The Airberlin, Etihad, And Lufthansa Threesome Heats Up Even More

I just can’t get over the situation in Germany right now between Lufthansa, Etihad, and airberlin. On the surface this all seems so backwards — Lufthansa is essentially bailing out their biggest regional competitor, and Lufthansa is also finally partnering with Etihad, a carrier they’ve claimed has threatened their very existence for years. But over a very short period of time, that has all changed.

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I feel like it’s easiest to explain this in bullet point format:

  • Airberlin has been in a horrible financial situation for a while and has been bleeding money with no end in sight
  • Etihad owns a 29% stake in airberlin, and has basically threatened to cut them off, which has meant that radical changes are needed
  • As part of this, Lufthansa will be taking over 38 planes from airberlin, and using them primarily for Eurowings, which is their low cost division
  • It seems odd for Lufthansa to essentially bail out their biggest competitor (since it’s very possible Lufthansa will also lose money when they operate these planes), but the goal is really to keep Ryanair and EasyJet out of Germany as much as possible, and Lufthansa knows that if airberlin goes out of business, those airlines will flood the market

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Okay, so that explains the first phase of the situation, which is strange enough already. But this is where it gets truly weird:

  • Starting next month, Etihad and Lufthansa will be codesharing on select routes — Etihad will codeshare on Lufthansa’s flights to Brazil and Colombia, while Lufthansa will codeshare on Etihad’s flights to the UAE
  • Airberlin has had three CEOs in the past five years, and the latest one is about to leave
  • Rumor has it that Thomas Winkelmann, who was the head of Eurowings for 10 years, and is now head of Munich Airport for Lufthansa, will become airberlin’s new CEO

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It’s amazing how interconnected these three airlines have become in such a short period:

  • Lufthansa has bailed out their biggest competitor and is partnering with an airline they’ve claimed is threatening the entire airline industry
  • Etihad has probably made out best in this situation, as they’ve managed to cut losses with airberlin, while putting Lufthansa in a situation where they’ll have a hard time speaking out against them; they’re now officially partnering with Lufthansa, and airberlin’s rumored new CEO has been a senior executive in the Lufthansa Group for over a decade

Comments

  1. Knowing nothing about German anti-trust law (or the economics of Lufthansa or AirBerlin), how much does this look like it is moving toward an actual merger or some sort of incredibly close non-merger relationship?

  2. @Ken: I’m not an expert in the field of anti-trust law, but worked in neighbouring fields in politics quite some time. That said, I don’t see any major difficulties anti-trust wise. Neither in Germany nor in the European Union (both perspectives are relevant in this case). Even though a merged airberlin+Lufthansa would have a very strong position in the German market, we would still be far from a monopoly. That’s mainly due to the fact that trains and buses play an (increasingly) important role in the domestic market as flying doesn’t give you (any) or at least no big time advantage. Moreover, the domestic market is no longer “controlled” by AB and LH. Transavia started flying Berlin-Munich this year, Ryanair has four daily flights between Berlin and Cologne and so on. The whole anti-trust thing might get more interesting in an European perspective due to the increased market power of Lufthansa in Central Europe (with Austrian, Brussels, Eurowings, Swiss, …). Yet, I doubt there will be big problems (they might have to give away some slots and so on…)

  3. @ Naif:

    AB is in oneworld & LH in *A. In my opinion, AB would probably be annoyed if Etihad joins *, though LH would probably be pretty happy about it.

  4. AB was always going to leave oneworld, we all knew that. So was AZ leaving SkyTeam and the joint venture between DL/AF/KL/AZ. What caught us off guard is that AB is now going to merge with LH, and therefore, be *A! LOL!

  5. This should not surprise anyone. The norms of competition and corporate governance do not seem to apply to Germany. This only looks funny if viewed through the lenses of an Anglo-Saxon.
    Is the interest of German consumers secondary in all of this? Some might argue not so, if the German model is preserved in the long term, with such interventions in the market.

  6. Well AB sold their frequent flyer program to Etihad, so no matter what they want does not count. Etihad owns their program!

  7. @Lucky-Great title, made my day! But when you say Germanwings, don’t you mean Eurowings? Didn’t they merge?

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