Air Berlin to halve airline fleet

AFP

Air Berlin Plc announced the most sweeping job cuts in almost 40 years of flying in a bid to rescue its ailing business, slashing its fleet by half as 40 jets are leased to arch-rival Deutsche Lufthansa AG and 35 others are deposited in a new tourism arm with an uncertain future.
About 1,200 of 8,650 staff may go and the three-way fleet split will leave Air Berlin’s main airline with just 75 planes. The company expects to get a 1.2 billion-euro ($1.35 billion) lifeline from the six-year deal with Lufthansa.
Air Berlin has racked up more than 1 billion euros of net losses in the past three years alone as it struggles to compete with Lufthansa and discount specialists including Ryanair Holdings Plc, even with the backing of Abu Dhabi-based Etihad Airways PJSC, which owns a 29.2 percent stake.
“This is the furthest-reaching restructuring in Air Berlin’s history,” Chief Executive Office Stefan Pichler, who took over in 2015, said on a conference call. “Our model so far has been too complicated. Any past restructuring has only scratched on the surface and cured symptoms, not the cause.”
The downsizing will bring expenses of less than 100 million euros and should allow the company to break even in 2018, Pichler said, adding that he feels “obliged” to stay at the airline during the process.
Shares of Air Berlin rose on the news Thursday, gaining 6.5 percent before trading up 1.8 percent at 75.5 cents as of 10:11 a.m. in Frankfurt. That pares the decline this year to 18 percent and values the company at 87.7 million euros. Lufthansa was priced 2.7 percent lower.
The two carriers revealed their plans after markets closed Wednesday.
Air Berlin said some of the people losing their jobs may be able to transfer to other airlines in which Etihad has a stake, though some may be dismissed. The carrier, which has lost about 94 percent of its value since first listing at 12 euros in 2006, will also hold talks with unions for pilots and cabin crew to seek “economically more beneficial” labor agreements for remaining staff.
All administrative functions will be bundled in the German capital, while “strategic options” are being evaluated for the tourism business. The main airline operation will have hubs in Berlin and Dusseldorf, as well as bases in Munich and Stuttgart, and retain 17 Airbus Group SE A330 wide-body jets deployed on long-haul flights, which are set to continue.
The narrow-bodies planes to be leased to Lufthansa will expand its Eurowings discount unit, which will get 35 planes, boosting the fleet size by more than a third. The group’s Austrian Airlines arm will receive the other five to expand its Vienna hub.

‘Competitive Rates’
Lufthansa said the aircraft it is taking — as many as 29 Airbus A320s and 11 smaller A319s — were available at “competitive market rates” and will be provided on six-year wet-lease terms, making Air Berlin responsible for their maintenance, as well as the provision of crews. Lufthansa, with a market value of 4.56 billion euros, is worth more than 50 times as much as its smaller competitor.
A final accord should be sealed in the fourth quarter and will require approval of the two companies’ boards and relevant competition
authorities.
Germany’s biggest airline announced another boost for Eurowings with its exercising of an option to acquire the 55 percent of Brussels Airlines NV it doesn’t yet own. The Belgian carrier, which has 40 short-haul planes, will most likely be folded into the discount operation, Lufthansa said in April. Brussels Air also uses nine A330s mainly for flights to west and central Africa.