Europe′s airlines gear up for turbulent times | Business| Economy and finance news from a German perspective | DW | 23.05.2012
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Business

Europe's airlines gear up for turbulent times

Ryanair fears an end to its run of success; Lufthansa saves, invests and modernizes; Air Berlin wants to introduce discount fares. Europe's airlines are fighting for market share in an industry in flux.

Plane landing

Plane landing

Europe's biggest discount airline, Ryanair, was always good for new savings ideas - most of which normally came from the boss himself, Michael O'Leary. By reducing the amount of ice in drinks, for example, the airline shed thousands of kilos and saved thousands of euros in the process. Ryanair even considered using just one pilot per flight - although, apparently, nothing ever came of that.

Ryanair Chief Executive Michael O'Leary speaks at press conference in London

Ryanair's O'Leary is never short of money-saving ideas

Not all companies are considering such measures, though, despite Europe's ongoing economic woes and the high fuel costs that are increasing pressure on European airlines. As aviation expert Heinrich Großbongardt said, the airlines are continuing to groan under oil prices, which are expected to rise even further throughout the year.

"And then you've got the 'little things,' like aviation taxes and emission credits, on top of that," Großbongardt said in an interview with DW. And European airlines are also dealing with tougher competition as a result of the expansion of state aviation companies from the Persian Gulf region.

Air Berlin in transition

The ongoing recession and the shrinking price gap between discounters and regular carriers are a few reasons for Ryanair's pessimism, which comes at the end of a long run of success and despite record profits recorded last year.

But the Irish carrier isn't the only discount airliner in transition.

Air Berlin - Germany's second-largest airline - has also been battling weak numbers. Aside from an internal austerity package announced earlier this year, it also has plans to introduce discount fares.

Its new "JustFly" price includes online-only check-in and extra fees for checked baggage - as its competitor Germanwings, a Lufthansa subsidiary, has been doing for some time.

Großbongardt emphasizes that Air Berlin finds itself in a difficult transition period: it has to save while implementing a new business model.

Whereas in the past the company largely carried business passengers on flights within Europe, it's now intending to extend this to longer routes, including through a partnership with Abu Dhabi-based Etihad Airways.

Lufthansa planes in Hamburg, March 2012

Lufthansa hopes for new profits with its "Score" program

Lufthansa in holding pattern

Lufthansa, recognized worldwide by its emblematic crane logo, is also facing tough times. It will likely have to lay off personnel, and merge operations and subsidiaries.

With its new "Score" program, Germany's flag carrier hopes to earn an additional 1.5 billion euros by the end of 2014. Last year, even though the airline broke the 100-million-passenger mark for the first time, this wasn't enough to boost its bottom line.

Due to a lack of demand, Lufthansa intends to strike business class from certain routes. And as an offensive maneuver it will also build up its business class offerings on stretches with high demand - with new seats that can turn into beds.

As such, Lufthansa is positioning itself to maintain its leadership in the premium sector.

Up in the air

At Lufthansa's main competitor, Air France, rumors of downsizing up to 5,000 jobs are causing concern. Within the last year, French-Dutch parent company Air France-KLM suffered 800 million euros in losses. A 2-billion-euro cost-cutting program is intended to help out by the end of 2014.

Within the industry Großbongardt thinks other consolidations are to be expected. Never before have there been so many players on the European aviation field, he said, adding that he doubts they all can be successful.

Author: Monika Lohmüller / sad
Editor: Gabriel Borrud

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