Air Berlin (AB) is in serious trouble, and not for the first time. This time, however, it is unclear whether the troubled carrier will see the sun rise again.
AB has been battling mounting debt, increasing customer dissatisfaction, and low yields—even lower than European average—for quite awhile, but now they are under crossfire by competitors who aim to capitalize on what sources say are AB’s weaknesses and unclear business model:
Ryanair (FR), the enfant terrible of the LCCs in Europe, is poised for further expansion and is attacking AB head on.
For example, FR announced the re-start of German domestic flights for the winter schedule; but they will now start in September on the profitable Cologne-Berlin route.
Currently, about 44 flights are flown between CGN and BER daily, about half by LH low-cost subsidiary Germanwings (4U) and half by AB. FR also plans to initially base five aircraft in BER and offer five daily connections between BER and CGN for starters.
And FR introduced itself in no unclear terms, offering prices in the 20 Euro (U.S. $22.75) range, which were immediately matched by 4U, and then were lowered to 10 Euro (U.S $11.38) one-way.
FR has made clear that they wish to tackle AB’s position as second largest German carrier, and it is hard to see how AB can fight back.
While a price war is hard to win in any case, AB simply doesn’t have the financial resources at their disposal, while cash-rich FR has announced that they intend to serve “all major German airports except FRA before the end of 2016.” But with FR’s existing services to Frankfurt-Hahn (HHN), they may well compete in the low-cost sector for passengers who do not mind a 90-minute bus ride, even in FRA.
Stefan Pichler, (right) the current CEO of Air Berlin, took over for Wolfgang Prock-Schauer on February 1, 2015. Many of AB’s issues are rooted in decisions made by Joachim Hunold (who led AB’s disastrous expansion in the 1990s and early 2000s and reportedly also owned most of the aircraft AB operated by means of various foundations, leasing them to AB at well above market rates) and former controversial CEO Hartmut Mehdorn, nicknamed “sanitizer” in Germany, and later the CEO of the no-less troubled Berlin-Brandenburg airport until March 31st, 2015. Mehdorn followed...
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