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kenyaprince

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20 Giugno 2008
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[h=1]airberlin cuts 30 routes, nine airports; dual-brands A320 with Etihad Airways[/h]By Ralph Anker in Berlin

airline-airberlin-slideshow-2.jpg


http://www.anna.aero/2014/01/15/air...allery-06cd426a6fd6e5ebe6a9d6d287706e07-55976http://www.anna.aero/2014/01/15/air...allery-06cd426a6fd6e5ebe6a9d6d287706e07-55976
"Moving forward" is the new slogan for the partnership between airberlin and Etihad Airways. airberlin CEO Wolfgang Prock-Schauer (fourth from left) and Etihad Airways CEO James Hogan (fourth from right) were on hand on Monday to unveil an airberlin A320 promoting the relationship between the airlines.​
airberlin remains something of an oddity among Europe’s biggest carriers. Founded as a charter/leisure airline back in the late 1970s, it has grown both organically and through acquisitions (dba and LTU), evolved from a low-cost airline into a full-service carrier, joined the oneworld alliance and now has Abu Dhabi-based Etihad Airways as its major shareholder. However, the airline has struggled to be consistently profitable, and still appears to be trying to be all things to all people by operating short-haul, medium-haul and long-haul routes, having a fleet that ranges from Q400s to A330s, operating year-round high frequency business routes, as well as low-frequency, seasonal, leisure routes.
In 2013 the airline cut its fleet by 12 aircraft (to 143) and saw passenger numbers drop by 5.4% to 31.54 million. However, load factor reached an impressive 84.9%, an increase of 1.3 percentage points on 2012. Looking at planned capacity data for 2014 suggests that airberlin hopes to grow once more this year, although at a modest rate.
CHT-ABHG-2014-vly.png
Source: Innovata / Diio Mi for representative weeks in each month of 2013​
This analysis looks at airberlin and its Austrian subsidiary NIKI separately, and also combined. The impact of the re-timing of Easter back into April this year can clearly be seen, especially in the case of NIKI, with its greater focus on leisure routes. After April, capacity growth for the two airlines combined averages just under 2%.
[h=2]Many routes dropped; very few added in 2014[/h]Despite the modest growth in capacity, very few new routes are planned for 2014 while around 30 routes have been dropped. The increase in capacity has therefore been achieved by an increase in average weekly frequency on many routes. The airline retains a diverse network, but a number of routes have been axed from the schedules, including the termination of all services at nine airports. Fifteen routes have been dropped that operated with at least three weekly flights last summer, with six of these being links to the airline’s virtual hub in Palma de Mallorca.
[TABLE="class: post-table, width: 100%"]
[TR]
[TH]From (Code)[/TH]
[TH="bgcolor: #F9F9F9"]To (Code, date last operated)[/TH]
[/TR]
[TR]
[TD]Berlin Tegel (TXL)[/TD]
[TD]Los Angeles (LAX, 18 Oct 13)[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Erfurt (ERF)[/TD]
[TD="bgcolor: #F9F9F9"]Antalya (AYT, 2 Nov 13)[/TD]
[/TR]
[TR]
[TD]Hamburg (HAM)[/TD]
[TD]Rome (FCO, 20 Oct 13), Venice (VCE, 3 Nov 13)[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Hannover (HAJ)[/TD]
[TD="bgcolor: #F9F9F9"]Antalya (AYT, 30 Oct 13)[/TD]
[/TR]
[TR]
[TD]Munich (MUC)[/TD]
[TD]Bari (BRI, 3 Nov 13), Palermo (PMO, 29 Mar 14)[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Palma de Mallorca (PMI)[/TD]
[TD="bgcolor: #F9F9F9"]Asturias (OVD, 31 Oct 13), Lisbon (LIS, 30 Oct 13), Memmingen (FMM, 14 Oct 13), Porto (OPO, 31 Oct 13), Weeze (NRN, 27 Oct 13), Zweibrücken (ZQW, 2 Nov 13)[/TD]
[/TR]
[TR]
[TD]Stuttgart (STR)[/TD]
[TD]Palermo (PMO, 27 Mar 14)[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Zurich (ZRH)[/TD]
[TD="bgcolor: #F9F9F9"]Palermo (PMO, 30 Oct 13)[/TD]
[/TR]
[TR]
[TD="class: post-table-caption, bgcolor: #CBCBCB !important, colspan: 2"]Source: Innovata / Diio Mi for w/c 12 August 2013 and w/c 11 August 2014[/TD]
[/TR]
[/TABLE]
The nine airports to have lost all airberlin services this summer include five in Germany (Erfurt, Heringsdorf, Memmingen, Weeze and Zweibrücken), two in Portugal (Lisbon and Porto), and one each in Italy (Palermo) and Spain (Asturias). Palermo, with the loss of 10 weekly departures is the hardest hit in terms of weekly frequency loss.
The only confirmed new routes being launched by airberlin (as opposed to NIKI) this summer are Düsseldorf to Madrid, Düsseldorf to Calvi (in Corsica), and Munich to Lanzarote (Canary Islands). From Vienna, NIKI is adding new routes to Larnaca, Madrid and Malta.
[h=2]Berlin, Düsseldorf grow, Palma base shrinks[/h]Analysis of the weekly seat capacity being offered by airberlin from individual airports shows that the airline is growing this summer at 11 of its top 15 airports, with Palma de Mallorca being the most significant exception, given that it is the airline’s third biggest base. Antalya’s fall reflects the growing competition in the Turkish market with the likes of SunExpress Deutschland entering the Antalya market, and doubling its seat capacity this summer between Antalya and Germany. The almost 20% increase in capacity at Frankfurt is almost entirely down to airberlin increasing frequency on just two routes, to Berlin Tegel and Palma de Mallorca.
CHT-AB-T15-APTS-S14-v-S13.png
Source: Innovata / Diio Mi for w/c 12 August 2013 and w/c 11 August 2014​
[h=2]airberlin’s seasonality weakness[/h]One of airberlin’s biggest challenges is the seasonality of its operations. Comparing weekly seat capacity in February (off-peak) with the previous July (peak) for Europe’s seven biggest airline groupings, reveals that airberlin is beaten only by Ryanair for the difference (in percentage terms) between these two periods. This reflects the airline’s reluctance to give up its many low-frequency, seasonal leisure routes that it considers a core part of its network strategy. However, this level of demand seasonality is incompatible with the airline’s ‘full-service’ cost structure, resulting in the airline’s poor level of financial performance in recent years.
CHT-Top7-AL-seasonality.png
Source: Innovata / Diio Mi for w/c 3 February 2014 and w/c 15 July 2013​
[h=2]Can Etihad Airways help airberlin to profit?[/h]This week airberlin jointly hosted a spectacular press conference in Berlin with its major shareholder Etihad Airways, to confirm Etihad’s long-term commitment to the relationship, and to unveil an A320 painted in a mix of the airlines’ corporate colour schemes. anna.aero was there and listened with interest to the presentations made by both airlines. With airberlin’s aspirations to be a global airline, its fleet of just 14 A330s is insufficient to give it much of a presence in the long-haul market. In fact, the widebody aircraft are used extensively on some of the Palma routes in summer as well as the airline’s modest transatlantic network, and flights to Abu Dhabi.
The codeshare arrangement with Etihad allows airberlin to access 33 African, Asian and Middle East, destinations via Abu Dhabi. Emirates and Qatar Airways will be competing for this traffic via their well-connected hubs in Dubai and Doha, while Lufthansa serves around 20 destinations in Asia non-stop from its Frankfurt hub. Lufthansa has been active in its attempts to restrict the number of German airports into which the MEB3 carriers can operate. The following table reflects the number of weekly flights available from each carrier into their respective hubs from Germany.
[TABLE="class: post-table, width: 100%"]
[TR]
[TH="bgcolor: #F9F9F9"]Airport[/TH]
[TH="bgcolor: #F9F9F9"]Emirates (DXB)[/TH]
[TH="bgcolor: #F9F9F9"]Qatar Airways (DOH)[/TH]
[TH="bgcolor: #F9F9F9"]Etihad Airways / airberlin (AUH)[/TH]
[/TR]
[TR]
[TD]Frankfurt[/TD]
[TD]EK 21[/TD]
[TD]QR 14[/TD]
[TD]EY 14[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Munich[/TD]
[TD="bgcolor: #F9F9F9"]EK 14[/TD]
[TD="bgcolor: #F9F9F9"]QR 14[/TD]
[TD="bgcolor: #F9F9F9"]EY 14[/TD]
[/TR]
[TR]
[TD]Düsseldorf[/TD]
[TD]EK 14[/TD]
[TD][/TD]
[TD]AB 7, EY 7[/TD]
[/TR]
[TR]
[TD="bgcolor: #F9F9F9"]Berlin Tegel[/TD]
[TD="bgcolor: #F9F9F9"][/TD]
[TD="bgcolor: #F9F9F9"]QR 7[/TD]
[TD="bgcolor: #F9F9F9"]AB 7[/TD]
[/TR]
[TR]
[TD]Hamburg[/TD]
[TD]EK 14[/TD]
[TD][/TD]
[TD][/TD]
[/TR]
[TR]
[TD="class: post-table-caption, bgcolor: #F9F9F9, colspan: 4"]Source: Innovata / Diio Mi for w/c 11 August 2014[/TD]
[/TR]
[/TABLE]
[h=2]The UK now a Q400 niche market of just one route[/h]Back in the summer of 2006, airberlin operated over 20 flights per day from London Stansted to 12 destinations, including domestic routes to Belfast City, Glasgow and Manchester. After the domestic routes were abandoned the following year, the German routes were gradually phased out, or moved to London Gatwick (and then phased out), leaving airberlin with just a single UK service, from Stansted to Düsseldorf, flown up to thrice-daily by the airline’s Q400s operated by LGW (that’s Luftfahrt Gesellschaft Walter and not London Gatwick). These Q400 flights are the only daily turboprop operation at London Stansted, creating further uncertainty about the future of the service. However, airberlin passengers are able to access a wide range of UK services thanks to the airline’s membership of the oneworld alliance, enabling it to codeshare on British Airways’ network of flights between London Heathrow and Germany, as well as domestic connections at Heathrow to other UK destinations.
 
[h=3]Airberlin receives a vote of confidence from Etihad, but how will the relationship evolve now?[/h]Analysis
17-Jan-2014 5:27 PM

Wolfgang Prock-Schauer and James Hogan, respectively the CEOs of airberlin and Etihad Airways, held a joint press conference in Berlin on 13-Jan-2014. At the conference, they reviewed the progress of their codeshare agreement since 2012 and outlined plans for its development in 2014.
In addition, Mr Hogan took the opportunity to reinforce the rationale behind Etihad’s equity alliance strategy (“Global reach is beyond the capability of any single airline”). He also reiterated his airline’s support for airberlin (“We are confident that airberlin is on the right path back to profitability and the next phase in the airline’s proud history”).
The announcements led to an 11% increase in the share price of Air Berlin PLC on the day as investors were cheered by Etihad’s vote of confidence in the loss-making German carrier. Nevertheless, the closer co-operation signalled by the two airlines stopped short of what some observers had expected. Further developments cannot be ruled out, however.

[h=3]Common codeshare passengers and revenues grew sharply in 2013[/h]The codeshare agreement between Etihad and airberlin has carried almost 900,000 common passengers in the two years since it came into being. In 2013 the number was 563,000, which was an increase of 74% on the 2012 figure of 323,000. Common revenues generated by the codeshare increased from EUR100 million in 2012 to EUR200 million in 2013.Airberlin carries the Etihad EY code on 66 routes, compared with 33 Etihad routes carrying the AB code.
Airberlin and Etihad joint codeshare passenger numbers (‘000): 2012 and 2013
aB1.png

Source: airberlin and Etihad Airways
[h=3]Further expansion of the joint network is planned for 2014[/h]The two carriers currently operate 42 weekly flights between them on routes connecting Germany and Abu Dhabi. In Feb-2014, a second daily Munich flight will be added, taking the weekly total to 49 flights. Airberlin announced the addition of new routes for the joint network in 2014. These include destinations in India, South Korea and Australia.
The two will also expand their joint sales operations, adding to the 17 joint sales offices around the world that represent them in more than 50 markets.
Airberlin's Mr Prock-Schauer, said: “The comprehensive commercial partnership with Etihad Airways has brought many benefits to airberlin, including our shares of joint revenues of EUR200 million, which is an integral part of our turnaround program.” He also referred to the benefits to airberlin passengers of being able to offer additional destinations and improved services as a result of the partnership.
Airberlin and Etihad joint codeshare revenues (EUR million): 2012 and 2013
aB2.png

Source: airberlin and Etihad Airways
[h=3]Airberlin to add to US frequencies in 2014[/h]In other indications of its plans for 2014, Mr Prock-Schauer said that airberlin will add to its US network, where it serves five destinations from Berlin and Düsseldorf, by increasing frequencies on its services to New York JFK and Chicago. In 2014, airberlin will fly 45 weekly frequencies to the US, where its oneworld partner American Airlines offers a significant number of additional destinations. It also has nine tourist destinations in the Caribbean.
Its new business class retrofit of the long-haul fleet is expected to be complete by the summer 2014 schedule. This new product is based on Etihad’s business class. WiFi will be added to the entire fleet over the next three years.
Airberlin’s US and Caribbean destinations
aB3.png

Source: airberlin
[h=3]Europe frequencies to grow by 8% on average[/h]From its main hubs in Berlin and Düsseldorf (it is the leading carrier in both of these airports), airberlin’s focus in Europe is on the 10 largest airports in Germany, in addition to Vienna and Zurich, while it also has a significant presence in Spain(it is number one in Palma de Mallorca) and Greece. In 2014, it plans to increase frequencies by an average of 8%.
Airberlin’s network from Berlin
aB4.png

Source: airberlin
Airberlin’s network from Düsseldorf
aB5.png

Source: airberlin
Airberlin’s network from Palma de Mallorca
aB6.png

Source: airberlin
Airberlin’s network to Greece
AB7.PNG

Source: airberlin
[h=3]Three strategic elements for Etihad to build a global network[/h]Etihad Airways' James Hogan said that Etihad’s business model was “about partnership”, referring to the “traditional alliances” as being “fractured”. Etihad was very focused on how to “build from Abu Dhabi a global network that reaches all parts of the globe”.
Its strategy to achieve this includes three elements: organic growth, codeshares with a range of airlines and Etihad’s ‘Equity Alliance’, of which Mr Hogan said airberlin was a “foundation member”.
[h=3]Etihad’s equity alliance investments are 'for the long term'[/h]He explained this latter element in further detail: “The Equity Alliance partners enable us to stretch our network globally and these investments aren’t for the short term, they’re for the long term. They are part of a very clear strategy over the next five, ten, fifteen, twenty years to build a network, where the guest… can link into a network.”
Each of Etihad’s equity partners provides it with access to new markets. In addition, members of Etihad’s equity alliance are increasingly co-operating with one another. The number of codeshare routes is also increasing across the Equity Alliance. For example, airberlin now offers 41 combined codeshare routes with Air Serbia, Virgin Australia and Air Seychelles.
Etihad Airways equity partners
AB8.PNG

Source: Etihad Airways
But Etihad is seeking more than just network benefits. More than any other carrier that has made minority equity investments in the airline sector, it seems that Etihad is attempting to derive the benefits of outright acquisition with its equity partners. Mr Hogan even used the word “Group” when referring to Etihad's equity partners, as if he views them as a single Group of companies.
One of the key benefits of successful acquisitions is that they can achieve cost synergies that are much deeper than those achieved by commercial partnerships. Mr Hogan is aiming for such benefits: “…The key to success isn’t about buying brands; it’s about all the carriers within the Group moving to sustainable profitability and we achieve that through scale.
"When we sit down with Boeing and Airbus, our discussions are about 500 aircraft. When we discuss with General Electricand Rolls Royce, the type of deals we are able to achieve as a group become better, because it’s about volume and it’s about unit cost. The flip-side is that we also achieve higher productivity.”
Equity Etihad Airways partnership benefits
AB9.PNG

Source: Etihad Airways
[h=3]Why Etihad invested in airberlin[/h]Mr Hogan recalled the reasoning that led to his carrier’s investment in airberlin, which he described as “one of Europe’s leading business and leisure airlines”. A key attraction for Etihad was Germany, which is Europe’s largest outbound market. Airberlin is the number one carrier in Berlin and Düsseldorf, through which it provides Etihad with additional gateways to the German market beyond its Frankfurt and Munich services (although Etihad also serves Düsseldorf).
“We invested in airberlin because we obviously saw the potential. What appealed to us in airberlin – they in fact carry more passengers than British Airways – [was] the size of the market, the scope of the business in Europe. [It] was a no-brainer for us to enter in to the partnership. The airline is well positioned. The connectivity that we bring strengthens both airlines.”
[h=3]Etihad reiterates its support for airberlin[/h]Significantly, Mr Hogan reiterated Etihad’s support for airberlin as it continues to implement its Turbine restructuring programme: “…airberlin’s new business strategy has made great progress and Etihad Airways continues to place its full support behind the airline and its management.” He added that “airberlin is making outstanding progress in a tough aviation market and being here [in Berlin] today is our endorsement of the airberlin business model”.
Mr Hogan described Etihad’s commitment to airberlin: “Quite simply, it’s a long term strategic investment. We are going nowhere. We are here to work with the management team of airberlin. … The long term goals we see very clearly. As an airline, as a partnership we continue to develop into each other’s network the passengers that we expect. We see the growth…. The benefits from a revenue perspective have been exceeded.”
[h=3]Etihad has provided more than EUR500 million to airberlin[/h]Mr Hogan stated that it had cost his airline USD105 million to acquire its 29% stake in airberlin and that this sum was recouped in the first six months through revenue generation and cost savings resulting from the closer cooperation. Setting aside the question of whether, and how much of, the benefits could have been achieved without an equity investment, there is more to the full picture when it comes to the sums invested by Etihad in airberlin.
In fact, the funds supplied to airberlin by Etihad go well beyond this transaction, which amounted to EUR73 million. Etihad also acquired 70% of topbonus (the airberlin FFP) and provided EUR156 million in debt financing and a further EUR40 million through a convertible bond issue. In addition, airberlin’s 2012 annual report made reference to EUR58 million of funds provided by Etihad in connection with a joint procurement programme and indemnity income.
Funds provided by Etihad Airways to airberlin since Jan-2012

EUR million
29% of airberlin equity
70% of topbonus
Debt financing
Convertible bond
Receipts re joint procurement
Indemnity income
Total

[TD="align: center"]73
[/TD]

[TD="align: center"]184
[/TD]

[TD="align: center"]156
[/TD]

[TD="align: center"]40
[/TD]

[TD="align: center"]32
[/TD]

[TD="align: center"]26
[/TD]

[TD="align: center"] 511
[/TD]
Source: Air Berlin PLC annual reports
These items no doubt have their own rationale and pay-back horizon, although it seems unlikely that the total sum of EUR511 million has been recouped in such a short timeframe. This is groundbreaking investment territory in an industry in transition and while there are undoubted risks associated with the purchases - which need to be appropriately weighted in the reward equation - the potential upside in financial and strategic terms is extraordinary.
For example, the investment in topbonus mirrors Etihad's investment in Jet Airways' FFP, JetPrivilege and raises some intriguing questions about how - and when - synergies can be exploited; each of the programmes is profitable in its own right, a positive start. Joint purchasing, the shadow cast by the "Group" and simply the ability to grasp a significant strategic role in the group airlines should deliver benefits in making the arrangements so attractive for the equity acquisitions that they will be unlikely to want to leave.
[h=3]Joint livery A320 unveiled for marketing campaign[/h]Prior to the press conference given by Messrs Prock-Schauer and Hogan, there had been some speculation that a major re-branding of airberlin was going to be announced. Darwin Airlines, which is Etihad’s most recent investment, is being re-branded as Etihad Regional and some had envisaged a similarly radical move might be on the cards for airberlin.
See related report: Etihad Regional joins the Etihad Equity Alliance as Swiss' Darwin Airline helps connect the dots
Mr Hogan explained the rationale for the Darwin re-branding, saying that the Etihad Regional brand “gives an opportunity to develop small, niche carriers, where the brand is unknown, into a network.”
This clearly does not apply to airberlin and such a high profile re-branding might have drawn more attention from any critics that already feel that Etihad’s interest in airberlin, while not breaking non-EU ownership limits with a 29% shareholding, is approaching a grey area in terms of limits on control exerted by non-EU nationals.
Wolfgang Prock-Schauer and James Hogan with cabin crew of airberlin and Etihad unveil an Airbus A320 in joint livery
AB10.jpg

Source: airberlin, photograph by Daniel Biskup
The two CEOs did announce a new joint marketing campaign, under the slogan “Moving Forward” and unveiled an AirbusA320 in joint airberlin/Etihad livery. This stopped well short of the possible closer integration that had been rumoured in some quarters, but is perhaps more realistic. Nevertheless, the two may have to confront the ownership and control limits at some point in the foreseeable future.
[h=3]Two year lock-up expires in Jan-2014: what next?[/h]Etihad invested the EUR73 million in airberlin through a capital increase in Jan-2012, thereby taking its stake from 3% to 29%. At that time, it committed to hold the shares for two years, but also not to increase its stake and not to make a public takeover offer for Air Berlin PLC. With that two year lock-up period now all but expired, Etihad is able to choose whether to sell the stake, to increase it, or to maintain the status quo.
Mr Hogan’s very clear commitment to airberlin rules out selling the stake. Maintaining the status quo beyond the short term looks unlikely too.
In Nov-2013, at the time of airberlin’s 9M2013 results, it warned that its targets to restore profits and to lower net debt were slipping. In our analysis of the results, we suggested that an additional fund-raising may be a possibility.
See related report: Airberlin: Turbine on maximum thrust, but FY2013 breakeven target abandoned. More cash from Etihad?
If a new fund-raising were to take the form of equity capital, which seems likely (airberlin had negative equity at the end of Sep-2013 and cannot increase its debt indefinitely), and if other shareholders were reluctant to participate, Etihad could find its stake increasing above 30% and this could trigger a requirement for it to make a public takeover offer.
In turn, this could lead it to hit against the 49% limit on holdings in EU airlines by non-EU nationals, a scenario that has not really been tested in the past. With this in mind, it is not clear how Etihad’s apparently open-ended commitment to airberlin will evolve, if it carries the Catch 22 risk that it could be blocked by ownership and control rules.
The need for airberlin to improve its finances without significant additional outside investment becomes more than just desirable in these circumstances.
 
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