Germany’s airline marketplace looks very different to what it did a few years ago after the demise of key players but capacity is being filled by both new and old entrants in one of Europe’s biggest markets
Germany might boast Europe’s most powerful economy and some of its wealthiest citizens but making a profit in its aviation market in recent years has proven to be challenging for airlines.
The last two years have witnessed the collapse of two well-known leisure brands in the country in the form of Air Berlin and Germania, and their demise has ushered in scramble by rivals to carve up their former markets.
In 2017, Air Berlin ceased operations after shareholder Etihad pulled the plug on further funding for the struggling carrier.
Its grounding opened opportunities across Germany, especially in the capital where Air Berlin had long held a strong presence at Berlin Tegel.
Lufthansa and easyJet went on to take over the lion’s share of former Air Berlin assets, with the German flag carrier taking over a significant number of aircraft, crew and routes via its Eurowings subsidiary.
EasyJet was more focused on taking over Air Berlin’s former operations in Berlin Tegel.
In October 2017, easyJet paid €40 million to acquire a part of Air Berlin’s business at Tegel. The airline took over a number of aircraft leases, around 1,000 former Air Berlin air crew and airport slots. It started 19 routes from Tegel at the beginning of 2018 and increased this to more than 20 during the summer.
Increased competition was particularly pronounced on routes from Germany to the Balearic Islands, where Germania and Eurowings were among the carriers to open new bases at Majorca to take over popular leisure routes previously offered by Air Berlin.
In January 2018 Thomas Cook acquired an air operating certificate in Germany from the creditors of Air Berlin allowing it in its words “facilitate further growth for Condor”.
Later that year Small Planet Airlines Germany also left the market following the insolvency of it and its Lithuanian parent company.
Earlier this year Germania also filed for insolvency and was subsequently wound up after its administrators failed to find new investors for the business.
At the time of its grounding, the airline blamed an increase in fuel prices over the previous summer, the weakening of the Euro against the US dollar, and delays in the arrival of new aircraft as factors in its collapse.
Filling the gap
A number of airlines have since moved in to the fill the gap left by the collapse of Germania.
In April, Corendon Airlines has added new routes from Bremen Airport to Rhodes, Kos, Heraklion, Hurghada and Antalya.
The same month Pegasus Airlines began operating a rival service between Antalya and Bremen.
Sundair is deploying an Airbus A320 jet at Dresden Airport this summer and operating flights to Crete, Kos and Rhodes in Greece and Antalya in Turkey. In total, 26 services per week are planned. In winter, the airline plans to serve Egypt and the Canary Islands.
TUI is basing a Boeing 737 at Nuremberg Airport this summer and offer flights from the German city to Heraklion, Corfu, Kos and Rhodes in Greece, Fuerteventura, Las Palmas and Tenerife in the Canary Islands, and Hurghada and Marsa Alam in Egypt – destinations previously served by Germania.
Speaking at the Routes Europe conference in Hannover in April, TUIfly Managing Director Oliver Lackmann said that so far the airline has only been able to find limited opportunities to expand into markets previously served by the former leisure airline.
“We have been looking after the shutdown of Germania whether it could be an opportunity to fly out of smaller airports”, he says.
“We took the decision to deploy one wet-lease [aircraft] into Paderborn in the summer and we took the decision to fly out of Karlsruhe/Baden-baden in the summer and winter as well.”
“But beside that there are no opportunities for TUIfly flying out of smaller airports – so we were looking into Münster Osnabruck, we were looking into Bremen, but this is not really an opportunity for us,” Lackmann explains.
Lackmann says TUIfly has been able to weather the challenges in the German market thanks to its “sustainable business model” which combines an airline business, tour operator arm and hotel portfolio.
The airline typically flies to popular holiday regions around the Mediterranean, the Canaries and Cape Verde islands and Egypt.
Lackmann says that while the company has explored the possibility of adding long-haul routes from Germany, the presence of two “pretty large” long-haul competitors on touristic routes already had put TUIfly off expanding in this direction.
“Having a smaller third long-haul operator for touristic providers in Germany in my opinion doesn’t make any sense,” he said, noting that the lack of feeder services also makes such a venture even “harder” to achieve.
Eurowings growing at pace
While other airlines have found limited opportunities to grow following Germania’s demise, some operators have continued to grow strongly in the market in recent years.
Chief among them is low-cost carrier Eurowings which has been pursuing a strategy of aggressive growth in Germany and other markets in Europe.
The airline took over 77 former Air Berlin aircraft and approximately 3,000 of the carrier’s employees in 2018 as part of a major expansion of its route network in Germany. It also took over regional carrier LGW.
That year Eurowings said it became the number one airline operating from Cologne, Düsseldorf, Stuttgart, Hamburg, Nuremberg and Hanover.
On routes to and from Majorca alone, Eurowings said passenger numbers had almost doubled. In total in 2018, Eurowings carried more than 19 million passengers, a rise of 17% more on the same period last year.
In July, Eurowings will add new services from Dusseldorf to Las Vegas and from December will begin flights to Newark.
The integration of former Air Berlin assets has not been without cost, however.
In Lufthansa’s 2018 annual report its Chief Executive Officer Carsten Spohr says the acquisition of assets and market share from Air Berlin along with disruption to flight operations in Germany caused by air traffic control problems and much higher fuel costs that year all added up to a “massive financial burden” for the airline group.
During a panel discussion at Routes Europe, Heiko Reitz Vice President Network Management and Airport Relations at Eurowings suggests that the airline causalities in Germany had to some extent taken the market by surprise. “Who would have predicted for Germany to have Small Planet [Airlines], Germania, Air Berlin also Niki leaving the market,” he says.
Reitz says that while it is important to “really seize the opportunity” when such a collapse occurs, but also all new route decisions must be made based on the market “so you look into the markets and see what makes sense”.
He says that despite Air Berlin leaving the market “we did not really see a strong reduction in competition”. He said it would be “interesting” to see if that trend continues.
Also at Routes Europe, Bence Szabo, Head of Network at easyJet, says that the UK budget carrier’s acquisitions in Germany had been “very modest” compared with its competitors who tried to “buy the world” – without naming those rivals.
“What we decided at easyJet was that whichever piece of Air Berlin we wanted to keep had to be aligned with our strategy, which is very clear, it is about being number one or number two in the bases that we are at,” says Szabo.
“We were number one at Schoenefeld but we couldn’t quite claim number one in the Berlin market,” he went on to say.
Ryanair and the future in Germany
Another carrier which has taken the opportunity of market upheaval to grow its presence in Germany is Ryanair.
The budget carrier has long had its sites on growing in the country – it recent years it has opened new bases at Dusseldorf, Hamburg and Nuremberg. In 2017, it stunned the market when it announced it would begin flights from Frankfurt, one of Lufthansa’s key bases in Germany.
In 2018, Ryanair announced it would serve Berlin Tegel Airport for the first time with four routes planned that summer.
Ryanair’s acquisition of a 25% stake in Laudamotion in 2018, followed early this year by its taking full control of the Austrian regional airline has opened up a new avenue for further expansion into Germany.
Ryanair has taken over Laudamotion’s Berlin Tegel base and will operate 15 routes from the airport this summer, including new services to Kefalonia and Paphos.
Utilising former Niki slots, Ryanair has also used Laudamotion – now renamed Lauda – to expand at Dusseldorf, a key battleground with Eurowings – and from Stuttgart.
So what does the future hold for the German market?
Further consolidation appears to be on the cards. In February, Thomas Cook disclosed that it was considering the sale of its airline business as part of a wider strategic review.
Since then media reports have surfaced linking Lufthansa to a possible bid for Thomas Cook’s German leisure carrier Condor.
If this were to happen it would mark an even greater share of the country’s traffic being controlled by its flag carrier. Whether German and European competition authorities would allow such a move to take place remains to be seen.
Perhaps the most likely outlook for the German market was summed up by Szabo at Routes when he spoke about the likelihood of further consolidation in Europe as a whole during Routes.
“The strong are getting strong and the weaker are going,” he summed up.