Travel News: Air Berlin restructuring official – what does it mean to you?

The rumors had been thick about a coming restructuring of Air Berlin and now it’s official. Air Berlin has made a press release that significantly shrinks the airline and refocuses it. The airline will give up its tourist business, focus on its hubs in Berlin and Duesseldorf and wet lease a number of its planes and crews to Lufthansa. Find out all the details and what it means to you after the break!

Air Berlin has been loosing money for years, despite many attempts to right the ship. Despite all that, the airline has lost EUR271 million on revenue of EUR1,7 billion in the first half of that year. Apparently, Etihad as the major stake holder with 29% of shares had enough, and is forcing a drastic reorganization including job cuts. Here are the key elements:

Air Berlin is moving the tourist business into a separate business unit and is looking for a “strategic alternative”, which usually means selling it – rumors are that easy jet is looking for an EU footprint to avoid being left in the cold after a Brexit. Up to 30 planes and staff could go into this venture. Many popular routes from all over Germany to tourist destinations in Southern Europe could be impacted by this. I suspect that a lot of the seasonal routes will be pushed into this unit – Air Berlin had to compete with low-cost carriers like Ryan Air and easy jet as well as charter carriers on these routes – and clearly wasn’t able to make money!

airberlin-a320Air Berlin is providing up to 40 planes to Lufthansa in the form of a wet lease – that means Air Berlin will provide the planes, crew, maintenance and overhead and Lufthansa Group (most likely the low-cost subsidiary Eurowings) will sell the flights. It will be interesting to see which routes Eurowings is taking over – given Air Berlin’s large number of routes from secondary airports in Germany, this could significantly increase Eurowing’s footprint. The transfer as a wet lease makes sense in Germany with its strong protection of worker rights, allowing Air Berlin to move the business without mass lay-offs and the impact on business operations and brand reputation. And it allows Lufthansa to ramp-up their Eurowings low-cost offering much faster than they could have otherwise.

airberlin-a330That leaves Air Berlin as a more focused network carrier serving higher-yielding routes from their hubs in Berlin and Duesseldorf with a fleet of 75 planes. Air Berlin will keep all 17 Airbus A330 planes for long-haul flights as well as 40 A320 and 18 Q400 planes for short- and medium-haul flights. It is planning to focus on US routes for long-haul and Italy, Scandinavia and Eastern Europe for short- and medium-haul flights. This route network will leverage its airline partners Eithad and Alitalia, providing connections to their hubs, and connections to Asia, Africa and the Middle East.

Air Berlin is also cutting 1,200 positions in Germany, which seems like a small number considering how much of the business is being cut. It remains to be seen if another shoe will drop later with regards to lay-offs.

What does it mean to travelers? When I reviewed Air Berlin, I pointed out their odd position as a hybrid between a low-cost/charter carrier and a full-service airline on long-haul routes with a business class offering. That “all-things to all-people” didn’t work out and the focus on being a full-service, network carrier makes sense to me from a business perspective – but it will have a significant impact on travelers:
For leisure travelers on German and European routes, it reduces the options and competition on short- and medium-haul routes across the continent. This can especially impact non-stop routes from secondary airports in Germany, like Hannover, Hamburg or Cologne.
For business travelers in Berlin and Duesseldorf Air Berlin might provide a better alternative to Lufthansa with this renewed focus. They have recently announced the roll-out of a European Business Class, which I’d expect to become available across much of the remaining fleet!
For OneWorld alliance members it reduces the number of flights they can earn and redeem miles or enjoy Elite benefits. The remaining OneWorld members British Airways, Iberia and Finnair don’t cover central Europe as well, making it more difficult to travel from the US or Asia to the region.
Lufthansa Miles & More members will be able to earn/redeem miles and enjoy Elite perks on more flights with Eurowings, making Lufthansa even more dominant in the region. Unfortunately, StarAlliance members in other airlines will not benefit from this as Eurowings is not a member of StarAlliance themselves!
And what does it mean to Air Berlin topbonus members? According to the email from topbonus Director Anton Lill (see below): nothing. Air Berlin promises that
– you will continue to earn miles on all Air Berlin and partner flights
– you can redeem miles on all Air Berlin and partner flights; all award tickets already issued remain valid
– you maintain your elite status and associated benefits
screen-shot-2016-09-29-at-11-05-26-amThis is reassuring and certainly true fir the short-term: Air Berlin is not killing its award program, eliminating elite benefits or voiding existing tickets. Frankly, it would be suicide if they want to focus on business destinations as a network carrier if they did.
But of course it is marketing speak and misleading at best for the long term. The number of Air Berlin flights to earn/redeem miles is going to go down drastically as soon as Eurowings is taking over those planes next year in summer and the tourist business has been separated and sold at some point in the future. If you are not living in or near Berlin or Duesseldorf, you might want to use your topbonus points while you can – and sign up for Lufthansa’s Miles & More program as an alternative!
In the long run, the more focused (and hopefully more profitable) Air Berlin might become a better airline, offering more long-haul flights to the US and Middle East with connections world wide. It might also benefit Etihad Frequent Fliers, who will likely get better connections around Europe!

I will update my review of Air Berlin Facts & Figures and my review of Air Berlin topbonus as more details will become available, so stay tuned!
You can find the full press release of Air Berlin here!

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Travel News: Air Berlin restructuring official – what does it mean to you? — 1 Comment

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