ailing airline

Keep it Up in the Air

Germany Airberlin
I will survive. Source: Picture alliance.

At first glance, it seems pretty obvious. Air Berlin, Germany’s second-largest airline, has been making losses ever since it went public 11 years ago.

Does it deserve state help? Many say no. After all, managers have come and gone, and shareholder Etihad has pumped in more than €1 billion ($1.12 billion) to no avail.

But there are three reasons why propping up the company wouldn’t necessarily mean a waste of taxpayers’ money but might actually make sense.

Firstly, jobs. A hasty refusal of any state aid wouldn’t penalize past managers who failed to fix the company, but the airline’s 8,000 employees. You could call this argument trite, but that doesn’t make it wrong.

If the airline does come up with a strategy, the government shouldn't refuse to help.

Secondly, Air Berlin is a mess today partly because the company failed to come up with a clear strategy, instead trying to be all things to all people, from tourism to charter markets and scheduled services via hubs. The airline was even competing with its much bigger rival Lufthansa in the premium segment, which was never going to work. That means if the airline does come up with a strategy, the government shouldn’t refuse to help.

And thirdly, competition: surely there’s room for several airlines in one of Europe’s biggest air travel markets. German airports, passengers and travel agencies could all do with another competitor.

One the other hand, though, the government can’t go ahead and hand over taxpayers’ cash only for Air Berlin to be snapped up by Lufthansa. So state aid does make sense but only if Air Berlin can survive as an independent company.

 

To contact the author: koenen@handelsblatt.com

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