the European Commission in January 2018.
What seems certain is that other airlines will seek to grow their business as Air Berlin exits the market. But perhaps the airline's departure is about more than the sale of operations and vacated market share. Air Berlin is long-established in Germany and its brand – sure to be missed by some customers – was eventually, perhaps, among its biggest assets.
Lufthansa has had a habit of acquiring the brand names of failed rivals. Germanwings was originally a short-lived airline in West Germany during the late 1980s, attempting to compete against Lufthansa with a concept of providing a better onboard service. It was no surprise that the name resurfaced later – incidentally, as Lufthansa's no-frills subsidiary.
Might there be a revival of Air Berlin's brand? Watch this space.
Source: Cirium Dashboard
