Airline Turbulence

'Sick' Pilots Throw Air Berlin into Chaos

Air Berlin streicht Flüge
Grounded in Berlin - again - as pilots call in sick. Source: Roland Weihrauch/DPA

Air Berlin Chief Executive Thomas Winkelmann warned pilots that they were “playing with fire” by calling in sick in large numbers on Tuesday and again on Wednesday, forcing the airline to cancel more than 130 flights and casting even greater doubt on its already uncertain future. Some 200 of the insolvent airline’s 1,500 pilots didn’t show up for work on Tuesday and nearly 150 again on Wednesday in evident wildcat strikes that reflected fears of job losses in the planned sale of the company this month.

Flights from and to Air Berlin’s main hubs in Berlin and Dusseldorf have been particularly hard hit. To make matters worse, customers aren’t entitled to refunds if their tickets were issued before August 15 – that’s a result of insolvency rules now governing Germany’s second-largest airline. The mass absences, which took everyone by surprise including pilots’ union Cockpit, followed the breakdown of talks on Monday when the management declined to give assurances that older and more highly paid pilots would keep their jobs under a new owner.

The pilots are worried that the most likely buyer, national carrier Lufthansa, may choose to pick out Air Berlin’s younger, cheaper pilots to save costs. Former pilots of German airline LTU, bought by Air Berlin in 2007, are believed to be particularly worried because they’re on contracts earning substantially more than other Air Berlin pilots and in some cases than their Lufthansa peers.

“We’re in the process of holding final talks with possible investors.”

Thomas Winkelmann, Air Berlin Chief Executive

Other possible bidders for Air Berlin include Thomas Cook’s German unit Condor, Easyjet and aviation investor Hans Rudolf Wöhrl.  So far, the only bidder to have publicly declared an offer is Mr. Wöhrl who said he was ready to pay €50 million ($60 million) for the entire company. He wants to get further investors on board and has said he is ready to pay further tranches depending on how Air Berlin’s business develops, up to a maximum sum of €500 million. Potential investors have until September 15 to submit binding offers. Air Berlin’s creditors committee is due to decide which bids to accept at a meeting on September 21.

Mr. Winkelmann, a former manager at Lufthansa, warned it was essential that Air Berlin kept up normal flight operations to ensure an orderly sale. “We’re in the process of holding final talks with possible investors,” he said. “Stable operations are an essential condition for the success of these negotiations. That’s the only way we can secure as many jobs as possible.”

If the absences continue for another day or two, Air Berlin will have to shut down core operations, Handelsblatt has learned. According to unconfirmed sources, Air Berlin lost around €4 million by having to cancel 100 of its 700 flights Tuesday. That’s on top of the €4 million it loses every day. Air Berlin filed for bankruptcy protection in August month after its biggest shareholder, Etihad Airways, withdrew after years of losses.

Air Berlin streicht zahlreiche Flüge
Air Berlin is believed to have lost around €4 million on Tuesday after cancelling 100 of its 700 scheduled flights. Source: Roland Weihrauch/DPA

Frank Kebekus, who is advising Mr. Winkelmann on the restructuring, warned the pilots. “Today’s events are a massive threat to the entire insolvency process,” he said. “If the situation doesn’t change quickly, we will have to shut down operations and thereby end all restructuring efforts.”

Air Berlin is being kept alive by a €150 million loan from state-owned development bank KfW that has been guaranteed by the German government because an airline can only be sold if it is still flying —and because Chancellor Angela Merkel was keen to avoid tens of thousands of German holidaymakers being stranded just weeks before the September 24 election.

Lufthansa, which is battling mounting competition on its home territory from budget rivals led by Ryanair and Easyjet, is seen as the prime contender to buy large parts of its rival. Its budget unit Eurowings wants to take over up to 90 of Air Berlin’s more than 140 jets and has been wooing Air Berlin staff for weeks, with experienced flight attendants particularly welcome. The 90 planes include 33 being used by Eurowings, five already leased to Lufthansa’s Austrian Airlines as well as planes used by Air Berlin subsidiary Niki, one source told Reuters news agency.

The state loan to Air Berlin, which is expected to run out at the end of September, has incensed Ryanair Chief Executive Michael O’Leary, who lodged a complaint against it with the German competition regulator and the European Commission. He accused the German government of providing “unlawful state aid” and of conspiring with Lufthansa to carve up Air Berlin.

In an interview with Handelsblatt last month, he said Berlin provided the loan so that Lufthansa could take over Air Berlin and eliminate almost all competition on German domestic routes. “It shows yet again that there’s one rule for the Germans and a different rule for everybody else,” he said. Mr. O’Leary was venting his apparent frustration at Lufthansa’s recent success in reclaiming its home market. For a long time, Lufthansa seemed to be sounding the retreat in Germany, cutting back services and closing or merging sites to cut costs.

But it’s expanding again thanks not only to its new budget unit Eurowings but also to the woes of Air Berlin. And Eurowings is pushing into smaller airports where Ryanair, to date, has had virtual monopolies, airports like Weeze near the German-Dutch border, or Saarbrücken, from where Eurowings started flights to Majorca in early April.

13 p20 Air Berlin Far Behind-01

Back at Air Berlin, the management and trade unions have been locked in talks on what will happen to the workforce in a full or partial sale of the airline. It’s clear that it won’t be sold with its entire workforce intact, and that buyers won’t want to take on the most highly-paid pilots. That’s likely to have become abundantly clear to pilots in negotiations so far.

Time is running out. Bookings are down and mounting flight disruptions could trigger the loss of Air Berlin’s prized take-off and landing slots. Renate Künast of the opposition Greens party, the chairwoman of the parliament’s consumer affairs committee, called Tuesday’s wave of flight cancellations a “scandal.”

“Negotiations with Air Berlin have descended into chaos and the passengers are the ones to suffer,” she told Handelsblatt. “We can’t have a company receiving tax money as a bridging loan and then leaving consumers out in the rain.”

Dieter Fockenbrock covers the aviation industry for Handelsblatt. To contact the author: fockenbrock@handelsblatt.com

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