Transport Airlines

Low-Cost Carrier Air Berlin Is Desperately Trying to Find a New Niche

Jun 18, 2014 11:44 am

Skift Take

Like Rynair, Air Berlin is learning that low-cost isn’t everything.

— Jason Clampet

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Reuters

A German carrier Air Berlin aircraft takes off at Tegel airport in Berlin. Reuters


Air Berlin Plc aims to end losses by repositioning itself to cope with a squeeze from low-cost carriers heading upmarket and network operators cutting costs, said the executive leading the company’s strategy review.

The overhaul will seek to determine the best niche for Air Berlin in the light of “convergence” among European airlines spurred by the economic slump, said Marco Ciomperlik, who was appointed to the new post of chief restructuring officer in May.

“There has to be change,” Ciomperlik said in an interview today after the company’s annual shareholder meeting in London. “Everything is up for consideration, the entire strategy.”

Air Berlin announced the review in April alongside a fresh bailout of 300 million euros ($407 million) in convertible bonds from investor Etihad Airways PJSC after the German company’s annual pretax loss swelled to 305.2 million euros. Etihad Chief Executive Officer James Hogan sits on the Berlin-based carrier’s board and attended the investor gathering.

Air Berlin has suffered as discount rivals led by EasyJet Plc upgrade their service to target business passengers after companies trimmed travel budgets, while family-friendly enhancements announced by low-cost leader Ryanair Holdings Plc yesterday will also have an impact, the executive said.

Lufthansa Recruit

At the same time, Deutsche Lufthansa AG is using its Germanwings no-frills division to take over mainline flights outside the Frankfurt and Munich hubs, improving their viability, and Ciomperlik said Air Berlin will also study reports that its German rival plans to use Dusseldorf-based regional arm Eurowings as the basis for a second low-cost unit.

Ciomperlik said Air Berlin will unveil the new “holistic” strategy in the third quarter, after CEO Wolfgang Prock-Schauer earlier told investors that the company would provide more information on the “fundamental review” during that period.

Goetz Ahmelmann, who joins Air Berlin as chief commercial officer on July 1 more than six months after his appointment was announced, will play a key role in determining how to reposition the carrier, said Ciomperlik, who previously led a cost-cutting drive at its maintenance division.

Ahmelmann worked for more than 20 years at Lufthansa, most recently as European sales chief. Number-crunching and modeling has already helped determine a range of options and those will be put before him and other senior managers, Ciomperlik said.

Air Berlin is already cutting 900 jobs after accumulating more than $1 billion of losses in six years, and while the strategy overhaul may have some employment implications it is essentially revenue-led and aimed at maximizing yields — a measure of pricing — and occupancy levels, the executive said.

“You can’t claw back 300 million euros just through cuts,” he said.

Air Berlin shares have slumped 16 percent this year after declining in six years out of the last seven, reducing its market value to 163 million euros.

To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net. To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net 

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