Second Wind

Air Berlin Gets Reprieve

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Where is Air Berlin heading to?
  • Why it matters

    Why it matters

    If German authorities block Persian Gulf carrier Etihad Airways from selling code-sharing flights with Air Berlin, the future of Germany’s No. 2 airline could be bleak.

  • Facts

    Facts

    • Germany is allowing code-sharing between Etihad and Air Berlin this winter.
    • Air Berlin lost €316 million ($405 million) in 2013, and needs Abu Dhabi-based Etihad to survive.
    • Etihad owns 29 percent of Air Berlin after paying €300 million, a move rival Lufthansa opposed.
  • Audio

    Audio

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For now, the flight plan for Germany’s second-largest carrier is still sound.

Reversing an earlier decision, German aviation authorities have decided to continue to let Persian Gulf carrier Etihad Airways sell code-sharing flights on Germany’s second-largest airline, Air Berlin. The concession is essential to keeping the struggling carrier aloft.

In September, the German Federal Office of Aviation had blocked Abu-Dhabi based Etihad, which owns 29 percent of Air Berlin, from sharing more than 30 flight codes with the German carrier. That would have prevented Etihad from selling Air Berlin seats under its own name during the winter season.

What would happen to the code-sharing permits in April next year was still open to discussion although, in Air Berlin’s view, the licenses should be granted, its spokesman Aage Dünhaupt said on Friday.

The code-sharing decision was highly political in Germany, where the dominant carrier, Lufthansa, fears increased competition from Etihad via its Air Berlin proxy.

State-owned Middle East-based airlines, including Dubai-based Emirates and Qatar Airways, have come under scrutiny in Europe, where local rivals think they are taking advantage of lower labor costs in the Persian Gulf to make inroads on the continent.

Air Berlin Etihad-Disputed Flight Routes-01

The Gulf-based airlines have aggressively expanded and eaten into the market shares of established European carriers such as British Airways, Lufthansa and Air France-KLM.

In Germany, there has also been concern that Etihad was exercising too much power over Air Berlin, in violation of a European Union law that limits non-EU ownership of European airlines to 49 percent.

Losing the sales from seats sold by Etihad, a rapidly expanding Mideast carrier which transported 11.5 million passengers in 2013, would have been a big blow for Air Berlin.

“The company is currently in a phase of restructuring and we cannot miss the sales. In the current turbulent situation, it would have repercussions throughout the whole firm,” Mr. Dünhaupt told Handelsblatt Global Edition.

Air Berlin lost €316 million last year and is struggling to reduce costs and compete with low-cost carriers such as Easyjet and Ryanair. The airline is having difficulty attracting customers in Europe, where consumers and businesses have curbed travel spending over the past five years.

Air Berlin WTB

 

Etihad, which had sales of $6.1 billion last year against €4.1 billion ($5.3 billion) for Air Berlin, pumped €300 million into its Berlin-based carrier earlier this year.

Air Berlin’s shares, which gained 1.7 percent to €1.20 on Friday, are only worth a fraction of their value seven years ago, when the stock was worth as much as €20.

Officials at the German transport ministry and Arab Emirates will meet next week to discuss code-sharing, Mr. Dünhaupt said.

The German Federal Office of Aviation, called LBA, declined to comment, referring questions to Germany’s transport ministry. The department was not immediately available to comment.

 

Gilbert Kreijger is an editor at Handeslblatt Global Edition and has covered companies and markets across Europe. To contact the author: Kreijger@handelsblatt.com

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