Air Berlin chief executive steps down

Air Berlin's chief executive Hartmut Mehdorn stepped down on Monday, handing over the task of bringing Germany's second largest airline back into profit to strategy chief Wolfgang Prock-Schauer.

Hartmut Mehdorn, CEO of German airline Air Berlin, arrives for a news conference in Berlin in this March 16, 2012 file photo. Air Berlin's chief executive stepped down on January 7, 2013, handing over the task of bringing Germany's second largest airline back into profit to strategy chief Wolfgang Prock-Schauer.   REUTERS/Thomas Peter/Files (GERMANY - Tags: BUSINESS TRANSPORT) *** Local Caption ***  BER001_AIRBERLIN-CE_0107_11.JPG

Hartmut Mehdorn, the chief executive of the Etihad Airways partner airline Air Berlin, has stepped down after 17 months.

He will be replaced by Wolfgang Prock-Schauer, the Air Berlin chief of strategy and network planning.

Mr Prock-Schauer is also a former chief executive of Jet Airways, the Indian carrier currently linked in partnership talks with Etihad.

Mr Mehdorn, 70, who is credited with turning around Air Berlin's performance since joining in September 2011, had made no secret of the fact he intended to resign as chief executive early this year.

"This is the right time for the change in management and it sends the right signal that Wolfgang Prock-Schauer, as the new CEO, is leading the turnaround programme which is so vital for the company," said Mr Mehdorn.

"Air Berlin has already achieved a great deal over the past year. I am confident that all our employees will make the turnaround a success."

Mr Prock-Schauer, 56, began his career with Austrian Airlines, then moved to India as the chief executive of Jet Airways in 2003. Two years later, he took Jet Airways to a stock exchange listing, expanding the company's long-haul business in the process.

In 2009, he joined British Midland International as the chief executive, before joining Air Berlin last year.

"Air Berlin is facing huge challenges. We must continue to push our process of change forward rapidly to become lean and smart, so that we can be successful in the global competitive environment," said Mr Prock-Schauer. "Together with my colleagues on the board, and the employees, we will put all our effort into this task."

The airline he inherits reported a third-quarter net income in November of €66.6 million (Dh319m), a more than 100 per cent leap from the €30.2m posted for the same period in 2011.

"We were able to increase revenue, improve capacity utilisation and yield and we were able to reduce cost significantly," Mr Mehdorn said at the time. "The journey is not complete, however, we are on the right track. Our target to return to profitability in the coming year remains unchanged."

Revenue rose 1.4 per cent to €1.4 billion and, although Air Berlin's "Size & Shape" cost-cutting programme yielded €70m in savings, higher fuel prices added €35m to the airline's bottom line. However, Air Berlin still delivered an operating profit of €101.2m, up 4.5 per cent from a €96.8m operating profit in the prior-year quarter.

Its partnership with Etihad contributed €50m in revenues and "significant cost savings" in the year to date, added Mr Mehdorn.

His success has been largely attributed to the deal he negotiated with Etihad in December 2011. Etihad took a 29 per cent stake in Air Berlin for a US$350m (Dh1.28bn) package of financing and loans. In return, Etihad gained an already functioning European network off the shelf, according to Paul Gregorowitsch, the Air Berlin chief commercial officer.

"Etihad is a young airline, a point-to-point airline. We are a network airline sitting in the heart of Europe," said Mr Gregorowitsch.

"Our market includes the top-level management at the top companies in the world. Hartmut got a good deal from Etihad. He is, after all, one of the sharpest business executives in this country today. But they got a good deal from him, too."

"Hartmut Mehdorn has done a remarkable job under the most difficult of circumstances for the European economy and the aviation industry," said James Hogan, the president and chief executive of Etihad.

"In the short period at the helm of Air Berlin, he has made an enormous contribution to the airline, taking some of the hard decisions that are required to turn around a business, and putting in place the foundations for a successful turnaround and the airline's sustainable commercial operation.

"I appreciate the openness and energy with which he has worked in Air Berlin's partnership with Etihad Airways. The mutual benefits of this strategic partnership are already in evidence and will continue to grow as the synergies develop in the coming year."

Mr Mehdorn will continue to serve as non-executive director of Air Berlin.