Air Berlin Incurred Record Loss of 447 Mio Euro For 2015 Financial Year

German carrier Air Berlin sees itself confronted with yet another year of record losses, incurring a 447 Million Euro loss for their 2015 financial year as it was revealed yesterday.

Air Berlin A321 copyThis comes after the airline already reported a 377 Million loss in 2014 during which they were able to partner up with Etihad Airlines who is now Air Berlins major shareholder, pretty much keeping them alive.

Etihad might have to search for routes to inject extra cash into the airline in the long run should Air Berlin find itself unable to finally turn a profit.

Industry publication fvw reported about Air Berlin’s press conference (access here).

Germany’s second-largest airline saw revenues drop by 2% to €4.1 billion in 2015, mostly due to a 6.8% reduction in capacity, while costs were reduced by 1.5% to €4.4 billion. This left the airline with an operating loss of €307 million, slightly worse than the previous year’s €293 million. The overall net loss broadened to €447 million from €377 million the previous year due to the additional financial impact of various taxes and debt revaluations. …

Several factors negatively impacted the financial performance in 2015 including a protracted and damaging dispute over codeshare flights in the final quarter of 2015 and the beginning of 2016, Air Berlin pointed out. “Even if the decision by the Lüneburg Higher Regional Court ultimately led to a pleasing outcome for us and our partner Etihad Airways, the months spent in limbo cost us €40 million in lost or cancelled sales in the fourth quarter of 2015,” the CEO explained.

A second factor impacting the financial performance was the airline’s fuel hedging programme, as Air Berlin benefitted only to a limited extend from the more favourable kerosene price in 2015 and its fuel hedging transactions, coupled with the sharp decline in the US dollar, meant a missed opportunity amounting to more than €200 million. “But in 2016 we will benefit from the relatively low cost of fuel in the order of €250 million,” Pichler added. Other factors that impacted results included geopolitical events such as the terrorist attacks in Egypt and Paris. …

The fuel hedging game, a process where airlines lock in specific prices for fuel in advance, certainly hit many airlines in a lethal way as fuel prices crumbled in the past 18 months and they still had to pay previously agreed rates which were negotiated on the basis of higher prices.

CEO Pichler also highlighted Air Berlin’s relationship with Etihad.

“Etihad Airways is committed to Air Berlin and we continue to play a key role towards its success. We delivered €140 million last year in direct passenger revenues to our major shareholder. We have its support for the aggressive and radical restructuring of our business. However, there are still hard decisions to be made, which require the clear support of key internal stakeholders.”

“The partnership between Air Berlin and Etihad Airways offers a better range of flights and destinations for passengers, plus strong growth potential. Overall, the two airlines saw passenger numbers grow in 2015 by more than 20% to 720,000,” Pichler said.

Needless to say without Etihad chipping in Air Berlin would have folded a long time ago given it’s disastrous financial situation. Air Berlin was more or less fine when it was a charter carrier where the airline turned a good profit transporting mainly german holidaymakers especially to popular destinations in the Mediterranean and North Africa. Air Berlin then acquired charter carrier LTU which traditionally had long haul routes and subsequently changed from charter to scheduled served after which they joined the oneWorld alliance.

Conclusion

Air Berlin made headlines for all the wrong reasons in the last 12 months, mainly focusing and horrible customer service and a complaint swamped customer relations center who couldn’t even process all the complaints anymore. The financial situation got also much worse as this article shows.

I had a couple domestic and European flights with Air Berlin this year and found their service to be pretty good so let’s hope they stay in Business and continue to provide some competitive weight to Lufthansa in Germany. I have no doubt though that Etihad will keep them alive either way.

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