Etihad partner airberlin to undergo restructuring as it eyes long-haul growth

The restructuring will include up to 1,200 job cuts and giving its rival Lufthansa up to 40 of its aircraft.

Etihad Airways partner airberlin is to undergo a “far-reaching” restructuring, involving up to 1,200 job cuts and the near halving of its exiting fleet of aircraft.

The shake-up will also see airlberlin expand on transatlantic routes and reduce its business in low-cost tourist services in the highly competitive European air travel market.

Germany’s second-largest airline, in which Etihad of Abu Dhabi has a 29 per cent stake, said it would become a “leaner, fitter, stronger” carrier operating from its two key hubs in Berlin and Düsseldorf, with a core fleet of 75 aircraft from the middle of next year.

“We are implementing a size and structure for the business that is fit for purpose. We will see revenues grow and costs contained as a result of this restructuring of our business,” said airberlin’s chief executive Stefan Pichler. He added that he expected the loss-making airline to return to operating profit by 2018.

After the restructuring, the airberlin fleet will be reduced from the current 136 aircraft to 75 in what was described as a “modern, cost efficient and leased fleet”.

At a presentation to analysts in Berlin, Mr Pichler said: “The new airberlin will be a sustainable and profitable business, as this restructuring addresses root causes not previously addressed.”

Under the plan, airberlin would provide up to 40 Airbus 320 aircraft to rival Lufthansa, the leading German carrier. It would operate up to 38 of the planes under a six-year lease agreement beginning in 2017 under a “wet-lease” agreement which would see Lufthansa cover all the operating, maintenance and staff costs of the aircraft.

“Fewer staff will be required, with up to 1,200 positions becoming redundant,” airberlin said in its statement.

The airline also announced it would separate its touristic business into an independently operating business unit. It is reviewing its strategic options for the tourism business of airberlin.

Lufthansa separately announced the same 40-aircraft deal, saying it will allow its budget airline Eurowings “to significantly expand its capacities and strengthen its position in the European point-to-point air transport market.”

The final agreement is expected to be concluded in the fourth quarter of this year, Lufthansa added, and is subject to the companies’ supervisory boards and competition authorities.

Mr Pichler said the restructuring plan was necessary due to “significant external market pressures which dictate a change to our current complicated business model.”

“We have to make reductions but we will aim to do so in a supportive manner, offering new opportunities to employees where possible,” he added in the statement. Some of the employees – current totalling around 8,000 – will be offered positions elsewhere in the Etihad partnership of airlines, which includes carriers such as Air Serbia, Alitalia and Jet Airways of India.

The company plans to concentrate on its profitable long-haul business which will be expanded with new routes and additional frequencies, particularly to the United States.

New long-haul markets include Los Angeles and San Francisco in California, and Orlando, Florida. The short and medium haul business will be refocused on key city routes in Europe.

The changes would reduce seasonal exposure which currently sees many of its aircraft lying unused during the European winter months. Last year the company suffered a record loss of €447 million ($501m).

The company has received regular cash injections from Etihad, which owns 29.1 per cent of its shares, and has undergone several restructurings previously to trim costs and achieve a return to profitability.

Saj Ahmad, analyst with Strategic Aero Research, said: “Etihad’s intervention and revamped strategy here will allow aerberin to re-establish itself as a proper full service airline but on a smaller, less expensive scale. Lessons have been learned from Etihad’s revamping of Air Serbia and Alitalia, which both now have the makings now of robust platforms.

“airberlin will be able to offload unused capacity by way of leasing out A320s to Lufthansa, while concentrating on being a long haul airline that will offer choice and better interline connections with Etihad,” he added.

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Published: September 29, 2016 04:00 AM


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