Air Berlin

Restructuring ahead after record loss

Air Berlin is aiming to reduce losses this year and fly back to an operating profit in 2016 with a package of measures after making a record loss in 2014.

Germany’s second-largest airline expects to show an operating loss of between €279 million and €304 million for last year compared to €232 million in 2013, and to make a net loss of between €362 million and €387 million, compared to €316 million the previous year. The final figures will be announced in April once the size of various restructuring charges has been clarified. The airline’s revenues stagnated at €4.16 billion last year.

However, CEO Stefan Pichler, outgoing CFO Ulf Hüttmeyer and his successor Arnd Schwierholz looked firmly to the future when presenting the results last week and outlined a package of “business redesign” measures in three stages to achieve the long-awaited turnaround.

In the first phase, lasting until September, Pichler aims to significantly improve yields and increase revenues. In April, the CEO wants to present plans for new company structures and processes. Then he wants to focus on routes and capacity in Europe, where capacity has already been reduced by 4.5% up to June. “We have to focus on our key markets,” Pichler declared. In particular, the airline wants to strengthen its position at its Berlin and Düsseldorf hubs.

But management has no plans to scale back its tourism business. “We stand by the tour operator segment and will not pull back to even the slightest degree,” said Hüttmeyer.

In the second phase, Air Berlin wants to concentrate on an updated sales strategy by steering distribution and target groups much more precisely than in the past. Detailed plans will be announced in 3-4 months’ time.

Finally, the third phase of the restructuring from April 2016 onwards will focus on development of the hub strategy and new long-haul destinations, which should generate higher revenues and better yields. In the fourth quarter of 2014, Air Berlin already improved yields by 4%, and a further 4.2% improvement is expected for the first quarter of this year.

Air Berlin also wants to deepen code-share partnerships with other oneworld members, and increase cost synergies with Etihad Airways and its partners, including Alitalia.

Pichler said: “Our new roadmap is characterised by ambitious but realistic objectives. In 2015, we will break the negative performance spiral of the past years by a significant redesign of our business model. We are currently focusing on all strategic and operational measures. I will personally put all my energy into making it happen.“