Air Berlin GmbH & Co. Luftverkehrs KG

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Air Berlin GmbH & Co. Luftverkehrs KG

Saatwinkler Damm 42-43
Berlin 13627
Germany
Telephone: +49 (0)1805 737 800
Fax: +49 (0)30 41 02 10 03
Web site: http://www.airberlin.com

Private Company
Incorporated: 1991
Employees: 2,300
Sales: DEM 1.28 billion (2005 est.)
NAIC: 481111 Scheduled Passenger Air Transportation; 481211 Nonscheduled Chartered Passenger Air Transportation; 488190 Other Support Activities for Air Transportation

Air Berlin GmbH & Co. Luftverkehrs KG is Germany's leading low-fare airline. Begun as a charter operator, Air Berlin has repositioned itself, in large part, as a scheduled carrier. It follows a low-cost business model with emphasis on direct, scheduled flights from a number of regional airports, rather than a hub-and-spoke system. Air Berlin specializes in flying to sunny vacation spots in the Mediterranean, the Canary Islands, and North Africa, as well as major business destinations in Europe. The airline makes more than 200 trips each week to the airline's first destination, the Spanish island of Mallorca, which it uses as a hub for service to mainland Spain. The airline's passenger count approached 14 million in 2005. It is the second largest airline in Germany after Lufthansa AG. Air Berlin's 200-person maintenance division handles all but the heaviest maintenance in-house. It also does third-party work. An engineering department allows the airline to handle minor modifications. Air Berlin has a holding in and a close alliance with NIKI, the airline formed from the remnants of Aero Lloyd Austria. As of 2005, company founder Kim Lundgren owned 26 percent of Air Berlin's shares.

Origins

Air Berlin was shaped by the forces that divided and reunited its namesake city. During the Cold War, only civil aircraft from the Allied occupying nations (the United States, the United Kingdom, and France) were allowed to fly into Berlin. In the late 1970s, an American started a company to provide flights for tour operators from the German capital to holiday destinations. Its two main clients, reported Frankfurter Allgemeine Zeitung, would be Hanover's TUI (Touristik Union International) and NUR-Touristic of Frankfurt.

Air Berlin Charter Company was established in Oregon in 1978 by former Pan Am pilot Kim Lundgren. It was originally a subsidiary of Lelco, an agricultural business of Kim's father Leonard Lundgren. It was renamed Air Berlin, Inc. in 1982 and Lundair, Inc. in 1992.

The first charter flight, from Berlin's Tegel Airport to Palma de Mallorca, Spain, occurred on April 28, 1979. Flights to the United States soon followed. A leased Boeing 707 was used briefly, replaced by a pair of Boeing 737s in 1981. According to Air International, the company posted its first profit in 1986.

German Registry in 1991

East and West Germany were reunified on October 3, 1990, and the occupation of the country by the Allies ended. On April 16, 1991, Lundgren established a new, German-registered company, Air Berlin GmbH & Co. Luftverkehrs KG, in partnership with Joachim Hunold, former marketing executive at holiday airline LTU (Lufttransport-Unternehmen GmbH), and other investors. On November 1, 1991, the German-registered Air Berlin took over Air Berlin Inc.'s operations. Its capital had been increased to DEM 7.5 million. Hunold became the airline's managing director.

Service from secondary airports was part of Air Berlin's plan to offer "blanket coverage." Originally based at Berlin's Tegel Airport, in 1992 the airline began flying from the sleepy provincial airport of Münster/Osnabrück. Other airports included Paderborn/Lippstadt, Nuremberg, and Dortmund, as well as Dresden, Erfurt, Leipzig/Halle, and Rostock-Laage in the former East Germany. Air Berlin developed a primary hub at Nuremberg. Air Berlin GmbH had also expanded its client base, reported Frankfurter Allgemeine Zeitung, adding several tour operators, including Cologne's ITS.

Passenger count exceeded one million in 1994. In 1995, the company operated a fleet of eight jets and had 90 employees, according to Flight International 's "World Airline Directory." Air Berlin thrived in the 1990s, ordering at least 16 new Boeing 737s during the decade to meet demand.

Scheduled Flights in the Late 1990s

A company spokesperson told Air Transport World that changes in the package tour market prompted Air Berlin to begin operating as a low-cost, scheduled carrier in 1997. It started running the Mallorca (Majorca) Shuttle to its top destination from several cities in Germany. At the same time, Air Berlin began selling seats through its own call center for the first time. Internet sales were added three years later.

A series of Spanish cities—Alicante, Almeria, Jerez de la Frontera, and Malaga—were added to the roster in the late 1990s due to increased interest in the Iberian mainland. Majorca was used as a secondary hub.

Air Berlin managed to grow its business even in the depressed aviation environment of 2001 and 2002. Passenger count grew by a third to 5.5 million in 2001 as sales climbed from DEM 407 million to DEM 562 million. After the September 11 terrorist attacks on the United States, its customers avoided Egypt, visiting Spanish destinations instead, reported Die Welt. According to Financial Times Deutschland, routes to Spain accounted for 70 percent of revenues, with half of sales direct to passengers and half to tour operators.

2002 City Shuttle

Air Berlin began offering scheduled flights to several European business centers through its City Shuttle program in October 2002. London, Milan, Vienna, and Barcelona were the first of these destinations. The lowest of these fares was DEM 39 one-way. A number of other airlines were entering the low-fare market at the same time, both to European capitals and to holiday destinations. What set Air Berlin apart, noted Flight International, was its emphasis on direct departures from a number of regional airports, rather than a hub-and-spoke system. A spokesperson told the Observer that the smaller airports Air Berlin used were often near city centers, making them more appealing to business travelers. Another appealing feature was a new frequent flyer program.

Air Berlin had 16 Boeing 737s at the time of the City Shuttle launch, which precipitated a huge fleet expansion. Another 15 aircraft were added within six months. The company also leased three BAe 146s and three Fokker 100s. As the fleet grew, the airline's 200-person maintenance division was preparing to add hangar space and perform heavier maintenance duties, both for the airline itself and for third parties, according to Flight International.

Air Berlin carried a record 9.6 million passengers in 2003 as revenues rose from DEM 696 million to DEM 894 million. It was Germany's second largest airline after Lufthansa AG. Revenues rose to DEM 1.05 billion in 2004, when the airline served 12 million passengers.

In 2004, the airline took a 24 percent holding in the "NIKI" airline being rebuilt from insolvent Aero Lloyd Austria by airline entrepreneur (and Formula One champion) Niki Lauda. Joint marketing agreements were part of the deal, billed as the world's first low-fare airline alliance. Air Berlin had begun flying to NIKI's base of Vienna, which it planned to use as a springboard into Eastern Europe, reported Air Transport Intelligence. By this time, Air Berlin had about 50 Boeing 737s in its fleet.

Another cooperation agreement, with German rival Hapag Lloyd Flug AG, was announced in July 2004. Hapag Lloyd was one of two airlines owned by travel group TUI AG and focused on holiday trips to the Mediterranean. TUI's other airline, Hapag Lloyd Express, connected major European cities and was not part of the code-sharing deal with Air Berlin.

According to Aviation Week & Space Technology, the European airline industry was expected to undergo some form of consolidation after spawning approximately 50 new airlines since the turn of the millennium. In 2004, Air Transport World counted 14 budget airlines in Germany alone. Unlike Air Berlin, however, many of these were unprofitable.

Company Perspectives:

The Concept

Survival in a highly competitive market requires creativity. Air Berlin is gaining new customers every day with its new ideas—and has already become the second largest German airline.

Everyone flies to huge airports such as Frankfurt, Munich or Düsseldorf. But Air Berlin was the first holiday airline to operate from "fringe airports" such as Münster/Osnabrück, Nuremberg, Paderborn, Dresden or Dortmund. Air Berlin aimed to provide "blanket coverage" to be closer to its passengers.

Originally flights were only available to package tour operators. Once the route network was extensive enough and the flights were sufficiently frequent, "flight-only" tickets were sold directly to the public. This applied to the Majorca Shuttle, for instance, offering daily flights from 12 German airports. Flight-only tickets are now available on all Air Berlin routes—and at prices that represent exceptional value. There are great deals, especially for families with children.

A massive aircraft order positioned Air Berlin to become the third largest low-fare airline in Europe, said Aviation Week & Space Technology. Primarily a Boeing operator for most of its history, in late 2004 Air Berlin ordered 70 A320 aircraft valued at $4.2 billion from Airbus. Ten of these were earmarked for NIKI, which already had an all-Airbus fleet of five A320s. Options were placed on another 40 planes. By the time of this order, charters accounted for only 10 percent of the airline's capacity.

2005 Euro Shuttle

The City Shuttle and Majorca Shuttle programs were combined into the "Euro Shuttle" in January 2005. The new name reflected Air Berlin's range of operations. It was a significant presence in the domestic Spanish market and also was growing its London (Stansted) to Majorca traffic. The airline was expecting to carry 13.8 million passengers in 2005.

Principal Competitors

easyJet PLC; GermanWings GmbH; Hapag Lloyd Express GmbH; Lufthansa AG; Ryanair PLC.

Key Dates:

1978:: Air Berlin Inc. is incorporated in Oregon, in the United States, by a former Pan Am pilot.
1979:: The first flight connects Berlin with the holiday destination of Palma de Mallorca, Spain.
1986:: The company posts its first profit.
1991:: Air Berlin GmbH & Co. Luftverkehrs KG is established in Germany by Kim Lundgren and local partners.
1994:: The passenger count reaches one million.
1997:: Air Berlin restructures operations as a low-cost, scheduled airline.
2002:: City Shuttle is launched.
2004:: Turnover exceeds DEM 1 billion; Air Berlin takes 24 percent holding in new "NIKI" airline.