Air Berlin + OneWorld = What?

Like many other people, I went "Hub?" with the announcement of Air Berlin joining Oneworld.

I recognize that many people think that AB is a LCC carrier but it has been Hybrid for a long time and fails the classic categorizations - FF Program, Connections, GDS Participation, Full Service Flights, Premium Service etc etc. It does indeed operate 3 separate business models:
LCC like,
Regular/network services,
Charter carrier.

For a detailed look - go to Anan.Aero who has done a nice job in assessing the move.

So I can only think of two reasons.

Reason A - OneWorld wants a PR story as its a lite news week after Farnborough.

Reason B - OneWorld wants to tweak the nose of the Kaiser (aka LH).

Let me know if you can think of another reason

Cheers

Germany: Milder Downturn vs Full Recession

The German market seems to be holding up better than many others. While the UK languishes in a deep economic doom and gloom climate and Brits contemplate going back to Holiday Camps such s Butlins, the German market seems to be resilient and holding firm if down a little.

There are several reasons. So the Professor took a look at the market to see if he could understand why.

Germany is not as much of a property owning market as is say the UK and USA. With over 1/3rd of the population now living alone - one of the highest in the world - the concentration of these live alones seems to be concentrated as one might expect in the cities. However the characteristics are not similar across all sectors of the country. There is the prosperous older north and the swinging south up coming. Interestingly because Germany does not have the same concentration of population in any single geography there remains a strong tie to the region in which people were born. The migration to the cities is not concentrated as it is say in the UK towards the south east.

Because of these characteristics we believe the German market for travel will remain robust and stable for quite some time. Unless something dire happens in the coming months, the German economic engine - while perhaps not the huge driver of growth that it once was - will still however purr along nicely. This should mean good news for LH and the big 2 tour operators. In the short term Air Berlin should benefit with its focus on the German regions.

Cheers

Consolidation Comes Slowly To Germany

While LH continues its aggressive expansionism with a long list of acquisitions and mergers, the creation of a strong second force has struggled. Should there be 2 players or 3?

Effectively there can really only be 2. So there if there is to be 3 if would not be efficient. However some still hold on to the belief that 3 is possible in that scenario LH's GermanWings LCC would be required to join forces with another player.

One of those doors just shut. Air Berlin will take over TUIFly's scheduled operations. This has remained a separate legal entity for some time and represents the HLX.com (bright yellow taxi) product. As some background, the TUI Group in Germany owns nearly 50 aircraft, which makes it the third-largest German fleet after Lufthansa and Air Berlin, carrying more than 12.5 million passengers per annum. TUIFly Charter operations will remain separate. TUIFly's other businesses such as the former FirstChoice airlines, Britannia Airways, Corsair etc remain under TUIFly's charter operations and are unaffected by this move.

Who Is Air Berlin's Masked Man?

Who is AB’s Masked Man ?

So who is the mysterious buyer of the 18.5% shares?

Speculation has centered on Etihad who currently denies the purchase of former shareholder Billionaire Blavatnik’s stake. However they are known to have cash and the amount is really quite small. Also another option could be new partner S7. It might even be Nikki Lauda himself. Who knows… we are waiting to find out.

Cheers

Air Berlin - seeking cash looks to Etihad

Air Berlin which has big ambitions but far less stellar performance than its fellow members of the big 3 LCC club. (AB+FR+EZ)

It market cap is actually quite low - be far the lowest of the 3. While its hybrid model has great potential - it remains largely a reverse camel - a committee organized by a bunch of donkey largely from the acquisitions.

So to address its perennial lack of capital - it has started discussions with Etihad to create a liaison - dangerous or otherwise - to shore up its balance sheet.

This would mark the second time in as many weeks that Etihad's name has been linked to a major European carrier - the other one being Olympic.

I didn't see the synergy then - I don't see it now.

Would some one care to enlighten me?

Cheers

Euro LCCs: A Quantam of..?

The big 3 European Low Cost Carriers have reported their October traffic numbers. They make for interesting reading.

Here are the numbers.

Ryanair carried 5.35m passengers last month, 18% more than in October 2007, taking its rolling 12-month total to 56.8m. October load factor was flat at 85% and on a rolling 12-month basis averaged 81.5%. They have already announced significant cut backs for the Winter months that could see capacity fall by as much as 25%.

For easyJet, October passenger numbers grew by a similar 18.4% to 3.96m, taking its rolling 12-month total to 44.27m (+17.6%). October loads were 1.4 percentage points ahead at 83.9%, and on a rolling 12-month basis 0.5pp ahead at 84.2%. Thus continuing their LF trends higher than their Irish rival.

Alas on the mainland things don't look so good. Passenger numbers at Air Berlin declined by 4.4% year-on-year to 2.7m last month, due to a ‘targeted capacity reduction’ of about 80,000 seats. Load factor dropped 1.6% to 80.1%. Still pretty healthy Air Berlin seems to have stabilized at about half the traffic of Ryanair.

For other airlines in the LCC category things are not looking too good. XL Airways (UK) and Zoom both left the field followed by Sterling last month. But bright spots from the UK include traffic growth at Jet2, and Monarch Scheduled. There is continued uncertainty in Germany over the fate of the musical chairs game being played out with TUI/Thomas Cook/Euro Wings+German Wings and Lufthansa. Air Berlin's ability to play has been weakened by their need to absorb all the hodge podge of traffic they acquired with LTU, DBA etc. The latter of which is no longer an entity.

Cheers

Germany - a Duopoly no longer, but not quite

The long awaited deal between Condor and Air Berlin has finally foundered on the rocks of the German competition authority. But in true German fashion (remember these are the guys who actually fined one company for LOWERING prices), the result is a strengthening of Lufthansa's hand.

A new third force company comprising GermanWings/Eurowings and TUI's air assets will emerge as an independent LCC group. Clearly not totally independent but independent in spirit anyway.

Frankly this still makes me scratch my head and wonder if Germany as a nation would ever pass the US RICO act.

Cheers

Timothy

EU Traffic powers ahead driven by LCCs and mega carriers

While BA's traffic continues to show declines – albeit at a lesser pace – the big 3 LCCs are powering ahead. So too are the other strong legacy carriers in particular LH and AF+KL. All 3 big LCCs report strong traffic gains – FR +22%, Easyjet +16%, Air Berlin +28%. The model still works. But Air Berlin should be looking for better solutions. It has essentially dumped the long haul scheduled business and is now looking to cut elsewhere.

Even those carriers who are most vulnerable in the second Tier EU legacy carriers (SK, IB etc) are appearing quite strong. But this is going to be short term. We believe that the top tier big 3 EU carriers have the ability to easily weather the economic climate. Similarly the 2 British Isles based LCCs. Everyone else without exception is vulnerable.

Consolidation - European Style LH+TUI combine LCCs

TUI's TUIFly aka Hapag Express bright yellow taxi planes, and Lufthansa's German Wings (Yellow Tails and we don't mean fish) have agreed to merge to present a potent force to counter the growing strength of Air Berlin's conglomerate.

This is likely to see some realignment of routes and probably a cut back at CGN airport whose locals have been enjoying some really good fares lately.

It is unlikely that LH would allow the name TUI on the new venture so the likely surviving name is German Wings. Although I really thought the HEX planes were a great idea.

Net result - LH gets MUCH bigger. Don't forget they have a small stakeholding in the other guys at TC through the merging of TC's airline operations with Condor - LH's former charter susidiary. Almost overnight - OK in a year... the German market has consolidated from 4 players into 2. Once again the big yellow of LH casts a huge shadow over the whole market. Peace is restored and life goes on. Of course there will be a lot of work for those people who negotiate pilot seniority lists.

I always say Germany Inc. would never pass the USA's RICO act.

Cheers

Timothy

Its Official! EasyJet is not a Full Blown HVC

Throwing out the pure LCC (Low Cost Carrier) model in favor of the HVC (Hybrid Value Carrier) has been on the cards for some time for Stelios's Orange clad heros. Now they big step, they have agreed to go into the GDS - Amadeus and Galileo for sure. Given their reach these make sense. (Sorry Tex!)

Using the model developed for Norwegian Air Shuttle, the GDS will be charging out a fee for this "service" This fee will be listed in the final pricing.

Impact?

So GOOD for Easyjet - they needed to do this for the broader reach. This gives them what they want and at a model that makes sense

VERY RISKY for Amadeus and Travelport. I believe this is a short sighted decision and will ultimately result in many conventional carriers adopting the model. However so far Amadeus has proved adept at surfing over this issue. However the number of Masterpricer transactions will be a big sticking point. I would love to have listened to that conversation. I doubt that Easyjet had good advice on this subject.

SIGH OF RELIEF for the travel agents - they now have less competition but more work and more cost

NEUTRAL for corporations - not sure its a benefit though - its more paper/processing work

BAD for LCC scanning vendors. But not that bad since Ryanair is not going to follow suit.

GREAT for Ryanair.They wasted no time in crowing over this one. Read the great press release:
http://www.ryanair.com/site/EN/news.php?yr=07&month=nov&story=gen-en-051107

For the other competition, expect Air Berlin however and several others (eg German Wings) to follow suit.