Clouds are thickening above Air Berlin and their deep-pocket investor Etihad Airways as 2016 gets underway.
      The Administrative Court in Braunschweig, North Rhine-Westphalia, ruled on December 30th, 2015, in favor of the German air transport watchdog LBA (Luftfahrt-Bundesamt; the German CAA) supporting LBA’s decision not to authorize 29 Etihad Airways (EY) codeshare flights operated with Air Berlin (AB).
      The court rejected EY’s petition to sign off on these codeshare operations between EY and AB, which CEO of AB, Stefan Pichler, had favored.

The EY ATM Option

      Pichler had voiced his “utmost confidence” that the codeshare operations in question were in full compliance with German law and the bilateral air transport agreements between Germany and the UAE.
      Apparently, Pichler got that wrong.
      The simple fact is that AB is kept afloat only by constant cash infusions of EY, and some of these cash infusions are barely in compliance with European ownership rules.
      To date, to stay afloat AB has sold off assets, including the uniforms of their crews, spare engines, and their own frequent flyer program, and outsourced all non-core activities.
      Perhaps those moves have temporarily improved balance sheets.
      Air Berlin Image Is The Pits S/H
      However, the image of an AB notorious for not dealing with customer complaints and inquiries has emerged.
      For the record, AB service was described by the German daily newspaper Handelsblatt in 2014 as “non-existing.”
      Now it can be said service has only gone from bad to worse in 2016.

Changes This Week

Up In The Air

Hogan’s Goat

      Since the competitively priced codeshare flights of AB from German secondary cities to popular Asian destinations with a transfer at EY’s hub in Abu Dhabi (AUH) were a main reason for EY to keep AB afloat, James Hogan, outspoken CEO of EY, has slammed the Braunschweig Administrative Courts verdict as “protectionist measures of the Lufthansa lobby” and announced that EY would appeal this decision at the Superior Administrative Court in Lueneburg.
      The usually smart and fast James Hogan may have put his foot into it.
      Questioning the independence of a German court and hinting that such court’s decisions may be based on anything else than applicable German and European law as well as enforceable bilateral or multilateral agreements may not have been the best idea. While certainly not shy of defending their market position and what they believe best to further their business, Lufthansa (LH) had nothing to do with lobbying or anything else in this decision.

Question Of Coverage

      Unlike the operations originating in FRA, DUS, HAM, and MUC, the codeshare operations ruled illegal are not covered by the air transport agreement between Germany and the UAE, and thus distort the market.
      Undermining national ownership rules and permitting foreign carriers unlimited investment into air carriers who do not have the necessary financial means at their disposal to keep up operations by themselves threatens a piece of national sovereignty and LH would be foolish not to contest such measures.

Color In Jade

AB Loses Tons Of Money

AB Employees Low Pay

      When Mr. Hogan hints that “after four years of investing in Germany, supporting Air Berlin jobs as well as creating our own new employment in Germany, we find the rules have changed,” he may have forgotten to mention that employees of AB are at the bottom of the pay scale in Germany and that many positions have been outsourced to subcontractors where neither union representation applies nor any airline employment perks are granted.
      “In other markets,” Mr. Hogan said,“such as Australia, India, Italy, Serbia, and the Seychelles, our investments have been welcomed and supported.
      “Yet in Germany, our commitment continues to be undermined by the lobbying efforts and protectionist tactics of Lufthansa,” Mr. Hogan added, concluding that Etihad’s experience would “serve as a warning to others when it comes to making international investment decisions. “Protectionism will undoubtedly harm the investment landscape in Germany.”
      With all due respect, those statements are not to the point and sound like pure hogwash.
      The big picture here (once again) is that AB is a British enterprise and taxes on revenues (which do not exist) would be due to the British crown’s coffers.
      Why the German government and the German taxpayer should continue to subsidize AB’s operations remains a mystery Mr. Hogan still has to reveal.
Jens