Deutschland Disruption: In just one week, the busy German airline market changed forever

Here’s the understatement of the year: Last week was an eventful one for Germany’s airline industry. Is “revolutionary” too strong a word?

Developments last week will most certainly be transformative, leaving Air Berlin a completely re-shaped airline from what it was, and Lufthansa a far larger player in the low-cost sector. The winds of change appear set to sweep across Germany’s TUIfly too.

It was no secret that Air Berlin had to do something. As far back as 2011, an Airline Weekly cover story explained the airline’s tortured predicament, characterized by external forces like rising competition and Germany’s onerous airline taxes to internal contradictions likes its simultaneous pursuit of longhaul and shorthaul markets, leisure and corporate business, direct and tour operator sales and so on. Its fleet was too complex. Its network was too fragmented. And its situation grew even worse as Lufthansa built up Eurowings, as Ryanair and others attacked German cities, as regulators questioned its codesharing rights with Etihad and as critical demand to Turkey and North Africa evaporated. Not even Etihad’s oil riches could save it, even after multiple rounds of cost cutting and capacity cutting. In its own words, uttered last week, it suffered from a “complicated business model serving multiple market segments from a single business platform.” It also mentioned high seasonality, low productivity and operational cost inefficiencies.

So finally, Air Berlin and its backers at Etihad decided on a big bang approach to reform. As announced last week, the airline will reduce its fleet to just 75 planes, down from 136 today and 153 at the start of this year— the number was as high as 170 five years ago. With those 75 remaining planes (61 currently in its fleet and 14 more to be insourced next year), Air Berlin will focus just on higher-yield markets from its two main hubs: Düsseldorf and Berlin, eying a larger share of domestic business travelers, as well as pursuit of more shorthaul business on routes to and from Italy, where it partners with fellow Etihad ally Alitalia, as well as Austria, Switzerland, Scandinavia and Eastern Europe. It will keep 40 A320s and 18 Q400s.

At least as importantly, Air Berlin is sticking to its longhaul international business, no surprise given its relative success of late. That means flying 17 A330s…

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