Air Berlin back in the black as costs are streamlined

Air Berlin reported a loss of €231.9 million in 2013, after making a profit of €90m in 2012. Michele Tantussi / Bloomberg News

Air Berlin, the German affiliate of Etihad Airways revealed further plans to trim costs yesterday as it returned to the black.

Germany’s second-biggest carrier reported net income of €8.6 million (Dh41.9m) for the second quarter, versus a loss of €38m in the same period a year ago. Revenue for the quarter stood at €1.146 billion, up from €1.114bn a year earlier.

The German carrier plans to increase operational efficiency through shrinking its fleet and closing five crew stations.

It will also focus on 10 markets in the Dach region of Germany, Austria and Switzerland, and increase its cooperation with Alitalia.

Etihad, which owns a 29.2 per cent stake in Air Berlin has also acquired a 49 per cent stake in Alitalia, the financially ailing Italian carrier.

“Etihad’s influence on Air Berlin is finally starting to show some rewards with this second quarter turnaround,” said Saj Ahmad, the chief analyst at StrategicAero Research.

“Recovering from a loss the same time a year ago is a positive sign that the long awaited results of Air Berlin’s restructuring is returning dividends alongside a small increase in revenues too,” Mr Ahmad added.

In April, Air Berlin said it would implement structural changes to its business and appointed a chief restructuring officer for the job.

The carrier reported a loss of €231.9m in 2013, after making a profit of €90m in 2012. Earnings were affected by a slow outbound summer season, combined with tough competition in its domestic market and a weak European economy.

Etihad said at that time it would subscribe to a €300m convertible bond to support the German carrier. The bond was part of a “recapitalisation which is intended to strengthen and assist in the reorganisation of Air Berlin’s capital structure.”

The Air Berlin stake acquisition in 2011 gave Etihad access to the tightly restricted German market. The airlines now operate 56 flights per week between Germany and Abu Dhabi. At the time of the deal, Etihad operated 25 flights per week to three destinations in the country.

Analysts say that Alitalia will represent a tougher challenge for Etihad than Air Berlin, which is still struggling to turn its operations around three year after the Etihad investment.

“The biggest challenge remains getting [Air Berlin’s] costs down and trying to drive up revenue,” said Mr Ahmad.

“Etihad has taken on the 49 per cent stake in Alitalia – a carrier in far worse shape than Air Berlin. Etihad’s goal of making them profitable by 2017 seems unlikely given that they’ve had almost three years owning Air Berlin and are still in the throes of improving them.”

Etihad’s growth strategy has relied heavily on expanding its route network through “equity alliances”, in which it invests in carriers that help it to expand its global reach in strategically important regions. Other equity alliances have been struck with Air Seychelles, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways and Etihad Regional – formerly known as Darwin Airline.

Etihad this week revealed it had hired a lobbyist in the US to shore up political support in Washington for its growing American presence.

Matthew Jennings, the former head of legislative affairs for the International Air Transport Association will take on the newly-created role of senior manager of the public affairs post.

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