As bankrupt Air Berlin stares at an uncertain future facing the prospect of being broken up, low-cost airline Ryanair says it doesn't have any intention of making an offer to buy the beleaguered carrier.
Ryanair was not interested in bidding for the insolvent German carrier Air Berlin, said the Dublin-based low-cost airline's CEO, Michael O'Leary, on Wednesday in Berlin.
But if there was an open and transparent insolvency procedure, O'Leary stressed, he would enter the fray to acquire either parts of or the whole of the airline. But this was now not the case, he noted, alleging that it was currently a "stitched-up game" played by the German government, Lufthansa and Air Berlin.
It is an "artificially generated insolvency," which had apparently been launched "so that Lufthansa can take over a debt-free Air Berlin," O'Leary insisted. On Wednesday, Ryanair requested Germany's Federal Cartel Office and the European Commission to investigate the "obvious plot" between the federal government, Lufthansa and Air Berlin.
Air Berlin, Germany's second largest carrier, filed for bankruptcy protection this month after major shareholder Etihad pulled the plug on funding. Air Berlin's planes are currently being kept in the air with the carrier's remaining resources, with a controversial 150-million-euro ($177- million) government loan expected to arrive soon. But if the money runs out and Air Berlin is grounded, the airport slots go into a pool where they will be divided up among airlines.
The race is on for interested parties to agree a deal for parts of its business, including planes and crew, which would bring access to take-off and landing slots at airports such as Düsseldorf, Berlin Tegel, Munich and Hamburg.
Germany's biggest carrier, Lufthansa, which was first to talk with Air Berlin, has said it had presented a term-sheet to the insolvent carrier, setting out its interest in taking over parts of the Air Berlin group. Lufthansa's proposal for the carve-up of Air Berlin reportedly would see it taking over the insolvent carrier's leisure airline unit, Niki, and other planes for a sum in the low hundreds of millions of euros.
Those aircraft, up to 90, would include 38 crewed planes Lufthansa already leases from Air Berlin.
Air Berlin's competitors like Ryanair and Germania have criticized the German government's financial assistance for the beleaguered carrier, arguing that it is illegal state aid that would unfairly favor Lufthansa to conclude a deal with the insolvent German carrier. Germania has also filed a complaint with a regional court in Berlin, asking it to prevent the government from paying out the promised loan.
Trade unions and German politicians, however, have come out in support of the government's decision. They have also issued statements underlining their preferences when it comes to Air Berlin's future. Berlin Mayor Michael Müller has clearly expressed his opposition to a potential takeover of Air Berlin by Ryanair, saying in an interview with German newspaper Tagesspiegel that the Irish carrier is an "anti-employee company" and that its business model is "early capitalist."
As the Air Berlin saga heralds a new shake-up in the European airline industry, experts warn that unless other carriers cut costs they may meet a similar fate themselves.
"The sector will continue to consolidate because the business models are in the process of changing," said Stephane Albernhe, managing partner at Archery Consulting. "It is an underlying trend in Europe and the United States, where four 'consolidators' are in the lead: American, Delta, United and low-cost Southwest."
For Europe, consultant Jerome Bouchard at Oliver Wyman believes that eventually "there will be an oligopoly centered around Lufthansa, IAG and Air France-KLM." International Airlines Group is the parent company of British Airways, Aer Lingus, Iberia and Vueling.
Before major consolidation can take place, however, Bouchard believes the airlines need to find a business model where they are no longer operating on the brink of bankruptcy. Low-cost Ryanair has soared to become Europe's top airline by number of passengers. Fellow budget operators easyJet and Norwegian are also major players.
While former flag carriers still offer a full range of services on both medium- and long-range flights, low-cost airlines offer fewer services and until recently have focused mostly on shorter journeys. The pressure on former national carriers will only continue as low-cost airlines push into the long-haul segment, which has until now been an area where they enjoyed comfortable profits.
With profit margins already tight, airlines are going to have to attack their high fixed costs on planes, fuel and labor. Wages are a major competitive drag for former flag carriers. For example, the salaries of Air France pilots are 20 to 25 percent higher than those of low-cost easyJet, according to industry experts.
sri/hg (dpa, AFP, Reuters)