Analysts predict ‘slow death’ for Air Berlin
23.06.08
Air Berlin has been badly hit by soaring fuel prices, and a series of austerity measures may not suffice to keep the German low-cost carrier in the air, banking analysts have said. One is predicting that the second-biggest German airline behind Lufthansa will 'die a slow death.'
From November, Air Berlin will trim its fleet by 10 percent, cut long-distance services by nearly one-third and return 14 leased planes to their owners. The airline will also reduce administrative services at dba, another budget airline it owns, in southern Munich and lay off 52 workers.
But Mezler bank analyst Juergen Pieper said the airline's economy plan ‘is good in theory but comes too late.’ He said the airline had developed too quickly in the past few years without establishing a clear growth strategy.
In buying dba and the charter airline LTU, Air Berlin enlarged its focus from Europe to long-distance services. More recently, Air Berlin also bought Condor, a carrier that flies to Phuket, Thailand and to the Caribbean. That left it unclear about ‘what its strong points are,’ Mr Pieper said.
LBBW analyst Per-Ola Hellgren added that Air Berlin was caught short by a sharp rise in fuel prices and its growth model was no longer valid. The acquisition of Condor, which has still not been approved by German competition authorities, ‘no longer makes sense.’
Air Berlin was being talked about as a possible takeover candidate a few months ago but it was no longer an attractive prospect, he said, adding that the company faced ‘a slow death.’
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