Lufthansa Picks Up Part of airberlin’s Carcass While easyJet Still Circles

Air Berlin

The end is nigh for airberlin. After years of being kept alive on life support thanks to Etihad’s free-flowing money, it’s all over. On October 28, airberlin will disappear as a brand, and all that’s left to figure out is who gets to pick up the most desirable pieces. Lufthansa has a deal for the pieces it wants, though there are some competition concerns. Meanwhile, easyJet continues to sniff around to see if there’s anything left worth taking.

It was widely expected that Lufthansa would be the winner here, and well, it was. Lufthansa is reportedly going to pay 210 million euros for, well, I guess I’m not entirely sure. I do know with certainty that Lufthansa will buy two of airberlin’s subsidiaries along with their aircraft, but those airplanes seem to move around like some sort of shell game so it’s hard to keep track. Here’s my best guess as to what’s happening.

Formally known as Luftfahrtgesellschaft Walter mbH (which is loosely translated to Walter Airlines), it’s no wonder this airline uses an acronym. LGW was bought by airberlin a few years ago and it served as a turboprop operator with what I thought to be 20 Q400 aircraft. According to this release, however, Lufthansa will take 17 Q400s and there will be another 13 A320 aircraft transferred in from airberlin. All LGW employees will come along as well. So that’s 30 airplanes.

Niki, which gets it name from its founder/race car driver Niki Lauda, will also be going to Lufthansa. Niki is primarily an Austrian leisure airline, though airberlin made it do all kinds of different things along the way. Etihad was supposed to buy airberlin’s stake in Niki and then create a joint venture with leisure airline TUIfly, but that whole plan fell apart. Now Lufthansa will take over its 20 A320 family (I think all A321?) aircraft. That makes 50.

After those 50 airplanes, I get more confused. Lufthansa says that “the wet-lease operation that is currently still provided for Eurowings by Air Berlin Group will be taken over by Eurowings’ own operational fleet.” At last check, there were supposed to be 33 wet-leased aircraft flying for Eurowings and another 5 for Austrian. If we assume that 5 for Austrian go away, then that would give us a total of 83 airplanes. But Lufthansa keeps saying there will be 81 aircraft. I’ve seen elsewhere say that it will just be the fleets of Niki and LGW plus 20 more A320 family airberlin airplanes (which would be 61, I think). I reached out to Lufthansa for clarity, but I didn’t hear back.

I suppose the specifics of that don’t entirely matter. What is clear is that Lufthansa is going to take about half of airberlin’s fleet and 3,000 of 8,500 employees. What does Lufthansa want with this? Well, it is trying to cobble together this monstrous patchwork operation it calls Eurowings by pretty much just picking any pieces it finds desirable and stapling them on. Niki can further bolster Lufthansa Group’s stranglehold in Austria. The Q400s can probably be peppered in wherever Lufthansa needs the lift in smaller markets. And the other Airbuses will help Lufthansa expand its presence in other German markets.

Remember, the Lufthansa strategy articulated a couple years back was to effectively shrink Lufthansa itself to serve only Frankfurt and Munich. All the other German cities, starting with Cologne/Bonn, would see their service replaced by Eurowings.

Airberlin’s strongest presence was in Berlin and Dusseldorf, so Lufthansa can effectively accelerate the strategy it already started by picking up airplanes and waving goodbye to its biggest competitor.

Of course, this deal isn’t done yet. It still has to pass a competition review. Lufthansa said it was only acquiring half the airplanes from airberlin, because that was the most competition authorities would allow. But that’s not stopping others from showing their displeasure.

Ryanair has complained that this would give Lufthansa a near monopoly on the domestic German market. That’s probably true, but Lufthansa says it’s not about Germany but rather all of Europe.

In Dusseldorf, for example, airberlin was responsible for 7.5 million of the airport’s 23.5 million passengers in 2016. Lufthansa/Germanwings/Eurowings/Sun Express handled 7.2 million. Lufthansa will still have the lion’s share there, but it’s not the same level of complete dominance that you’ll find domestically. That’s because you have airlines like Condor and TUIfly doing heavy leisure flying along with some big metal from Emirates and others flying long-haul. It makes it look like more balanced than it really is.

It’s not just Germany, however. The Austrian government is making some noise about how much of Austria will be controlled by Lufthansa Group after the Niki takeover. In 2016, Austrian/Lufthansa/Eurowings was responsible for over 55 percent of the total traffic in Vienna. airberlin and Niki made up 10.9 percent. The next biggest airline was easyJet with a paltry 2.7 percent.

Though I have no actual visibility into this, my guess is that there will be some concessions required for this to go through. Then again, it may also depend on what easyJet ends up doing. That airline has been in negotiations to pick up as many as 30 A320s and the ability to expand in congested markets like Berlin. At last check, easyJet had lowered its bid and it was unclear if there would be any kind of deal. If so, that would ease competitive concerns.

[Original Lufthansa/airberlin photo via calflier001/CC-BY SA 2.0]

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11 comments on “Lufthansa Picks Up Part of airberlin’s Carcass While easyJet Still Circles

  1. And so pan-European airline consolidation continues. I have to wonder how much longer the larger national airlines will continue to hold onto their national identities. It’s always fascinated me that the official names of the older airlines have continued to be tied to their countries of origin (Examples: Deutsche Lufthansa AG, KLM = Koninklijke Luchtvaart Maatschappij N.V.,), but the rising airlines have English-language names — although Lufthansa is rising too, of course. I’m not usually one for predictions, but watch for Eurowings to gradually become the dominant brand and the Lufthansa brand to gradually slip more and more into the background. I’m purposely leaving things open for discussion on the Air France/KLM consolidation here. I know they’ve stated that the identities of the two will stay intact for the time being, but the laws of economics dictate that there has to be some rethinking at some point. Champagne+Jenever Air, anyone?

    1. We’re dealing with the US model here. I would imagine that after the dust settles there will be three major carriers on the Continent, Luftansa et al, British et al and Air France/KLM. Look for Ryanair to be the Southwest of the continent and several smaller airlines, such as Aer Lingus, Iberia, SAS etc., to be the Alaska Air or the Allegiant of Europe.

      The days of basically one-nation niche airlines are largely coming to an end. Ask Alitalia!

      1. Aer Lingus and Iberia are both owned by International Airlines Group, the parent company of British Airways. So both of them are part of the BA sphere.

      2. What about Wizz or Norwegian? The Spirit or Frontier of Europe? Kind of appropriate considerin Wizz uses Airbus aircraft, just like Spirit.

  2. I don’t expect any major objections from the German or EU competition authorities – the concentration levels are high, but unless there’s factors at the airports that create major barriers on new entrants (Berlin, maybe?), I think they’ll take more of a Europe-wide view and presume that new entrants will emerge if there’s any major price increases from concentration. There’s also competition domestically from the ICE trains to keep in mind.

  3. Selfishly, I wouldn’t mind a Lufthansa takeover of Alitalia as that will hopefully yield more Star Alliance availability into Italy.

    1. You don’t want any part of AZ. Either there is no availability, or you can ticket it and AZ “loses” your record. Not worth it at all…better off taking the train to any secondary or tertiary airport in Italy

  4. It looks like Skywork Airlines based in Bern in Switzerland is about to close up shop. Seems that Lufthansa (who own Swiss) should pick up some new customers in Zurich as well along with Easyjet in Basel

  5. Of course LH wants to argue that it is focusing on the larger European market, but concentrating the German market in its hands will come at the cost of other carriers’ ability to penetrate the market. Hopefully, the EU will recognize that and require divestitures. LH’s business plan makes sense in having hubs at FRA and MUC; Germany is blessed to have many cities with the potential to support lots of air service. Gaining slots in cities outside of FRA and MUC that could and should be used to increase air service is not in the best interests of German consumers or carriers that want to increase their presence in Germany where non-German low cost carriers have very low penetration compared to other major EU countries.

  6. Then there is last Sunday’s election outcome in Austria.  Can you say ‘Monkiewench’?   A Kindred Soul aka Norman L. Wherrett [Possible double-post.  Sorry Cranky!]

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