Editor’s Comment: Air Berlin hangover

LARA editor Mark Thomas summarises the latest happenings across the low-fare and regional aviation industry.

The demise of a major European carrier like Air Berlin (and it was not the only one in 2017, sadly) was never going to be anything other than a painful affair for all concerned, but the after-effects are still being directly felt.

The Lufthansa Group has actually produced this week a pretty strong set of financial results for its network airlines, especially Lufthansa itself and Swiss.

It’s low-fare carrier Eurowings is also in decent shape – but the unavoidable costs of dealing with the fall-out from Air Berlin and integrating its former aircraft impacted its figures extensively. Lufthansa isn’t kidding when it describes the integration process as “unprecedented” in Europe and admits that it has taken longer than it expected.

Eurowings suffered a loss of €199 million in the first half of the year with that largely attributable not just to the effects of the integration but particularly to the “higher technical, charter and leasing costs incurred to achieve the capacity expansion required within such a short time.”

There is a bright side though, with the Lufthansa Group expecting to turn things around as soon as next year for Eurowings, and return it to profitability. If it achieves this goal, it will be an outstanding piece of business practice.

It did also, unintentionally, flag up something that could get in the way a little. Fuel costs for the first half of this year for the group rose by €216 million to €2.8 billion, and for the full year it is predicting they could be an eye-watering €850 million higher than last year.

Lufthansa Group has done some intensive work to reduce its overall costs to help offset the increasingly heavy burden (as for all airlines) of rising fuel costs, with Lufthansa and Swiss in particular praised for their substantial reductions in sustainable unit costs and improved efficiencies.

But it also starkly flagged up that another major increase in costs came through delays and flight cancellations due to strike action and the “infrastructural inadequacies of Europe’s aviation systems, such as the current capacity problems at the continent’s national air navigation services providers. The impact of these trends was felt by all airlines, not only the Lufthansa Group.”

The company’s comments clearly indicate that – even with the best-laid plans – there are enough loose cannons out there to provide further challenging times for Europe’s commercial aviation market.

 

 


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