AirBerlin B737-800 D-ABBF MUC

German Giants Huddle Closer as LCCs Circle

Long-struggling Air Berlin has bowed to the inevitable and launched a radical restructuring that will see it cut 10 per cent of staff – 1,200 jobs – and trim its short-haul operations.

Having tried to be all things to all men, the airline, which hasn’t posted a positive operating result since 2007, says it will now focus on network operations as it hives off its leisure business into a separate unit.

“The core Air Berlin proposition in future is now clear: a dedicated, focused network carrier serving higher-yielding markets from two hubs in Dusseldorf and Berlin,” says CEO Stefan Pichler.

Etihad, which owns 29 per cent of Air Berlin, has said it supports the move.

Air Berlin is currently Germany’s second-biggest airline behind Lufthansa, and the two controlled about 45 per cent of the market last year.

This has resulted in a curious co-dependence to keep low-cost carriers (LCCs) at bay: In 2015 Ryanair and Easyjet accounted for just eight per cent of the German market, but within Europe as a whole their share is closer to a third.

To try and prevent the pair capitalising on Air Berlin’s woes, Lufthansa has struck a deal to wet lease up to 40 A320s from the former for six years. Most of these will bolster Lufthansa’s own attempt at a low-cost carrier – Eurowings – which already has 90 aircraft.

Despite Eurowings’ rapid growth, Ryanair and Easyjet have both questioned whether it will be able to function as a true low-cost carrier, and both maintain ambition expansion plans in Germany.

Ryanair, for instance, expects to raise its market share in Germany to around eight per cent this year, and has designs on 20 per cent by the end of the decade.

From next summer Air Berlin says its core operations will be served by 75 aircraft – 17 A330s, 40 A320s and 18 Q400s – down from 127 today.

In the short-term its reduced stature will be compensated for by a bigger Lufthansa group, but expect Europe’s main budget carriers to muscle into Germany over the coming years, and to add traffic to a market that is yet to hit its 2008 peak by number of flights.

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