Air Berlin is off to a flying start this December

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Germany’s second largest airline Air Berlin is history – but the airline Monopoly continues to gain momentum.

Concentration will continue after the biggest bankruptcy of a European airline to date, corporate executives and industry experts agree. Because the market is still extremely fragmented. More than 160 companies are in Europe’s skies, and by no means each has its own future, according to experienced airline consultant Gerd Pontius.

 

It is still unclear whether Air Berlin is actually split as planned between Easyjet and Lufthansa. EU Competition Commissioner Margrethe Vestager is apparently unwilling to signal the Lufthansa deal on the takeover of Air Berlin subsidiaries LG Walter and Niki unchanged. Thomas Cook (Condor) and IAG (British Airways, Iberia, Vueling) have also turned a blind eye to the Austrian holiday plane Niki – and many doubts have been sown in Brussels.

Lufthansa offered a concession on Thursday to dispel the competition law reservations. One wanted to give up take-off and land rights at large airports, such as Berlin or Dusseldorf, in order to be able to offer competitors, a person familiar with the documents said.

 

Air Berlin was not the only company in strong turbulence in 2017. The British monarch had to give up from one day to the next because the state did not jump her aside. The slots from Monarch went to IAG and the up-and-coming low-cost carrier Wizz from Hungary. The once-proud Alitalia state line faces a similar smash as Air Berlin next year despite massive state aid. Also in Rome, the sheikh airline Etihad has stopped providing financial support.

Lufthansa CEO Carsten Spohr has been voted “Manager of the Year”, partly because of the early-stage Air Berlin deal. At the same time, he has closed collective bargaining with his long-running pilots and has integrated the Belgian Brussels Airlines noiselessly into the group.

If the European Commission decides to antitrust the Air Berlin business before Christmas, Spohr has secured a large part of its national competitor, including its important airline rights – without having to take on the high debts and relatively well-paid staff. Even a part takeover ban for the Niki could cope with the crane and secure the flight rights in other ways.

The fact that pilots and flight attendants from Air Berlin have to re-apply to the Lufthansa subsidiary Eurowings in order to fly their old aircraft on worse terms, the trade unions has long been outraged. At least for the personnel the golden times of the aviation seem to be over, while the Lufthansa shareholders may look forward to another record profit. And passengers are currently paying top prices for their tickets, because many Air Berlin jets will have to stay on the ground until they decide from Brussels.

The end of Air Berlin was the prelude to redistributing the German and the European aviation market. Spohr responds to the triumphal procession of low-cost airlines with a quick buildup of its own low-budget subsidiary Eurowings, which will include more than 200 aircraft in the coming summer.

After approving the deal, Easyjet will also be traveling within Germany, becoming a far stronger competitor than the sheer Air Berlin ever could. At the Alitalia is the new Easyjet boss Johan Lundgren as well as the Lufthansa.

The British, initially limited mainly to Berlin Britishcan also like the Irish Ryanair hope for attractive slots that Lufthansa may still have to open as a cartel. Ryanair, however, must first solve self-created problems with the pilots, who are increasingly rebelling against the extremely liberalized working conditions.

 

The business models, at least on the short- and medium-haul routes, will increasingly converge, experts expect. Already in the wood class alleged premium carriers and low-cost airlines are to be distinguished only in nuances. “A real business class behind the curtain and behind the curtain ultra-lowcost without any extra – that’s the model that needs the mass,” says, for example, the head of the successfully refurbished Air Baltic from Latvia, Martin Gauss.

 

Whether it works on long- distance overseas connections is being tested by companies like Norwegian or IcelandicWOW Air. Benefits of hard low-cost operations such as short turnaround times and low crew accommodation costs are eliminated on long flights due to safety regulations. In addition, the established network providers do not want to oversleep a trend again and keep with their own companies such as the Eurowings (Lufthansa), Level (IAG / British Airways) or Joon (Air France) against.

 

Internationally, airlines are also trying to minimize competition through mutual capital links and joint ventures. For example, Lufthansa and Air China cancel their flight times and standardize prices in order to bill them together afterwards. Passengers thus receive between China and Central Europe in both directions a wide range with countless connecting flights, but should not hope for low prices. According to consultant Pontius, 82 percent of the tickets are already sold via the North Atlantic through the joint ventures. From Europe to Japan it is 65 percent.

Globally, the industry continues to see itself on an unchecked growth path. In 2017, it will transport over 4 billion passengers for the first time, an increase of more than 7 percent compared to the previous year. After two weak years, the airline association IATA climbed again significantly by more than 5 percent to a total of an estimated 743 billion US dollars. The airlines in the concentrated US market were once again particularly profitable.

 

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