COLIN BAKER LONDON
Deutsche BA is to reinvent itself as a low-fare carrier after a troubled 2001 threatened its existence. Chief executive Adrian Hunt says the airline is "going back to its roots" as a low-fare domestic carrier. It will drop international services to London Gatwick, Madrid and Barcelona and the extra capacity will be put into increasing its frequencies on German routes. It will be rebranded as DBA to differentiate it from parent British Airways.
The move comes shortly after Ryanair launched a base at Frankfurt Hahn. There is also competition from charter/low-fare outfit Germania. "We evaluated what was happening in the low-fare sector and were enthused by the rate of growth," says Hunt. He picks out the example of the USA's stylish low-fare start-up JetBlue Airways as a role model, noting that the German market is different from that in the UK. "It is not cheap and dirty, and not price-driven," he says.
Hunt lays much of the blame for the airline's troubles over the past two years at the door of high fuel prices and the weak Euro, problems that were exacerbated by the 11 September terrorist attacks in the USA. The carrier also leased its fleet of 16 Boeing 737-300s at a time of high demand for aircraft, so rates were expensive.
The setbacks of 2001 culminated in a round of cost cutting. "Without that, we would never have got through the winter," says Hunt.
Leases for the 737s come up for renewal in August, offering another opportunity to cut costs. The aircraft are leased from Boullioun Aviation Services, GE Capital Aviation Services and Deutsche Structured Finance.
DBA is taking a pay-as-you-go attitude towards services such as on-board catering, call centres and paper tickets, and is hoping to increase the number of tickets sold via the internet. About 64% of passengers are business travellers, many from small companies.
Hunt believes this change of strategy will see the carrier reach the break-even point in 18 months' time. "If not, something isn't working," he says. Services to major city centres and the Spanish market could be launched in the future. This market is particualry interesting as many Germans own villas in Spain.
Hunt dismisses talk of a possible merger with Germania. He says that Germania chairman Dr Hinrich Bischoff regrets not hooking up with Deutsche BA when the latter was launched in the early 1990s. "He is like a jilted lover," says Hunt. He argues that the long history of co-operation between the two carriers may explain why the merger stories took hold in the industry.
BA says it has no plans to sell DBA, but is willing to consider offers. Analysts say there are few potential buyers in today's climate, however.
Source: Airline Business
