Lufthansa takeover

Air Berlin heads into history with final flights and sell-off

Lufthansa was today set to buy more than half of Air Berlin, which has cancelled all its remaining own-code flights from October 28, but a deal with Easyjet remains uncertain.

October 12, 2017
Air Berlin is heading into the sunset
Photo: Air Berlin

Lufthansa CEO Carsten Spohr said in Berlin that he would sign a deal to acquire 81 planes and take on about 3,000 of Air Berlin’s 8,000 employees. According to sources, the agreement will cover the 38 planes already wet-leased from Air Berlin, along with Austrian-based leisure airline subsidiary Niki and regional carrier LGW.

Speaking this morning as Air Berlin’s deadline for exclusive negotiations with Lufthansa and Easyjet officially expired, Spohr said he expected the European Commission to approve the partial takeover by the end of this year. But he added that it could take 6-9 months to integrate Air Berlin’s flight operations.

The Lufthansa Group reportedly offered €200 million for parts of Air Berlin and is prepared to bear additional operating costs of up to €100 million during a transition period. Separately, Lufthansa could spend up to €1 billion to buy or lease 61 planes (41 A320s and 20 turboprops) which are owned by various leasing companies and are currently operated by Air Berlin.

The takeover of 81 planes from Air Berlin will enable Lufthansa to expand budget subsidiary Eurowings dramatically, especially in Düsseldorf, according to experts. Eurowings will fill part of the gap left by Air Berlin’s cancellation of long-haul flights by launching services from Düsseldorf to various Caribbean destinations from November 8 to provide tour operators with capacity for the winter season.

The Lufthansa subsidiary will then launch more long-haul routes from Düsseldorf for summer 2018, including to New York, Miami and Los Angeles. The Miami route will be taken over from Lufthansa which will fly to the Florida metropolis this winter as a temporary measure. Eurowings will operate the new intercontinental routes with Airbus planes from the Lufthansa Group.

Meanwhile, the situation with Easyjet is less clear. The British airline, which is relatively small in Germany, is interested in up to 30 Air Berlin planes and domestic/European routes that cannot go to the Lufthansa Group for anti-trust reasons. However, German newspapers have reported that the talks are proving difficult after Easyjet apparently lowered its original offer of about €50 million. Talks are still continuing, according to an Air Berlin spokesperson today.

If a deal with Easyjet cannot be reached, then Air Berlin might turn to other bidders. These include Thomas Cook’s German airline Condor, which made an offer in a consortium with Austrian entrepreneur Niki Lauda, British Airways parent IAG and entrepreneur Hans Rudolf Wöhrl. The latter two are former owners of Deutsche BA, the small airline that Air Berlin acquired a decade ago to expand domestic routes.

The latest developments come after Air Berlin, which declared bankruptcy on August 15 but kept flying thanks to a €150 million emergency government loan, earlier this week officially terminated all its own short-haul flights with effect from October 28. It had already stopped its long-haul flights as of October 15.

The airline’s management explained that Air Berlin-coded flights could no longer be operated due to the insolvency. But flights operated by subsidiary Niki, which is not insolvent, will continue.

The operational shutdown leaves the bulk of about 100,000 tickets for short-haul flights within Germany or to European destinations after October 28 effectively valueless, according to German newspaper reports. There will be virtually no compensation for about 90,000 bookings made before the insolvency declaration on August 15, although some 10,000 tickets bought after August 15 will be compensated.

The earlier cancellation of long-haul flights had already resulted in about 100,000 passengers being stuck with tickets that will not be refunded. The overall financial value of these 200,000 tickets is unclear.

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