Political Turbulence

Germany Grounds Air Berlin's Owners

Air Berlin CEO Wolfgang Prock-Schauer, right, and Etihad Airways CEO James Hogan, right, at a press conference in Berlin on January 13, 2014. Source Fabrizio Bensch Reuters
No code to share. Air Berlin CEO Wolfgang Prock-Schauer (r) and Etihad Airways CEO James Hogan at a press conference in Berlin in January.
  • Why it matters

    Why it matters

    If the German government’s code-sharing restrictions on co-operation with Etihad are upheld, Air Berlin’s share price, already a fraction of its value five years ago, may fall further.

  • Facts

    Facts

    • The German government is trying to ban 30 code-sharing flights between Air Berlin and Etihad.
    • Etihad injected €300 million into Air Berlin this year, eliciting protests from Lufthansa and another German airline.
    • Abu Dhabi-based Etihad may simply expand code-sharing between Air Berlin and Alitalia, of which it is also part owner.
  • Audio

    Audio

  • Pdf

When Etihad Airways provided Air Berlin with a financial injection of €300 million ($381 million) in April, the competition was alarmed.

The Abu Dhabi-based airline is already the major shareholder in Air Berlin, Germany’s second largest carrier. Executives at German market-leader Lufthansa and leisure airline Condor warned the German government that the company, known for its aggressive international tactics, would soon gain full control over the German carrier. Etihad currently owns 29.21 percent of Air Berlin.

The warnings apparently had their desired effect.

The German Federal Office of Aviation, which is subordinate to Transport Minister Alexander Dobrindt, a member of the conservative Christian Social Union (CSU), recently informed Etihad Airways that more than 30 flight connections shared with Air Berlin could not be approved for the winter flight schedule.

Handelsblatt has learned from industry insiders that permits that allowed Etihad to incorporate Air Berlin routes into its network, including those from Berlin to New York, Rome and Madrid, were issued improperly.

Disputed Flight Routes-01

 

The aviation agency’s threat to revoke the permits would have serious consequences. It would mean that routes known to customers as “operated by” connections, where different companies share the same routes and which are referred to in the industry as code-sharing, could no longer be offered and sold as the airline’s own flights.

Struggling Air Berlin currently uses the system to improve capacity on less popular routes, such as from Berlin to Helsinki.

For its part, the Persian Gulf airline benefits from the collaboration because it enables the company to offer a connection from Abu Dhabi to Helsinki via Berlin, even though Etihad doesn’t actually offer a service to the Finnish capital. That leg is flown by Air Berlin.

“If the flight rights are lost, an Etihad growth strategy based on investments in other airlines and code-sharing will come to nothing.”

Richard Klophaus, Aviation Expert, Worms University of Applied Science

In the first half of 2014, the codesharing agreement made it possible to increase the number of passengers carried jointly by Etihad and Air Berlin by 7 percent to 270,000.

“If the flight rights are lost, an Etihad growth strategy based on investments in other airlines and code-sharing will come to nothing,” warned Richard Klophaus, an aviation expert at the Worms University of Applied Science, near Frankfurt.

The transport ministry had no comment on the impending withdrawal of flight rights, nor did the Federal Office of Aviation, Air Berlin or Etihad.

However, Etihad already appears to have a fall-back plan. Handelsblatt has learned from industry insiders that Etihad’s Italien subsidiary Alitalia could invest in Air Berlin.

That would enable Etihad to continue offering a continuous route network, and the Federal Office of Aviation would be powerless to do anything about it. That’s because the agency can only impose route restrictions on non-European airlines.

The fight over Air Berlin is apparently being waged using every trick in the book.

Air Berlin WTB

 

Jens Koenen is the head of Handelsblatt’s Frankfurt bureau and covers the aviation industry. Daniel Delhaes is based in Berlin and covers industry and politics. To contact the authors: koenen@handelsblatt.com and delhaes@handelsblatt.com.

 

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