Lufthansa

Postponed opening of Berlin Brandenburg causing the summer blues for Lufthansa and Air Berlin

Berlin Brandenburg Airport’s announcement that it will not open its EUR2.5 billion new premises as scheduled on 03-Jun-2012 is leading to major operational challenges for all involved, but in particular Lufthansa and Air Berlin which would be the largest operators at the new airport and had planned significant network expansions and new procedures. The delay, which is expected to be several months long, is above all bad news for Air Berlin which had aimed to cement its new strategic positioning as full service network carrier and oneworld member with the opening of the German capital’s new airport.

Low-cost carriers will be the least affected as their drive for low airport costs exceeds the need for enlarged and architectural attractive airport capacity. LCCs also remain outside the public relations contest to participate in the opening of Germany’s prestigious capital airport.

Lufthansa 1Q2012 operating loss widens as crown-jewel subsidiary SWISS sinks into the red

Lufthansa Group will have to seriously score with its SCORE “Change for Success” restructuring programme to keep its position as Europe’s most profitable airline group after it incurred a consolidated EUR381 million operating loss for 1Q2012. Although 1Q is a seasonally weak quarter, the loss from operating activities in the first three months of 2012 deepened 125% from the EUR169 million operating loss posted in 1Q2011. The group’s net loss reduced 22% year-on-year, to EUR397 million from EUR507 million in the year-ago period, when results were negatively affected by changes in present value of hedging options.

The group had a negative operating margin of 5.6% in 1Q2012, a deterioration of 3.2 ppt compared to 1Q2011.

The worse than expected financial performance is indicative of the dire operating environment in Europe. Denmark’s Cimber Sterling Group filed for bankruptcy on 3-May-2012 following on the demise of Spanair in Jan-2012 and Malevin Feb-2012.

As A380 continues to be restricted in India, Lufthansa to deploy 747-8 to Delhi and Bangalore

Two of the first destinations for Boeing 747-8 launch operator Lufthansa will be Delhi and Bangalore, notable as the 747-8 will have the largest capacity in Lufthansa's fleet after its A380, which India has not yet permitted foreign airlines to operate with. Lufthansa serves Delhi with daily 747-400 and A340-600 service while Bangalore sees daily 747-400 service. With Lufthansa utilising 46 of the 50 weekly frequencies available to German carriers (Lufthansa is currently the sole operator to India) and the Germany-India bilateral unlikely to be expanded in the near future, the deployment of larger aircraft is Lufthansa's main mechanism to expand in the growing Indian market.

Europe-India services will grow in the near future with British Airways (BA) likely to expand in India following International Airlines Group (IAG), its parent company, acquiring bmi, which has bestowed IAG with 42 London Heathrow slots. The Lufthansa Group of airlines is the largest European airline group serving India while IAG is a distant second and Air France-KLM third.

Union support of US Airways' quest to take over American is a first step in a long merger process

Public support by American’s unions of a merger with US Airways is an unprecedented move, and reflects the years-long frustration that has built among American’s employees towards previous and current management. The employees see an opportunity to start fresh, and work with a management team that will cease blaming labour for the carrier’s plight. US Airways sees an opportunity to completely overhaul American’s lacklustre revenue management that has consistently produced results that pale in comparison to its peers. But many questions remained unanswered over the perceived strength of a combined network, and many tasks have to be completed before a merger gets remotely close to reality.

US Airways formally declared it was examining its options regarding American earlier this year, and tactically began courting the carrier’s unions to gain support for a merger of the two companies that would entail US Airways’ management taking charge of the new American. Unlike US Airways' attempt to take over Delta Air Lines in 2006 when it was restructuring under Chapter 11 and Delta employees rallied to block the deal, American’s employees are exhausted with methods management has adopted in negotiating new collective bargaining agreements during the last few years.

airberlin makes no apologies for Etihad alliance after joining oneworld

airberlin this week proclaimed it would “take off for a shared future” with oneworld, but the carrier’s medium-term future is not with the global alliance but rather its new strategic partner Etihad Airways.

In the driver’s seat is airberlin CEO Hartmut Mehdorn, who after the carrier’s joining event in Berlin this week gave a frank assessment of the situation. “Of course,” Mr Mehdorn said of British Airways preferring to receive airberlin’s feed instead of Etihad. But conversely, few oneworld carriers serve airberlin’s namesake hub. “And we would prefer a flight to Berlin. It’s a give and it’s a take.”

airberlin can extract from oneworld only as much as member airlines fly to Berlin, which the majority do not do. The Berlin Government is working to incentivise companies to make Germany’s largest and capital city their home. From there more flights can flow, but this ambition has a long lead time. It is not irrelevant to ask if airberlin, knowing an Etihad alliance would eventuate, would have proceeded with oneworld membership.