Etihad's Woes

Decoding Air Berlin

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Germany is still letting Etihad pick up their planes at Hamburg's Airbus factory.
  • Why it matters

    Why it matters

    German officials say the code sharing violated an aviation agreement signed with the United Arab Emirates, potentially jeopardizing Etihad’s investment in Air Berlin.

  • Facts

    Facts

    • The German Federal Aviation Office has said that Ethihad can no longer offer 34 German flight connections for its winter schedule.
    • Etihad Airways owns 29.21 percent of Air Berlin.
    • A cash injection from Etihad to Air Berlin this year left Lufthansa crying foul.
  • Audio

    Audio

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The ambitious Gulf airline Etihad and its German partner Air Berlin are flying into turbulent weather.

The flagship carrier for the United Arab Emirates can no longer offer 34 German flight connections for its winter schedule. The German Federal Aviation Office (LBA) gave the airline that news in a letter sent earlier this week, Handelsblatt has learned from company and official sources.

The 34 flights are about half of those operated by Air Berlin and marketed by Etihad with its own flight numbers to its customers, so-called “code sharing,” in order to broaden its network.

“The code share flights could not be approved, because they are not covered by the aviation agreement between the United Arab Emirates and Germany,” said a spokesman for the German transport ministry.

Lufthansa has been up in arms and crying unfair competition.

In Berlin alone, which is Air Berlin’s main hub, more than 20 connections to other countries in Europe will be affected, but so will the domestic German flights, such as from Düsseldorf to Hamburg.

The move is a significant setback for Air Berlin and major shareholder Etihad. Since buying a stake in the German airline in 2012, Etihad has been trying to press ahead with its expansion in Germany with such code-sharing arrangements. The deal allows the beleaguered Air Berlin to better fill its airplanes with the Etihad transit passengers. Tickets for this winter have long been on sale, including for the problematic code-sharing flights. But Air Berlin is reassuring passengers that regardless of the outcome of the dispute, they will be brought to their destinations.

The Federal Aviation Office signaled to Etihad at the beginning of August that it would soon no longer permit the flight connections. After that, there were intensive discussions between the LBA, representatives from Etihad and German Transport Minister Alexander Dobrindt. Etihad reportedly requested a postponement and even invited Mr. Dobrindt to the United Arab Emirates for bilateral talks about a revised version of the aviation agreement. Mr. Dobrindt, however, remained firm. His ministry reportedly determined in July that the air rights had in part been wrongly awarded since 2012.

Air Berlin is betting on a last-minute resolution. “There are still discussions underway,” said a spokesman for the airline. He called the decision incomprehensible, and said the affected flights had already been approved by the LBA six times in a row. “This also involves something akin to protecting good faith,” he said.

But the aviation agreement left no room to maneuver. Arab airlines are allowed to fly into three airports in Germany, which currently are Frankfurt, Munich and Düsseldorf. The once provisional location, Hamburg, has also been established by regular usage. The airline’s flight plan is crucial, but will be kept strictly secret.

According to information from the transport ministry, the code-share flights are allowed only from the four destinations within Germany to three other airports, currently Berlin, Stuttgart and Nuremberg.

Evidently the LBA was generous in its decisions up till now, since a second large German airline in addition to Lufthansa was politically desired. But in the meantime, the focus has become more about the German aviation market.

After Etihad helped out Air Berlin in the spring again with a cash injection of hundreds of millions of euros, Lufthansa has been up in arms and crying unfair competition. And the infusion of capital has cast doubt on the German airline’s independence.

Air Berlin must remain under European control, otherwise it will lose its operator’s certificate. That is stipulated by the heavily politically regulated aviation market. The LBA still has to make a decision on that.

 

Daniel Delhaes is an editor in the Handelsblatt Berlin bureau. Jens Koenen is bureau chief in Frankfurt, currently specializing in the aviation and IT industries. To contact the authors: Delhaes@handelsblatt.com and Koenen@handelsblatt.com.

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