Lufthansa Could Buy Part Of Airberlin From Etihad

Filed Under: Airberlin, Lufthansa

Germany’s second largest airline, airberlin, lost almost $500 million last year, which was an increase over their loss the previous year, despite oil prices being as low as they are. Things aren’t looking like they’ll be improving for them anytime soon.

The airline seems to have an internal struggle as to whether they want to be a low cost European airline, or a full service longhaul airline.

If they want to go low cost, they’ll have a hard time competing with the cost structures of other European low cost carriers. If they want to go premium or longhaul, they’ll have a hard time competing with the Gulf carriers.

It seemed like they were going the low cost route, but Etihad’s ownership stake in airberlin has partly changed that, as they’re also trying to cater to premium passengers.

airberlin-lounge-berlin-airport - 23

With continued sustained losses and no sign of things getting better, rumor has it that Etihad may soon be looking to reduce their 29.2% stake in the airline. It looks like a potential plan for that is starting to arise.

Per Reuters, Lufthansa is apparently in talks to buy parts of airberlin. Specifically, Lufthansa is looking at buying about 40 of airberlin’s 150 planes, including crews. Basically they’re looking at taking over airberlin’s flights that aren’t into the airline’s main Dusseldorf and Berlin hubs.

Lufthansa could use these planes to expand their low cost Eurowings division, and this would allow them to do that on the cheap (relatively, at least).

Nonetheless, the concept behind this is interesting. It wouldn’t be like a usual investment or takeover. In this case a portion of the airline’s fleet and employees would be transferred, while airberlin as such would continue to exist. You also have to wonder what this means for Etihad’s partnership with airberlin, and if they’ll continue operating their services to Abu Dhabi.

There’s also the question of regulatory approval, given that Germany’s biggest airline would be taking over part of the country’s second largest airline.

Lufthansa-First-Class-Lounge-Frankfurt - 43

Bottom line

Airberlin is in an unfortunate situation, and I’m not sure there’s actually a great solution for them. Given the losses they’re sustaining, I suppose they’re better off being a smaller airline, since they’d be losing less. In theory I see the upside for Lufthansa, as they could expand their Eurowings branch.

While the global aviation market is doing well overall, some European airlines are still struggling, as they can’t compete with some of the low cost carriers on short-haul flying, while they can’t compete with the Gulf carriers on longhaul flying.

What do you make of Lufthansa potentially taking over part of airberlin?

  1. Based on the trip reports, it would appear they placed themselves in this situation through lack of long-range vision. Their long-haul hard product is decent-ish insomuch as it’s a no-frills version of the Solstys J product found on lots of *good* airlines. Their soft product is passable as a seemingly “good” US domestic F product. This is not a winning combination.

    They either need to cut their losses and JUST be a LCC, or they need to invest some actual capital and step up their game if they truly want to compete internationally. But given the losses they’re currently sustaining, it’s going to be a hard sell to get anyone to dump MORE cash into the airline with a mere hope for a decent ROI in the next 5-10 years, assuming they can actually get the soft product to match legitimate international players and can improve upon their just-above-mediocre hard product.

    Regulatory issues notwithstanding, I foresee Lufthansa rolling them into Eurowings and calling it ein Tag.

  2. Its unfair to say they cant compete with Gulf Carriers. They (seems) to have a pretty low cost structure, they are a oneworld member, they have a solid relationship with Etihad to provide feed and a solid longhaul premium product.
    However their biggest strength and the way they can compete with Gulf Carriers is their hub in TXL. The German government restrict flights from foreign carriers to Germany, and because of that EK dont fly to TLX at all, QR only have one daily flights and I believe EY allow AB to operate all flights to AUH. AB are the only full service/ or long-haul airline to hub in TXL. I agree they need to decide what they want to be (LH Group do both by operating two separate brands) but dont write them off as unable to compete.

  3. Lufthansa or AB needs to restore the Berlin to DC nonstop.

    I understand AB is mostly leisure but why do they have nonstops to both Miami and Ft. Meyers ?

    How would any of this affect AB and OneWorld? I like how many AB flights connect out of American’s domestic terminals. Without AB AA miles are hard to use to Europe without huge fuel surcharges on British.

  4. Maybe IAG can buy airberlin. The airline group already has British Airways, Iberia, and Aer Lingus. All airlines are part of OneWorld. Even airberlin can convert to Avios for its FF program.

  5. @Ollie, that’s exactly what I was thinking, and far more likely to pass regulatory approval in Germany. That said, the rate at which IAG has integrated Aer Lingus has been rather slow (they’re still not part of OW).

  6. There’s a lot of difference between buying planes and buying a share of a company. Sounds like it’s the former.

  7. @ollie interestingly BA used to have a German subsidiary called Deutsche BA that has traffic rights dating back to the post-war occupation in a similar way to Delta at Narita. They ditched it at some point.

    IAG picking up AB – I think they’d want to merge short haul with vueling and run long haul with a focus on Berlin. Problem is with no prospect of BER opening any time soon and TXL so restricted it’s hard to build much of a business. Probably a big factor in AB’s problems today.

  8. With the current Brexit cloud hanging over all UK & EU business who want to invest in each other I serious doubt it that IAG would serious be interested

  9. Earlier this month we traveled ARN-TXL-ORD on AirBerlin, then AA to AUS (terrible ORD-AUS connection requiring layover in ORD . . . didn’t do it). I used AA miles for the trip and was very pleased with AB Business Class. Good food, good IFE, friendly and attentive staff and reasonable comfortable seats. Being westbound, it was a day flight, it was power napping and not serious sleep time. The only complaint that I have would be the connection in Berlin. Had we not been J class, and seated in the front seats from Sweden, allowed priority check-in, security clearance and boarding, it would have been very stressful due to the minimum connect time allowed and changing concourses. Was in “best in class”, perhaps not. But still very nice for the trans Atlantic crossing and, here’s the bonus, flying Air Berlin avoided BA and it’s rip-off “fuel surcharge”. It may be Brexit for them, but it’s BAexit for me!
    This was the first time that both my wife and I used Global Entry (I have had GE but she didn’t and I always waited with her in the long lines. . . which the Immigration and Customs Officers agreed was a very good idea). From the time we stepped off the AB A-330 aircraft and exited arrivals at ORD, I would estimate 10-12 minutes max (we travel light with carry-ons only). Well worth the $100 and the TSA PreCheck is a bonus.

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *