Germany’s airline market has roared into life as Air Berlin plans a public offering, Lufthansa boosts services from the regions to counter low-fare players and DBA and LTU join forces.
German investment firm Intro, architect of a turnaround that saw budget carrier DBA turn a profit for the first time in 2005, is aiming to repeat the trick after taking a controlling stake in struggling German charter carrier LTU.
Under the leadership of Hans Rudolf Wohrl, Intro has bought the 49.9% share in LTU that was being held in trust since the demise of previous controller the Swissair Group, as well as the 10.1% held by Cologne-based CKA, a financing arm of the Oppenheim bank.
The move should secure LTU’s future, certainly for the short term, according to ABN Amro analyst Andrew Lobbenberg, who adds that this consolidation should mean less volatility in the market and make the two carriers stronger. However, Carsten Gutknecht-Stoehr, senior vice-president credit aviation at Germany’s DVB Bank, is not convinced about LTU’s low-cost long-haul model and wonders whether Wohrl can achieve the same success there
There is little cross over between the operations of the two carriers, with just nine destinations served by them both. “DBA and LTU fit together perfectly as they cover different business areas,” says Wohrl. “DBA is mainly focused on the German domestic market with 180 domestic flights daily and LTU has a strong position on international routes within Europe and overseas.”
In fact, DBA is to provide feed for LTU’s medium- and long-range services, and although the two carriers operate different aircraft types – LTU has an all-Airbus fleet while DBA operates Boeing 737s – there is scope for common fleet usage, says DBA.
The two carriers have different high seasons and DBA, primarily targeting the business market, sees a lull during LTU’s busy holiday season so there is scope to exchange aircraft to fill demand, says the carrier, while in April LTU will wet-lease a DBA 737 for the summer season.
In boosting its domestic service DBA has become a serious rival to Lufthansa, while others have been attacking the flag carrier’s international short-haul network. EasyJet and Ryanair are expanding aggressively into central and northern Europe and the threat posed by these low-cost invaders “is influencing and enforcing our decision-making”, says Lufthansa vice-president sales and services Europe Karsten Benz.
The German flag carrier, with a domestic market share that has fallen from almost 74% on 2000 to just over 56% last year, is fighting back with more point-to-point services from regional airports such as Hamburg and Düsseldorf in addition to feeding its Frankfurt and Munich hubs. It is also studying more service from Stuttgart and Berlin. These moves are independent of those of its low-cost affiliate germanwings, which operates out of Hamburg too. There is a Chinese wall between two carriers, insists Benz, in terms of capacity management and planning.
Despite these initiatives, Gutknecht-Stoehr believes that once Frankfurt airport is finally in a position to expand and add capacity Lufthansa will jump to absorb it. Elsewhere in the group, questions remain over the carrier’s role in charter operator Condor. One possibility is that Lufthansa could sell the Thomas Cook tour group but retain and take full control of Condor.
Germany’s largest budget carriers, Air Berlin, meanwhile, has finally announced plans to launch an initial public offering, but will not say when. It has been preparing itself for a flotation for some time. The carrier has taken over the management of charter carrier Germania, following the death of owner Hinrich Bischoff in November. Gutknecht-Stoehr says that with particular strengths in the Spanish market and its seat-only sales policy Air Berlin has established a model that works well. “But how much can you stretch it? This is the challenge,” he adds.
Hapag-Lloyd Express, budget arm of the TUI group, says it achieved break-even last year and wants to carry 4.6 million passengers in 2006, a million more than 2005. It is adding nine new destinations this year. ■
JACKIE THOMPSON / LONDON
Source: Airline Business
