Disappointing results for AirBerlin in 2016 and 1Q 2017: losses of €2million per day!

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airberlin financial results 2016 and first quarter 2017 – Progress achieved in business restructuring

  • Old business model leads to disappointing financial results in 2016 and Q1 2017
  • One-off costs for balance sheet adjustments and restructuring for 2016 burden the EBIT development
  • Wet-lease agreement with Lufthansa Group successful and separation from tourism sector started
  • Stronger focus on Düsseldorf for long-haul growth in light of infrastructure limits in Berlin

The business year 2016 and the first quarter 2017 at airberlin were dominated by the transition to a new business model at the airline. Structural issues of the old business model and high restructuring costs have impacted the reporting periods.

airberlin CEO Thomas Winkelmann said:

Old airberlin’s indistinct market position, the strongly season-dependent route network and the high operating costs have together led to highly unsatisfactory financial results. The new strategy we launched in autumn 2016 is a major step to turn around the airline’s fortunes. I came on board to develop a focussed, cost-efficient network airline away from an unprofitable hybrid carrier. This also now means sounding out new opportunities beyond the existing strategy.

airberlin CFO Dimitri Courtelis added:

The first half-year of 2017 will be dominated as was 2016 by the structural challenges of the old airberlin and the high expenditure required to restructure the airline. It is normal that before improvements become noticeable the first phase of a remodelling of this magnitude is enormously difficult.

Financial key figures Business year 2016 in € Business year 2015 in €
Revenue 3.79 billion 4.08 billion
EBIT -667.1 million -307.0 million
EBIT adjusted -332.2 million -215.4 million
Restructuring costs

(fleet harmonisation, personnel-related provisions, consulting services)

334.8 million 91.6 million
Net result -781.9 million -446.6 million
Seat load factor 84.3 per cent 84.2 per cent

The decrease in revenue in 2016 is due primarily to a capacity reduction of 4 per cent and the decline in revenue per passenger (yield) by 3.8 per cent. The threat of terrorism in the eastern Mediterranean region led to excess capacity and an associated fall in prices in the leisure sector. These factors impacted negatively the business results of 2016. As a counter-measure, airberlin expanded its long-haul network, added more XL seats, introduced buy-on-board and launched a new short-haul European business class product. Ancilliary revenue grew by a significant 20 per cent in 2016.

The necessary restructuring costs of 334.8 million euros for the transition to the new airberlin saw the EBIT drop to -667.1 million euros in 2016 compared to the previous year. The provisions were made mainly for fleet harmonisation to Airbus aircraft and staff, plus consulting services.  

The business result for the first quarter 2017

Key figures Q1 2017 in € Q1 2016 in €
Revenue 649.6 million 737.1 million
EBIT -272.3 million -172.2 million
Restructuring costs 5.9 million
Net result -293.3 million -182.3 million
Seat load factor 80.6 per cent 83.4 per cent

 

The first quarter 2017 is dominated further by the challenging structure of the old airberlin business model. Other external factors have had a negative impact including a ground staff strike at Berlin Tegel Airport and operational limitations of the airline’s new ground service provider, which led to flight cancellations and reductions in capacity.

Outlook and progress in the restructuring process

Mr Winkelmann said:

We have a lot of work ahead of us in 2017. Due to the infrastructure limits in Berlin we will focus more strongly on Düsseldorf with our plans to expand further our long-haul route network. The restructuring process of airberlin is up and running and we will now accelerate our pace of change towards the positioning of new airberlin.

The strategic turnaround for the new airberlin was initiated at the end of 2016. Since then the airline has achieved major progress in three important fields:

  • Concentration of its route network on flights within Germany, to major European cities and to more long-haul destinations. airberlin from May 2017 will offer even more connections to the USA. Furthermore, airberlin has adapted its network to the new fleet target size of 75 aircraft and downsized its flight network from 387 to less than 100 routes. The fleet harmonisation to Airbus aircraft has been completed.
  • A wet-lease agreement with Lufthansa Group for 38 aircraft has developed successfully and 35 aircraft have been moved to date.

A separation from the ‘sun-seeking’ seasonal tourism business started at the beginning of the airline summer season in March and a total of 35 leisure-dedicated aircraft were transferred to NIKI. The second stage is now pending regulatory approval of a joint venture between Etihad, NIKI and TUI.

28 April 2017

2 COMMENTS

  1. But in this case Lufthansa might be interested!

    You are right, of course: the staggering losses of AirBerlin are four times higher than those of Alitalia. But nobody notices because everybody is concentrated on Alitalia.

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