December 14, 2017 / 4:32 PM / a year ago

Niki setback unlikely to divert Lufthansa's flight path

BERLIN (Reuters) - Lufthansa’s failure to salvage Austrian holiday airline Niki may slow expansion of the German carrier and its budget unit Eurowings, but it is still expected to benefit from the resulting drop in competition in the short term.

A Niki logo is seen at Vienna International Airport in Schwechat, Austria December 14, 2017. REUTERS/Heinz-Peter Bader

Germany’s biggest airline dropped a bid for Niki, part of insolvent Air Berlin, on Wednesday, saying it was unlikely to be approved by the European Commission due to competition concerns.

Niki’s collapse is likely to be a boon for carriers serving similar markets, including Lufthansa, TUIFly and Condor, because it removes seats from a crowded market.

“Whilst from a Lufthansa perspective they would have preferred to acquire Niki their core object of strengthening the German market remains intact,” aviation consultant John Strickland said.

Although organic growth could be a little slower as Eurowings will have to find hundreds of extra staff it needs by itself, take-off and landing slots and planes coming onto the market will help.

Even before it put in its bid, some at the top of Lufthansa had queried whether it was worth bidding for Air Berlin operations, because the airline would likely benefit from its demise anyway, according to one person familiar with the matter.

Lufthansa said it would still pursue its bid for Air Berlin’s smaller regional carrier LGW, with the Commission due to decide by Dec. 21, and would continue to grow Eurowings.

Following the collapse of Air Berlin in the summer, Lufthansa said it planned to grow the Eurowings fleet by around 60 planes and would need a further 3,000 staff as a result.

The planes flown by Air Berlin, Niki and LGW were leased, and Lufthansa has now taken on many of them from the lessors.

But they still need crews to fly them and it is here where Lufthansa could be slowed into its ambitions. Instead of taking on around 800 staff in one fell swoop from Niki, it will now need to take them on separately.

“This will slow down the process,” a source familiar with the matter said.

Eurowings and sister company Austrian Airlines began advertising for crews on Thursday, saying they would offer shorter recruitment processes than normal for any former Air Berlin or Niki staff.

“We are continuing our growth as planned,” Eurowings CEO Thorsten Dirks said.

However, should another buyer for insolvent Niki be found, Lufthansa will have to lease out some of those planes to the buyer, under an existing deal with the European Commission.

Niki’s administrator began urgent talks on Thursday to find a buyer before Niki loses valuable runway slots, with Thomas Cook saying it was interested.

LIFT FOR LUFTHANSA

Lufthansa already seems likely to pick up Niki’s take-off and landing slots at airports such as Vienna, Duesseldorf, Cologne, Munich, and Palma thanks to EU slot allocation rules.

Under those rules, 50 percent of slots returned to the pool are first offered to airlines not already at the airport, while 50 percent go to incumbents.

Bernstein analysts said even if Lufthansa eventually picks up the Niki planes and slots, there will still be a gap in the market before that capacity comes back and that would benefit Lufthansa in the short-term.

“This is likely to drive even more passengers onto Lufthansa (as we have already seen with Air Berlin), pushing up seat load factors and supporting yields,” they wrote in a note.

The loss of Niki’s capacity from the market this winter will not only benefit Lufthansa.

Bernstein analysts said tour operators would quickly need to contract plane seats for holidays they have already sold and this would support yields and seat load factors.

Reporting by Victoria Bryan; Editing by Georgina Prodhan and Alexander Smith

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below