AIRLINE BREAK-UP

Air Berlin’s Final Curtain

2017-09-25T125136Z_605714544_RC1D9E83D6D0_RTRMADP_3_AIRBERLIN-LUFTHANSA.
Air Berlin employees waiting to hear the bad news. Source: Reuters

The lights are finally going out at Air Berlin, Germany’s second largest airline. Now the only question is how many of the airline’s 8,600 staff will lose their jobs.

Operations at the bankrupt airline will cease on October 28, with the exception of its subsidiaries Niki and LGW, which are still solvent and will continue to operate. Ongoing talks with potential buyers for parts of the company are due to end by Thursday.

The end of operations has come sooner than expected. A government loan was meant to keep the planes flying until November at least. But a letter to Air Berlin staff from chief executive Thomas Winkelmann and insolvency general representative Frank Kebekus says running costs were higher than expected, eating into creditors’ assets. Under German bankruptcy law, this means the plug must be pulled as soon as possible.

This puts serious pressure on negotiators to conclude a deal with potential investors ahead of Thursday’s deadline. The current front-runners are Lufthansa and Easyjet. Sources close to Air Berlin say talks with Lufthansa are advancing well: the German flag-carrier has made an offer for Niki, the regional airline LGW, and 13 additional medium-range aircraft and crew. In all, Lufthansa wants to take over around 81 aircraft, along with 3,000 of Air Berlin’s current 8,600-strong workforce.

It is unclear if Easyjet’s hardball tactics are related to the recent collapse of British holiday airline Monarch.

However, talks with Easyjet have been much harder, sources said. According to one German newspaper, the British low-cost carrier has reduced its offer for 30 A320 aircraft, including their Berlin-based crew. Easyjet said recently that if its bid is successful, it will launch a number of services from Berlin to other German cities.

It is unclear if Easyjet’s hardball tactics are related to the recent collapse of British holiday airline Monarch. The low-cost operator is thought to be interested in around 40 of Monarch’s aircraft, as well as landing slots at London’s Gatwick airport. Last year, Easyjet was reported to be close to making a takeover bid for the holiday airline. Industry experts say IAG, owner of British Airways and Iberia, also stands a good chance of acquiring parts of Monarch.

But Easyjet’s cold feet may in fact be related to Air Berlin’s murky cost situation. Under German law, a successful bidder for Air Berlin must pledge to keep operations going until a final ruling is given by EU competition authorities. According to Mr. Winckelmann and Mr. Kebekus, this could take “several weeks or months” – a serious risk for any buyer.

Sources at Easyjet told Handelsblatt that the company’s board has had reservations about Air Berlin for some time because of the many unanswered questions surrounding the airline, including labor issues. Easyjet’s German staff are currently represented by the large union Verdi, but taking over Air Berlin crew could mean dealing with the more militant Cockpit and Ufo unions.

10 p16 Air Berlin-01

The consequences of an Easyjet pull-out are unknown. All parties involved in the talks want a second bidder at the table, not least because it fends off awkward questions about a Lufthansa monopoly. If Easyjet backs out, German holiday airline Condor could be an alternative bidder – sources said the subsidiary of travel firm Thomas Cook had expressed an interest in buying at least a dozen Air Berlin aircraft.

Time would be the major problem for any new negotiation with Condor. If Air Berlin is to shut up shop on October 28, that would leave very few days for a new round of complex talks with Condor.

Adding to the difficulties, Condor has already sold most of its tickets for the traditionally weak winter season. The airline would be reluctant to take over thousands of unsold Air Berlin seats just ahead of winter, along with associated take-off and landing slots. It would make more sense for Condor to buy the aircraft in a few months time, ahead of the summer season. Whether that would be even possible, is yet another of those unanswered Air Berlin questions.

Delays to the Air Berlin sell-off will mean more worries for the airline’s staff, above all its ground crew. In their letter, Mr. Winkelmann and Mr. Kebekus said they hoped the sell-off process could save up to 80 percent of Air Berlin jobs.

But there are no guarantees on this. The German news agency DPA reported this weekend that Air Berlin has already begun talks with labor representatives on layoff packages. The company will also hold two job fairs for staff this week, with representatives from firms including BASF, Deutsche Bahn and internet retailer Zalando.

Jens Koenen leads Handelsblatt’s coverage of the aviation and space industry and writes about IT companies. To contact the author: koenen@handelsblatt.com

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