Lufthansa has said its likely purchase of the bulk of Air Berlin will make it “very well positioned” to compete better with Ryanair across Europe, even though it will still have an inferior share of the market.
The German flag carrier is set to takeover the bulk of Air Berlin — which has been propped up by a €150m German government loan since August, when largest shareholder Etihad Airways pulled its support — pending formal European Commission approval. EasyJet and Thomas Cook-owned airline Condor are, reportedly, in talks to acquire some of Air Berlin’s other assets.
Speaking in Dublin yesterday, Lufthansa’s head of operations for Ireland, the UK and Iceland Andreas Koester said the airline is “very confident” it will succeed in getting regulatory approval for the transaction.
Lufthansa will invest €1.5m — including the €210m acquisition fee — in integrating 81 planes and 1,700 employees of the failed Air Berlin business into its existing Eurowings low-cost subsidiary. Air Berlin is due to formally cease operations tomorrow.
Asked about Ryanair’s vocal opposition to the deal, and its appeal to the EU, Mr Koester said that the commission is sure to cast an eye on all points raised by Ryanair in its appeal, before ruling.
The addition of Air Berlin will give Lufthansa a 9% share of the European passenger market — equal with EasyJet and Aer Lingus owner IAG, but still below Ryanair.
“It’s very important to remember that even after the acquisition, Lufthansa is still below Ryanair [in market share terms],” Mr Koester said.
Despite this, he said the German group is positioned well to compete. He expressed no concern over Ryanair’s aggressive plans to further grow its share of the lucrative German market in the coming years, saying it “all depends on its [Ryanair’s] engagement with the market”.
Lufthansa recently agreed — after a long-running dispute — a new pay deal with three pilot representative bodies, running up to at least 2022. Mr Koester declined to comment when asked about the possibility of disgruntled Ryanair pilots, currently involved in their own contract terms battle, looking to shift to the German airline.
Regarding Lufthansa’s operations in Ireland — the airline, and its subsidiaries, run routes from Dublin, Cork and Shannon airports — Mr Koester said it is competing well, has boosted passenger numbers on its Irish routes by 10% this year and will increase capacity by 30% over the winter and next summer.
Lufthansa yesterday reported a 32% rise in third quarter earnings to €1.52bn, which were slightly ahead of analyst expectations.
Despite posting record results for the first nine months of the year, however, the group didn’t alter its full year target of simply beating last year’s €1.75bn profit.
Group chief executive Carsten Spohr said the result “gives us the investment and growth capabilities we need to play an active part in the consolidation of the European airline market, and to continue to invest in the future of our company”.
Lufthansa also said it expects to see a positive impact on its results in 2019 from the Air Berlin deal, after work next year to integrate the operations.
“It will be a major operating challenge for Eurowings,” Mr Spohr said.
Additional reporting Reuters
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