airberlin: Board of Directors adopts strategic repositioning plan

• Strengthening of leading market position in Berlin and Dusseldorf
• Enhanced cooperation with Alitalia and Etihad Airways
• Network planning focus on long-haul route expansion
• New flights to three US destinations and Cuba
• Measures to increase revenue and reduce costs
• Quality and service improvements for all guests

At its meeting on 10 November 2015, airberlin’s Board of Directors adopted the Management Board’s recommendations for its strategic repositioning, as the next step of the airline’s journey to sustainable profitability. The package of measures includes three key components: improved network and fleet planning, measures to increase revenue and a programme to reduce costs. The goal is to improve the financial result by 310 million euros by the end of 2018.

Stefan Pichler, CEO of airberlin: “In the recent months, we have systematically analysed all the options that will enable us to sustainably improve our results. Based on this information, we will realign airberlin’s strategic position over the coming months.

“In the programme, we have worked to achieve the right balance between initiatives aimed at increasing revenue and those aimed at reducing costs”, continues Stefan Pichler.

“Numerous measures have been implemented and are already showing a positive effect. Even in this difficult economic situation, it is important for us to demonstrate to our passengers and partners ongoing improvements in the quality of our operations, and to return airberlin to profitability. We will achieve this by working together with our employees and our partners.”

New long-haul routes to North America and network strategy focussed on Berlin and Dusseldorf

One important component of the new network strategy is the harmonisation of airberlin’s network with those of its partner airlines. In particular, it will be intensifying its collaboration with the Etihad Airways Partner Alitalia and oneworld® partner American Airlines.

Stefan Pichler explains: “We are continuing to realign our network to provide optimum connectivity with our key strategic partners, improving choice for our customers. We are focussing our commitment in areas where we will be able to increase our market share in the current competitive environment. This will be achieved, particularly, on the transatlantic routes and in a number of European markets. We will continue to grow in these sectors. Overall capacity in 2016 will remain stable in comparison to the previous year.”

The first step of the long-haul expansion plan is the addition of non-stop flights from Dusseldorf to three new destinations in the US (Boston, Dallas Fort Worth, San Francisco), and to Havana in Cuba*.

*Subject to government approval

Starting with the 2016 summer schedule, airberlin will fly to San Francisco five times a week, to Boston and Dallas/Fort-Worth four times a week and to Havana two times a week. With up to 62 weekly non-stop flights to a total of 14 long-haul destinations in the US, the Caribbean and the United Arab Emirates, airberlin continues to strengthen its position as the market leader at Dusseldorf airport over the long term. Additional flights to JFK and Los Angeles will increase the attractiveness of the North American routes, especially for business travellers.

Through closer collaboration with Alitalia, the airberlin group will continue to expand its flight services from Germany, Austria and Switzerland to Italy. This will strengthen the link between the partner hubs of both airlines and, in particular, reinforce their joint presence in northern Italy. The joint route network of airberlin, NIKI, and Alitalia already currently comprises more than 1,500 codeshare flights per week. Furthermore, airberlin also plans to increase its collaboration with Air Serbia. The expansion of the strategic partnership with Etihad Airways remains a central element of the network strategy and both airberlin and Etihad Airways continue to drive it forward.

airberlin will continue to invest in its market leadership at Palma de Mallorca as a key pillar of its tourism segment with high-frequency flight connections from Germany, Austria, and Switzerland. Once again, airberlin will increase the number of flights during the summer holiday season by more than 9 percent up to 500 weekly flights to the Balearic Island.

Reducing complexity

One overarching goal is the reduction of the complexity of the network. “In the future, we will focus even more strongly on our two hubs, Berlin and Dusseldorf. This is where we will strengthen our leading market position”, explains Stefan Pichler when speaking about airberlin’s network strategy.

airberlin will complete the transition of the fleet to one that consists entirely of Airbus aircraft by mid-2016. The improvement of the cabin configuration of the A330 long-haul aircraft will also contribute to reduce complexity. All three long-haul Airbus aircraft, which previously had only Economy seats and were also used for medium-haul tourist routes, will be refurbished with FullFlat Business Class seats by the summer of 2016, after which they will be used exclusively for long-haul flights.

Initiatives aimed at increasing revenue

At the same time, initiatives from price control and revenue management have also been launched which are already contributing to significantly improve revenue.

The use of dynamic control software improves airberlin’s pricing and revenue management making it possible, for example, to adjust price calculations flexibly according to requirements. This also increases yield per seat from flight sales and other services.

Beyond that, airberlin is strengthening all of its sales channels, consolidating its cooperation with travel agencies, tour operators and corporate clients, and is optimizing its online presence on the airline’s website “Our aim is to double our market share in the corporate client sector over the next three years,” Stefan Pichler said: By tapping into new sources of revenue such as making airberlin’s product range available in all distribution channels, and broader marketing of existing products (including seat reservation or additional packages for the new Simply Good fares), airberlin is positioning itself more successfully on the market and closer to its customers. Above all, digital marketing channels are being upgraded and tailored towards the passenger. Additional revenue will also be generated, for example, from increasing on-board sales, more XL seats on airberlin’s long-haul fleet and improved relationships with tour operators. airberlin is also continuing the service initiative launched in the summer of 2015 and implementing more efficient self-service tools.

Measures aimed at reducing costs

The third central element of the programme aims at reducing costs. Through targeted renegotiations of existing contracts with airports, as well as with other external partners, from ground services to companies contracted by airberlin technik, airberlin intends to reduce its costs further.

In light of its growth-oriented network strategy, airberlin will have to let less employees go than previously anticipated. Downsizing will take place primarily in the administrative departments. Due to the upcoming negotiations and discussions with the employee committees, airberlin is currently unable to provide any information on the exact number of redundancies, the offices and facilities affected, or the specific departments involved. The goal here is to find socially responsible and amicable solutions in each and every case.

Benefits for airberlin’s passengers

The approved package of measures is not only designed to make airberlin more efficient and more productive, it also contains numerous new incentives and offers for airberlin’s passengers. Besides new routes and additional XL seats, a modern CRM system is also being introduced, which will be more effectively tailored to the needs of the customers to provide an improved range of digital media.

“airberlin will continue to invest in product innovations and provide an unparalleled customer-oriented network”, concludes Stefan Pichler.

airberlin is appealing to the Federal Government

During the announcement of its third quarter financial results today, airberlin called on the German authorities to support a competitive airline sector.

The airline said the Federal Government has a responsibility to create an environment that will not damage aviation in Germany. Since its introduction, aviation tax alone has cost airberlin around 600 million euros.

Stefan Pichler said: “airberlin would already be profitable were it not for the aviation tax. Our two subsidiaries which do not face the tax in the same extent, FlyNIKI and Belair, are profitable.

Stefan Pichler: "Aviation tax must be abolished: it puts Germany at a competitive disadvantage. Now, the 8,000 jobs at airberlin are being threatened further by the actions of the authorities in attempting to withdraw our ability to code-share with our long-standing partner Etihad Airways.”

airberlin is appealing to the Federal Government to represent the interests of employment and competition in Germany, by continuing to approve the codeshare flights operated by airberlin.

Stefan Pichler: “The Federal Government must ultimately arrive at a permanent solution in its discussions with the UAE, and not – at airberlin’s expense – unilaterally terminate the approval policy that has been continuously implemented since 2012.”