airberlin strikes a deal with Lufthansa to ward off rival low-cost carriers

German carrier Air Berlin have struck up a deal with Lufthansa in order to downsize their current fleet. The contract sees Lufthansa wet leasing 38 and dry leasing two aircraft, of the A320 family. The contract is subject to all necessary corporate and regulatory approvals.

Air Berlin are currently the ninth largest European airline, but this deal will mean their ranking will drop to 14^th in Europe. This contract, set to last six years from March 2017, will see Lufthansa subsidiaries Eurowings and Austrian Airlines take over the aircraft – 35 to Eurowings, five to Austrian.

The deal, struck by the competitors, makes logical sense for both parties. Air Berlin’s financial struggles have been well documented – in the first half of this year, the company lost €271 million on €1.71 billion turnover. This deal helps to keep Air Berlin up and running, whilst strengthening Eurowing’s capacity, helping to reserve the German market from other low-cost carriers. Eurowings, with an additional 35 aircraft, will be in a position to expand their offering across Europe, warding off interest from the likes of Ryanair and easyJet.

The restructuring of the low-cost carrier would create a “lean, dedicated network carrier”, as Air Berlin will continue to operate a “reduced core fleet” or around 75 aircraft from its hubs in Düsseldorf and Berlin. These aircraft will be focused on long-haul routes to the likes to China and the United States of America. The restructure would allow for current long-haul flights that are operated seasonally to become year-round services.

Etihad Aviation Group, who have a 29 percent share in Air Berlin, have announced that they are in discussions with TUI AG to create a strong European leisure airline group. This group will be focussed on point-to-point flying to connect key tourist markets.

Air Berlin has issued a statement that assures passengers that currently scheduled flights will go ahead as normal, and operations will not be affected up until a new schedule is released.

Ryanair CEO Michael O’Leary believes this deal should be looked at by the European Commission, stating “they [the European Commission] blocked the proposal merger between Ryanair and Aer Lingus – which was going to shake up the foundations of the European aviation – three times. Yet, Lufthansa can buy Air Berlin.”