Frankfurt Hahn Airport

German airlines adjust strategies as outlook darkens

Germany’s two largest airline groups, Lufthansa and Air Berlin, have announced wide-ranging measures to either preserve profitability, in the case of the former, or restore profitability, as they grapple with a gloomy regional economic outlook. Air Berlin, sandwiched between the low-cost and full-service space, will reduce its exposure to the struggling German leisure segment, which has been on a downward spiral all year.

Germany, the de facto leader of the European Union and a major underwriter of the bailout packages as a large holder of European sovereign debt, has been hit with renewed, and increasing, recession fears. German investor confidence fell to its lowest in more than 2.5 years in Sep-2011, the ZEW Center for European Economic Research said on 20-Sep-2011.

EU steps up investigation into state aid to airports

The European Union plans to launch “in-depth investigations” into state aid granted to German and French airports and used to subsidise services from low-cost carriers. State aid is generally forbidden under EU law, but it is permitted for smaller airports, handling up to five million passengers p/a, in order to boost the economy of less developed regions. The European Commission has said it has "doubts whether the subsidies are necessary" and "whether the aid was proportionate".

Ryanair in the dock

Ryanair may have to repay millions of euros as Germany’s highest court ruled fees it has received to operate from airports may amount to subsidies in breach of EU competition rules. Lufthansa and airberlin have been awarded the right to pursue legal action accordingly. Together with the other difficulties the Irish airline faces in Germany could this be the beginning of the end for its operations there? Or might there be even more significant outcomes?

Ryanair raises full year result outlook as profits increase and yields improve

Ryanair has raised its full year profit outlook with the carrier now expecting to exceed the upper end of its previous forecast range of EUR350 million to EUR375 million, to report a profit of EUR380-400 million subject to 4Q yields. Based on forward bookings in the current quarter, traditionally the weakest for European carriers, Ryanair anticipates that winter (H2) yields will exceed its previous forecast, with full year yields now anticipated to be at the upper end of the +5% to +10% range which was previously indicated – ie close to 10%.