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Bloomberg
Air Berlin Plc’s insolvency could open the way for Deutsche Lufthansa AG to add new hubs for inter-continental flights while allowing short-haul discount specialist EasyJet Plc to boost its presence in the German capital.
The ailing carrier’s Berlin and Dusseldorf bases would provide Lufthansa’s lower-cost Eurowings arm with a chance to expand a long-haul network currently limited to Cologne-Bonn airport and a fledgling operation in Munich. At the same time, slots in Berlin used for short-haul services could help EasyJet narrow the gap to Ryanair Holdings Plc in Europe’s biggest economy.
Air Berlin filed for insolvency on August 15 as leading shareholder Etihad Airways PJSC of Abu Dhabi pulled the plug on funding the unprofitable carrier, which will rely on a government loan to keep flying for the next three months. Lufthansa, Germany’s biggest airline and the No. 3 in Europe, revealed that it was in talks about buying parts of its national rival, while EasyJet has also expressed an interest, according to people familiar with the matter.
A deal could be “very attractive†for Lufthansa if it can acquire elements of Air Berlin, which has 8,600 workers, without taking on the company’s debt or staff contracts, Sanford C. Bernstein & Co. analysts including Daniel Roeska said in a note. There’s also a “strategic rationale†behind EasyJet making a move, and the UK carrier has the business model to make a transaction work, they said.
While the 150 million-euro ($175 million) loan should get Germans home from their summer vacations, Air Berlin will likely run out of cash at the end of the three-month period, setting a deadline for negotiations, Bernstein said.
Lufthansa, which is unlikely to be able to buy all of Air Berlin for antitrust reasons, already has strong links to its one-time arch rival following a deal to lease 38 of the smaller carrier’s Airbus SE A320-series planes plus crews for six years. Some 33 of those aircraft are slated for deployment with Eurowings and five with the group’s Austrian Airlines division.
At the same time, Air Berlin planned to offload its own Austrian unit Niki, which has 21 A321 jets, by combining it with 14 aircraft from TUI AG. Though the plan suffered a setback in June when Europe’s largest tour operator failed to agree on terms with Etihad, TUI said that it’s ready to participate in Air Berlin’s restructuring. Thomas Cook Group Plc’s Condor arm, which books seats on Air Berlin flights, also said it could play an “active role†in a rescue plan. Lufthansa is also interested in Niki, people familiar with the talks said earlier this week.
Overall, Lufthansa could end up taking as many as 90 planes from Air Berlin, with a deal coming as soon as next week, Sueddeutsche Zeitung reported, citing unidentified people familiar with the discussions. EasyJet is also interested in Niki, the newspaper said.
Air Berlin’s Swiss Belair arm, which has seven A320-family planes, is set to close at the end of the summer, according to an announcement in March, while the company was due to full control of regional affiliate LGW, with 20 Bombardier Inc. Q400 turboprops.
The restructuring steps were designed to trim the Air Berlin fleet to just 75 jets from almost 150, leaving it focused on inter-continental routes from Berlin and Dusseldorf, fed by shorter European flights, plus minor hubs in Munich and Stuttgart. It currently serves about 20 long-haul destinations with 17 Airbus A330 wide-body jets, with the focus on the US and the Caribbean.
Air Berlin Overview
Rump Air Berlin ~75 aircraft 17 A330s, 20 Q400s, rest A320 family Main bases Dusseldorf and Berlin Lufthansa and possibly EasyJet interested Lufthansa lease ~38 aircraft 33 A320-family leased to Eurowings, five to Austrian Airlines Eurowings bases plus Vienna Lufthansa owns some planes; may take over workforce Leisurecarrier ~35 aircraft 21 A321s at Niki, 14 Boeing 737s leased from TUIfly Vienna-based TUI, Condor have an interest.
As Air Berlin doesn’t own its aircraft, the main value for suitors may be in its landing rights, which are distributed by a national coordinator. German Economy Minister Zypries said slots may be sold off by the insolvency administrator to raise funds.
Lufthansa is likely to want to safeguard the leased Air Berlin planes, which fly mainly on Mediterranean routes, according to Bernstein.
Future of Air Berlin’s
Niki uncertain
Reuters
Austrian holiday airline Niki’s 850 employees braced for a bumpy ride as insolvent parent Air Berlin began talks to sell its assets before it runs out of cash.
German flagship carrier Lufthansa was scheduled to hold discussions about buying parts of Air Berlin ahead of other potential bidders, a senior labour union official told Reuters.
Media said Lufthansa was interested in taking over major parts of Air Berlin and Niki. But Niki labour bosses said that the brand’s future was unclear and it was not known whether the Austrian carrier would be sold separately from Air Berlin’s assets or as part of a package.
Niki, founded by former Formula 1 race car driver Niki Lauda, is not part of the insolvency proceedings but depends on cash from Air Berlin to cover its costs.
Union representative Peter Stattmann told all bills had been paid so far but that the next “litmus test†would be August wages in the two-digit millions of euros, due at month-end.
“We were promised (these wages). We will see if it will happen that way,†he said.
The chancellery and the transport ministry in Austria, which like Germany faces federal elections in autumn, said they stood ready to support Niki should it face a financial bottleneck.
“We won’t leave anyone out in the cold,†Transport Minister Joerg Leichtfried said.
The pressure is on to complete talks to carve up Air Berlin quickly because a 150 million euro ($176 million) bridging loan it received from the German government will keep its planes flying for only up to three months.