Sunday, October 29, 2017

Air Berlin Bids Farewell After Four Decades And A Failed Gulf Marriage

Munich, Germany - October 27: A man stands in the open door of Air Berlin flight AB6210 before departing for Berlin at Munich International Airport on October 27, 2017 near Munich, Germany, and waves an Air Berlin flag. Flight AB6210 is the last Air Berlin flight to fly as the company ceases operations today following its recent bankruptcy. Lufthansa is taking over a large portion of the flights and EasyJet is in negotiations. The company began operating in 1979 as an American charter airline out of Cold War-era West Berlin. 
(Photo by Andreas Gebert/Getty Images)

Air Berlin has operated its final flight – a one-hour ten-minute hop from Munich to Berlin – after white-knight Etihad Airways withdrew its financial support in August and the German carrier was forced into insolvency.

Flight AB6210 departed Munich at 20:35 GMT on Friday 27th October, landing at Berlin’s Tegel Airport at 21:45 following a farewell tour over the city. About 1,600 staff members and aviation enthusiasts watched the airline’s final landing from a viewing platform, Reuters reports, while several hundred more staff welcomed passengers on the runway apron.

Social media users also commemorated the historic flight by posting memories of the 39-year-old company under the hashtags #ber4evr and #dankeairberlin.

Air Berlin was founded in 1978 by former Pam Am pilot Kim Lundgren. The US-registered company exploited Cold War-era rules that reserved flying rights from West Berlin for American, French and British carriers. Its initial focus on Spanish charter holidays paved the way for transatlantic expansion in the 1980s and scheduled flying in the 1990s – putting it on a collision course with Europe's emerging low-cost carriers.

Etihad, the state-owned flag-carrier of Abu Dhabi, came to its rescue as an investor in December 2011 after years of mounting losses.

But the Gulf carrier pulled the plug this summer, abandoning a non-organic growth strategy led by former chief executive James Hogan. As I reported in April 2016, Etihad's management were masking heavy losses at Group level through creative accountancy that incorporated sales revenue from overseas investments while turning a blind eye to concomitant losses.

That smokescreen collapsed in July, when Etihad admitted a $1.87 billion loss for 2016 and began offloading stakes in three European partners: Air Berlin, Alitalia and Darwin Airline. Strategy chief Hogan and finance chief James Rigney had already been dismissed by this stage.

Of the €3 billion ($3.5 billion) that Air Berlin has lost since its flotation in 2006, more than €2 billion was racked up after Etihad acquired its 29% stake.

Etihad’s focus on driving traffic through its Abu Dhabi hub distracted Air Berlin from more pressing existential threats during the partnership. Chief among the headwinds were rising competition from the new breed of low-cost carriers in Europe, and lingering inefficiencies from Air Berlin’s own airline-investment strategy. The German carrier had acquired stakes in Austria’s Niki, Germany’s LGW, Turkey’s Izair and Switzerland’s Belair.

Insolvency proceedings have so far seen Lufthansa, Germany’s flag-carrier, bid for 81 of Air Berlin’s 140 planes, including the entire fleets of Niki and LGW. If approved by competition regulators, the acquisition will pave the way for expansion of Eurowings, Lufthansa’s low-cost division.

Another low-cost carrier, EasyJet, has agreed to take over responsibility for 25 of Air Berlin's leased aircraft.

(Martin Rivers - Forbes)

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