Air Berlin acquires LTU
Air Berlin delivers a net profit of € 50.1 million for its financial year 2006, following a net loss of EU 115.9 million in the previous year. The airline managed not only to grow its revenues but also to lower its cost base. Air Berlin PLC also announces that it has agreed to acquire 100 % of the Dusseldorf based airline LTU.
Through this transaction, the Air Berlin group will become the largest airline in the most important German source market with a catchments area around Dusseldorf of approximately 18 million inhabitants. The LTU Acquisition
On Monday evening, Air Berlin agreed to acquire 100 % of LTU for € 140 million in cash plus the assumption of between € 190 and 200 million of net financial debt. The agreement is conditional on the approval of the German “With the acquisition of LTU we are reacting to demands from the market. Many of our customers, who especially appreciate our good service offering, have been asking us for many years to start offering long-haul flights. This is
now possible for us, as we have the necessary feeder network through our European and domestic German connections“, Joachim Hunold explained. Hunold expects the integration of LTU into the Air Berlin Group to yield synergies of between € 70 and 100 million. Among other things, he identified joint purchasing and marketing, flight schedule harmonization and cost reduction through volume discounts at airports as “key drivers” to obtain these synergies. Although restructuring measures cannot be excluded, the acquisition does not aim to curb manpower at LTU. As Hunold stated: “For consistently growing the Group, we need a skilled and motivated staff. I am still acquainted with a lot of my colleagues from my previous work experience at LTU. That was the most successful period in its history. Since I believe in LTU and its staff, I see a future for the company.” LTU will remain a legally independent company within the Air Berlin group, with its own management. The LTU name will also be retained in the foreseeable future. However, there will be a seamless integration of LTU’s routes into Air Berlin’s network in the European market. At present, LTU operates 15 medium range and 11 long range aircraft. Its most important destinations are the Dominican Republic, the United States, Thailand, the Canary Islands, Northern Africa and Turkey. The company had 2.244 employees as per 31 December 2006 and carried 5.3 million passengers last year. Air Berlin carried 16.8 million passengers in the same period, operates 93 aircraft and currently employs about 4,000 people. Through the acquisition of LTU, Air Berlin will become the fourth largest airline for European traffic, behind Ryanair, Air France/KLM and Lufthansa. One of the primary motivations for the acquisition was the possibility to improve Air Berlin’s position at Dusseldorf airport, according to Hunold. “The catchments area of Dusseldorf airport is the most important market in Germany
and the second most important in Europe, behind London. We would not have been able to grow at this airport organically, due to the limitation of departure slots”, Hunold explained. The Code Share-Agreement Air Berlin also changes its code share partner; Condor will replace TUIfly. In the code share agreement with Condor, Joachim Hunold sees advantages both for the customers and for the two companies. Air Berlin, LTU and Condor will co-ordinate their respective flight plans and cross-sell their tickets. Advantages for customers will arise from a broader service offering: the three companies’ aircraft will, for example, not anymore fly to the same destinations in parallel but at different days of the week. Condor, which belongs to the Thomas Cook travel group, currently operates 36 aircraft and carried 7.8 million passengers in 2006. Through the code share with LTU, both airlines will improve their position in the long haul sector.
While LTU and Condor both rely primarily on tour operators and travel agencies for their distribution, Air Berlin’s strengths are in single-seat sales as well as sales over the internet. Besides, the Berlin airline has a high proportion The Hapagfly airline, which belongs to the TUI group, has benefited in the past years from Air Berlin’s distribution power. Air Berlin is terminating its code share agreement with this airline by the end of the winter flight plan
2006/2007. Hunold cited the repositioning of Hapagfly (recently re-branded TUIfly) as a competitor as the reason for this decision. Also, tour operator customers showed reluctance to book their customers onto flights operated