Eurowings could take over one third of Air Berlin’s fleet within the next few weeks under a major agreement between the Lufthansa Group and Etihad Airways that would expand the low-cost carrier dramatically.
Lufthansa would wet-lease 40 Air Berlin planes, including crews, for the winter season onwards and integrate them into Eurowings, and also launch a code-share cooperation with Air Berlin shareholder Etihad Airways under a deal due to be approved by Lufthansa’s supervisory board at the end of September, German media reported this week.
Eurowings would be able to expand its network significantly, especially to European city and holiday destinations. The deal would expand the Lufthansa subsidiary into a budget carrier with some 140 planes, flying domestic, European and long-haul routes from diverse German airports as well as from Vienna, its first non-German base.
However, Eurowings would also face the challenge of integrating the operations of the 40 Air Berlin planes into its flight schedule within just a few weeks and also taking over commercial responsibility for the routes.
In addition, Eurowings will open a base on Majorca next year, stationing two A320s at Palma Airport, where Air Berlin has a large base, to offer “numerous flights to Germany and other European cities”. A future base is also planned at Salzburg in Austria.
Great respect
The Air Berlin deal would fit neatly into Lufthansa’s strategy for Eurowings, which was presented by Karl Ulrich Garnadt at last week’s fvw Kongress. The Lufthansa board member, who is responsible for the Eurowings division, admitted: “Lufthansa completely under-estimated budget flights for a long time, and we even laughed at them. But that has now turned into a great respect.”
He explained that Lufthansa plans to build up its own low-cost subsidiary into a serious competitor for the leading budget airlines, whose business models are starting to converge with traditional airlines, in three phases. Eurowings has successfully completed the first phase, flying profitably to some 150 destinations, while the current second phase includes switching to an A320 fleet and setting up bases outside Germany. The third phase will focus on organic growth and launching the ‘Wings’ cooperation model for other airlines, under the Eurowings single brand policy, Garnadt said.
For Air Berlin, the Eurowings deal would downsize its operations to save costs and enable it concentrate in future on its Berlin and D?sseldorf hubs, operating mostly long-haul routes and feeder flights to Abu Dhabi. However, it would also mean abandoning its profitable original core business of charter flights to holiday destinations as well as some city flights.
The German competition authorities are expected to approve the agreement, possibly on condition that some slots are given up on domestic routes where Lufthansa and Air Berlin currently compete. This could help Ryanair or Easyjet to expand their operations within Germany.
German travel managers have welcomed the plan to “strengthen” both Lufthansa and Air Berlin but urged them to ensure that any agreement does not impact negatively on ticket prices. Dirk Gerdom, president of the German Business Travel Association (VDR) said: “It’s clear that any form of consolidation, even if it mostly affects tourist routes, affects the market situation. It weakens competition and thus also affects the conditions for business travel.”
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