Air Berlin CEO Is Leaving The Company, Lufthansa Expected To Take Over Long Haul Fleet As Well

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The troubles of Air Berlin continue with the announcement that their CEO will leave the company early next year, being replaced by a Lufthansa Executive of all people, likely preparing a larger takeover.

ab-restructure

At the same time it is rumored that Lufthansa will also take over the entire Air Berlin Long Haul fleet on top of the recently announced lease of 38 Air Berlin aircraft and crew.

The long speculated end of Air Berlin could actually be closer than everyone had imagined judging by the developments of the past few days.

German Daily Newspapers Welt (see here) and Handelsblatt (access here) reported today that a deal has been struck between Air Berlin majority shareholder Eithad and Lufthansa.

According to the Welt, this new solution has the blessing of the political leadership and the Department of Transportation where people are in agreement that given the desolate situation of Air Berlin it’s important to strengthen Lufthansa’s market position in Germany (presumably before certain markets fall prey to outside interference).

One issue however is the massive amount of debt which has been amassed by the carrier, roughly 1 Billion EURO by now. Lufthansa has already stated that the carrier won’t be responsible for that debt under any circumstances.

Incumbent Air Berlin CEO Stefan Pichler has been booted out of his job and will reportedly leave the company by the end of January. He will be replaced by Lufthansa Executive Thomas Winkelmann, currently Hub Manager in Munich and former Germanwings CEO. Lufthansa would also take over the long haul fleet of Air Berlin.

Welt reports that Mr. Pichler was pushed out by Etihad, Air Berlins majority shareholder after negotiations between the CEO’s of both companies.

It’s being rumored that the Air Berlin pet project is becoming too expensive for Etihad after injecting more than 1 Billion Euro into the small airline, all of which has pretty much been burned by now and as mentioned above the carrier is still loaded with another Billion Euro of debt. Etihad themselves announced on Sunday that they want to save costs through restructuring and will reduce jobs within the company. Having Air Berlin as a money burning machine is not in the long term interest of a company that needs to scale back cost centers.

Conclusion

Just two weeks ago Etihad paid four times AB’s market value for their acquisition of NIKI and then struck a deal with TUI to make sure they have a way to fill these planes. Now another step in yet a different direction. It’s really hard to see what strategy Etihad has for the German carrier other than getting rid of unprofitable capacities and clean their books if possible in any way.

Competition is very important in the German market because without Air Berlin, Lufthansa will have a monopoly and dictate the price and conditions unless a third party such as Ryanair enters the market more widely. That means prices will go only one way and that is up. Previously I said that I see this last cash injection of Etihad as Air Berlin’s last chance to turn around and operate profitably or the lights will eventually go out. Seems like the lights are already dimmed now.

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