Air Berlin’s CEO to resign, leaves airline in troubled water
Even though I don’t believe Air Berlin really qualifies as a low-cost carrier, the airline is still worth paying attention. After all, it’s still Germany’s second largest airline (behind behemoth Lufthansa) and one of Europe’s largest carriers in terms of passenger numbers. But sometimes numbers are just not enough – or perhaps too much in a sense – and even though the carrier has managed to transport a high volume of passengers, it’s been struggling for quite some time with financial difficulties.
Indeed, recently, Air Berlin announced it would launch a “Shape & Size” program dedicated to bringing back profitability to the company. The plan came as a “better late than never” relief for an airline that has repeatedly turned up losses for the past three years. Measures are rather stringent, involving a capacity reduction exceeding a million seats, several route closures, drastic flight frequency reductions and major change in airport focus. While radical changes were certainly needed, none of those proposed promised better than costs and losses reduction, and certainly not an increase in revenue.
Such a plan, while necessary, may also be incredibly dangerous at a time when fuel costs are changing unpredictably and the global economic conjuncture is fragilized. But the real problem is that cost reductions are nearly not drastic enough. It’s already hard to say whether Air Berlin really qualifies as a low-cost with a service focused on quality rather than price, long haul routes towards major destinations and even a frequent flier program.
It’s not that Air Berlin’s business model is a bad idea per se. It’s just that, coming with a hybrid business-model between low-cost and legacy carriers, there are very few chances applying textbook recipes for restructuration from any other model probably won’t work as well.
That might be the underlying reason behind Air Berlin’s CEO Joachim Hunold’s decision to hand in his resignation yesterday. That doesn’t mean either that the company will disappear. After all, continuity will be assured with actual board member and ex-Deustche Bahn AG chief Hartmut Mehdorn, and the airline will eventually integrate Oneworld by the beginning of next year. But Air Berlin’s future is surely in jeopardy, it still may be a competitor to other companies, but it is hardly a challenger.
