Air Berlin filed for bankruptcy protection this morning, the latest step in the collapse of the German airline. Flight operations continue but Etihad is no longer willing to pump cash into the failing operation and the future of the company appears more bleak than ever. A loan from the German government is in place but the most likely outcome appears to be the brand folding.
Earlier this year the Lufthansa Group took over flying on 35 of Air Berlin’s A320 family aircraft in a wet-lease arrangement. The planes still belong to Air Berlin and are flown by Air Berlin crew but on flights marketed and sold as Lufthansa services. At the time of the agreement the plan was to have Air Berlin shed its ultra-competitive short-haul operations in Europe but maintain its Berlin hub and long-haul flights. Instead of that surviving it now appears that Air Berlin will see its remaining pieces sold off to other companies.
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Air Berlin’s restructuring plans hit a snag
The collapse of Air Berlin would be a financial mess for Etihad, the latest in massive losses by its foreign airline investments. It would also be a significant hit for the oneworld group where Air Berlin provides connectivity within the European continent. There are several other member airlines that can help shoulder the load but they are all less conveniently located geographically to support connections within Europe. Air Berlin never did join the anti-trust immunized joint venture with other oneworld partners across the Atlantic Ocean, its primary long-haul market, putting it at a further competitive disadvantage.
The last two years have been profitable for European airlines – except airberlin…and Alitalia pic.twitter.com/4OetAJ4Dbn
— Will Horton (@winglets747) August 15, 2017
And, of course, one must wonder how much of the carrier’s troubles can be associated with the debacle that is the Brandenburg airport situation in Berlin. Sure, everyone is affected by the new terminal not opening, but Air Berlin was disproportionally exposed to the inability to grow and the challenges of creating connecting flow at Tegel versus the new facility.
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The competitive pains on the cost side for Air Berlin in the European market are brutal. Ryanair continues to expand in the Continent, with expectations of carrying some 40% of short-haul traffic a decade hence, up from 15% today. CEO Michael O’Leary is not shy about calling out the competitors for their inability to match costs or prices, though in his recent comments AirBerlin was not even an afterthought; the carrier was already written off and not worthy of mentioning in the same breath as EasyJet or WizzAir.
The short haul fleet is likely to end up transferred to Lufthansa Group permanently. The props may end up grounded or sold off to some other small startup that wants to connect truly tiny markets or even a different region. The A330 fleet might be harder to place, especially with the rapid growth in low-cost transatlantic options. Maybe IAG takes them on to bolster the Level brand in a hurry?
Header photo courtesy of Air Berlin Group.
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With the props you’re probably right but I guess that the A330’s will also end up in the LHG, operated by Eurowings
Was gonna book an award trip on them tonight. Now, I have to read my CC’s bankruptcy insurance fine print very carefully..
Agree the A330s will probably go to LH group to help sweeten an LH buyout of the good assets of AB.
Those planes can go to strengthen Brussels Airlines which is now 100% owned by LH Group under the Eurowings banner.
So glad I left AB off my itinerary.
I have a flight on Air Berlin in November with AA miles. Any thoughts on that? Should I be calling AA now to see if they can change it? Wait and see if AB is still in the air? What would you do? Thanks.
I think there’s a pretty good chance the flight won’t operate as booked but I also do not expect that AA will do anything now since the officially no operations are changed for the airline yet.
If there is an alternate carrier/routing that you can find with award space open and not pay a significant fee then go for it. But otherwise ride it out.
Thanks for the comment. I checked and AA is still offering award flight availability for the nonstop flight to ORD on that date with AB, but also with IB connecting through Madrid (about $100 higher in fees), and on BA connecting through London (about $250 higher).
An awkward part is that my outbound reservation is a separate award booking not involving AB, so that I’m probably stuck with that one, except for the possibility of a free date change or paying a redeposit fee to get my miles back.