Wednesday, 21 September 2011

Air Berlin fleet cuts








An Air-Berlin aircraft passes along the air traffic control tower and terminal building at Berlin's Tegel airport, August 3, 2011. REUTERS/Fabrizio Bensch
Germany's two largest airlines said on Wednesday they were cutting capacity and fleets to salvage profits, as economic turbulence hits bookings numbers and prompts customers to put off booking flights until the last minute.
Air Berlin (AB1.DE) said it hoped to pass on planes it no longer needed to Asian rivals, while German flagship airline Lufthansa (LHAG.DE), which on Tuesday shocked investors with a profit warning, said it would now only increase capacity over the winter by 4 percent.
Lufthansa had in July already reduced the planned growth in capacity to 6 percent, down from an original 12 percent and indicated on Wednesday it could cut more seats.


"Close attention will be paid to further developments and Lufthansa will, if required, use its existing flexibility to make further adjustments to its capacities," it said.
French rival Air France-KLM (AIRF.PA) has already said it will halve its winter capacity growth this year, while U.S. airlines Delta (DAL.N) and American Airlines (AMR.N) have also announced they will be selling fewer seats this winter.
Air Berlin, which is in the midst of an overhaul under a new chief executive, said it would reduce its fleet by a net 18 aircraft to 152 planes and that it was considering halting activities at some smaller regional airports, following its decision to withdraw from Erfurt in eastern Germany.
"We are in turbulent times," CEO Hartmut Mehdorn told journalists. "On the booking side, customers are being very cautious, booking later, and this is not only happening to us, but to the whole industry."
Lufthansa had on Tuesday warned of disappointing booking trends as it said it no longer expected to improve on last year's operating profit of 876 million euros in 2011.
Investors punished Lufthansa shares further on Wednesday and several brokers cut targets and recommendations on the stock.
Lufthansa was down almost 4 percent at 9.92 euros at 1025 GMT, after closing 4 percent lower the previous day, while Air Berlin shares were down 0.5 percent.
The Lufthansa warning came after industry body IATA said airline profits would fall in 2012, with European airlines to be particularly hard hit.
IATA said Asia-Pacific airlines should be able to maintain profits in 2012, and Air Berlin Chief Financial Officer Ulf Huettmeyer said the company hoped to take advantage of growth in Asia to offload some of its planes.
"We have good chances to place these planes on the market. There's an enormous demand for planes in Asia," he said, adding that options for Air Berlin included returning leased planes earlier, leasing them to other airlines or selling them altogether.
Air Berlin, which is seeking its first annual profit since 2007, said late Tuesday it planned to improve operating results by 200 million euros with the fleet reduction.
Founder Joachim Hunold stepped down as chief executive in August after the airline had warned it would not return to an operating profit in 2011.
Reporting by Victoria Bryan, Reuters.



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