The sudden gold of Lufthansa with Air Berlin




Taking 81 aircraft and 3,000 employees of its rival Air Berlin, which is in bankruptcy since the 15th August last, for a sum of just over 200 million euros according to the German press (which will add a hundred million of integration expenses), Lufthansa carries out a coup in gold.

Doubling of the fleet of Eurowings

To the extent that these aircraft will be assigned to its subsidiary low-cost Eurowings, the latter will see its fleet, once the transaction is validated, double overnight to nearly 180 aircraft. That is 2.5 times more than the fleet of Transavia (Transavia Holland and France), the entity of low-cost Air France-KLM. This is so for a price equivalent to that of two A320neo new (at list prices). A size that will allow him to withstand the low-cost airlines classics such as Easyjet or Ryanair. Among these 81 aircraft, almost half of them had been the subject of a rental agreement.

Higher prices in sight

Lufthansa will thus lock the sky German. The effects of leverage are two-fold. First of all, the German company will be able to increase the tariffs on a large number of lines on which Air Berlin was forced to severely lower their prices to fill its aircraft in the face of fierce competition from Lufthansa. Will then add a better allocation of assets of Air Berlin since it is clear that Lufthansa is not going to be fun to maintain over-capacity on the lines to low revenue per unit.

“It is a fateful day for the competition in the air,” commented Tomaso Duro, analyst of the research institute DIW, recalling the situation of “quasi-monopoly” that will be available to Lufthansa on routes such as Berlin-Frankfurt or Cologne-Munich.

Rapid return on investment

The operation promises to be so lucrative. It should according to Yan Derocles, analyst at Oddo Securities, generate a little less than a hundred million euros of income additional. Either a return on investment extremely quick at the end of four years only. Bernstein Research estimates the gain in the same waters.

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