Tarmac Tussle

British Airways, Lufthansa in Air Berlin Bidding War

247 000 Unterschriften für Erhalt von Airport Berlin-Tegel
British Airways hopes to land a deal for more business in Germany. Source: DPA

Air Berlin’s creditors are about to decide who will be the lucky buyer for their insolvent airline. British-Spanish IAG, the holding company for British Airways, Iberia, Vueling und Aer Lingus, has come out as a serious contender, rivalling a bid from German national carrier Lufthansa on the eve of Thursday’s meeting.

“Lufthansa has prepared for this day excellently and extensively and presented a very well-founded offer,” an industry source told Handelsblatt. “But the offer from IAG could become seriously dangerous for Lufthansa.” Both companies declined comment.

It’s not known what parts IAG is bidding for and what price it’s offering, but the company likely wants to snap up the low-cost subsidiary Niki. Willie Walsh, the chief executive of the holding company, already has two budget airlines, Spain’s Vueling and the recently launched Level. Niki could fit into further expansion. But Lufthansa and its bid for Niki and other parts of Air Berlin stand in the way, with sources saying it has offered a low three-digit million euro sum.

British budget airline Easyjet is also in the running and is believed to be interested in Air Berlin’s takeoff and landing slots in Berlin as well as some routes to and from Hamburg, Munich and Düsseldorf. There are also two separate bids for Air Berlin as a whole by aviation investor Hans Rudolf Wöhrl and entrepreneur Utz Claasen, but industry analysts said creditors were unlikely to accept either over doubts about their plans’ viability. Chinese entrepreneur Jonathan Pang, owner of the small northeastern German airport of Parchim, is being regarded even more firmly as an outsider. His idea of basing much of Air Berlin at the provincial airport is regarded as a tad audacious.

20 p18 Air Berlin – Key figures for Lufthansa and IAG-01

Meanwhile, Berlin-based logistics company Zeitfracht has made public its bid for Air Berlin’s freight subsidiary Leisure Cargo, the Walter airline unit that has 20 aircraft and maintenance company Air Berlin Technik. Industry sources said there were no other bids for Leisure Cargo and Air Berlin Technik.

In the final moments before the big decision, it is still unclear whether Niki Lauda, the former racing driver and founder of Niki, has indeed gone ahead with his stated plan to launch a joint bid with Thomas Cook’s German leisure airline Condor. He had declared an interest in Niki and in a number of Air Berlin planes. But industry sources said that Thomas Cook had also submitted its own bid. The company declined to comment.

All these bids are being listed by experts from management consultancy Roland Berger and rated by insolvency administrator Lucas Flöther before presentation. The creditors committee includes a rep of Lufthansa’s budget unit Eurowings, which has leased some Air Berlin planes, as well as an official from the German Labor Agency and a shareholder rep from the investor protection group SdK. A Commerzbank manager will be there on behalf of leasing companies and a lawyer from law firm CMS Hasche Sigle, in addition to Air Berlin representatives.

The formal decision on who gets what will be announced on September 25, the day after the German election when creditors are hoping the certainty of bad news can be sopped up by election headlines. “It’s clear that some parts will be left over and will probably have to be liquidated,” a source close to the involved companies said. No one appears to be interested in bidding for Air Berlin’s long-haul business, with sources saying Lufthansa has abandoned a plan to take over the 17 jets. “The planes are old; we can get better ones in the market,” a Lufthansa manager told Handelsblatt.

Once the successful bidders have been announced, work will start on the details, and many prospective buyers are wondering whether they will be forced to take on all the Air Berlin staff at the units they’ve bid for. Under German law, all employees of active business operations sold off must be kept on at existing wages for one year. That also applies to insolvencies, according to Wolfgang Lipinski, an expert on labor law at law firm Beiten Burkhardt.

Lufthansa wants to take over part of the air crews, but at the lower salaries being paid by its Eurowings unit. In addition, it could face legal action from ground staff it wants to let go. Negotiations could prove difficult because bidders will try to avoid giving the impression that they’re buying active operations. That may not work, because by their very nature planes with slots and crews could be seen as ongoing businesses. It’s a legal risk that could delay takeovers if employee representatives seek court injunctions to block the deals. That could prove very expensive, forcing buyers to devote their own funds to keeping Air Berlin operations up and running.

 

Jens Koenen is lead reporter for the aviation and IT industry, and Frankfurt bureau chief. To contact the author: koenen@handelsblatt.com

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