Air Berlin Says Economic Turmoil Hampers Turnaround Plans

Air Berlin Plc (AB1), Europe’s third- biggest discount carrier, said a recovery plan will take longer to execute because of high fuel prices and slow economic growth.

The additional challenges suggest the path to sustainable profitability will be “longer than was expected,” the German carrier said in its annual report today, though sales will rise this year and the company is still seeking an operating profit.

Air Berlin will pare its fleet by 13 planes in 2013 while pursuing 900 job cuts in a push to lift earnings by 400 million euros ($418 million) by 2014. It posted net income for the first time since 2007 last year only after selling control of its frequent-flier program to No. 1 investor Etihad Airways PJSC.

“Despite the major progress we have achieved in reducing our costs and increasing our efficiency, we have not yet reached out goal, namely sustainable profitability,” Wolfgang Prock- Schauer, who took over as chief executive officer in October, said in the report. The Berlin-based company needs to “further reduce our costs” to be competitive, he added.

The fleet will be cut to 142 planes from 155 by the end of 2013, with eight aircraft arriving and 20 exiting, some via the early termination of leases. Air Berlin plans to reduce capacity by about 5 percent after cutting it 7.4 percent in 2012, when 15 jetliners were stood down, Chief Financial Officer Ulf Huettmeyer said at a press conference.

Suppliers and service providers are also being asked to contribute to efforts to reduce expenses, the annual report said. Reducing debt to about 500 million euros is also a major objective this year for the company, which is cooperating more closely with Etihad, whose CEO, James Hogan, and chief financial officer, James Rigney, sit on its board.

Air Berlin shares traded 1.5 percent lower at 2.52 euros as of 1:43 p.m. in Frankfurt after earlier declining as much as 4.7 percent. The stock has advanced 64 percent so far this year.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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