Air Berlin Targets $400 Million Worth of Plane Sales to Cut Debt

Air Berlin Plc (AB1), Germany’s second-largest airline, will sell about $400 million worth of planes to a new Chinese lessor as part of a financial turnaround plan.

The transaction should be completed “within the next couple of days,” Chief Financial Officer Ulf Huettmeyer told analysts today. The deal would cover 13 jets, some to be placed in China and others leased back by Air Berlin, he said on a call from China.

The sale will bring Air Berlin close to its debt target of about 500 million euros ($665 million) from 706 million euros at mid-year, he said. The carrier is reducing its fleet to 143 planes this year from 155 at the end of 2012. Air Berlin may tap equity markets to improve its finances once investors are convinced by the turnaround program, Huettmeyer said.

Reaching a target of breaking even before interest and taxes for the full year has become more challenging as a hot summer in Germany depressed bookings in July and August, Chief Executive Officer Wolfgang Prock-Schauer said on the call from Berlin.

“Due to the extreme weather there was a certain slowdown in passenger movements,” he said. Business in September and October may yet allow Air Berlin to meet its target with “encouraging” signs that bookings are picking up, he said.

Etihad Partnership

Air Berlin fell 2.1 percent to 2.1 euros as of 10:30 a.m. in Frankfurt. The stock has advanced 37 percent this year, valuing the airline at 245.7 million euros.

The loss before interest and taxes narrowed to 8.1 million euro loss in the second quarter from 29.4 million euros in the same period a year earlier, the airline said today in a statement. Sales were little changed at 1.1 billion euros even after an 8 percent reduction in capacity.

Passenger numbers benefited from a partnership with minority shareholder Etihad Airways PJSC, which holds a 29 percent stake, and code-share numbers will probably double this year, Prock-Schauer said. More travelers also came to Air Berlin via the Oneworld alliance, he said.

The airline remains on track with its cost-cutting effort that seeks to improve earnings by 400 million euros by the end of next year, Prock-Schauer said, adding that about 80 percent of the target for this year has been secured.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

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

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