Lufthansa, EasyJet Launch Bids for Etihad Castoff Air Berlin

Updated on
  • Insolvent carrier says had ‘several’ offers by Friday deadline
  • Alitalia gains attention from European discount leader Ryanair

Deutsche Lufthansa AG and EasyJet Plc kicked off the carve-up of Air Berlin Plc as bidders submitted proposals for the carrier abandoned by investor Etihad Airways PJSC after a turnaround failed.

Air Berlin’s administrators received binding offers from “several” suitors as of Friday’s 2 p.m. deadline, according to the company. Lufthansa and EasyJet confirmed that they lodged bids, while Thomas Cook Plc’s German Condor unit submitted a pitch with Niki Lauda, the founder of Air Berlin’s leisure arm.

“The proposal is consistent with EasyJet’s focused, city-based strategy in Germany,” the Luton, England based discount carrier said in a statement, adding that it aims to buy “parts” of Air Berlin’s short-haul business. It added that “there is no certainty at this stage that any transaction will proceed.”

Lufthansa, which has its main hubs in Frankfurt and Munich, submitted an offer by the deadline, according to a spokesman who said the parties had agreed not to disclose details. Creditors will meet Sept. 21 to assess the proposals with a decision set for Sept. 25, Air Berlin said Friday in a statement.

EasyJet’s bid may be coordinated with Lufthansa, Per-Ola Hellgren, an analyst at Landesbank Baden-Wuerttemberg, wrote in a note to clients ahead of the deadline. “While it may seem like a choice between the plague and cholera, we believe that Lufthansa would rather see a somewhat stronger EasyJet than Ryanair expanding without resistance,” he said.

Woehrl Interest

Europe’s biggest discount airline, Ryanair Holdings Plc said it didn’t submit an offer and is limiting its interest to Alitalia SpA, another Etihad investment that filed for bankruptcy after the Abu Dhabi carrier pulled the plug on funding.

Air Berlin has also drawn interest from a crowd of less likely bidders, including closely held logistics service provider Zeitfracht of Berlin. Utz Claassen, a former CEO of German utility EnBW, according to media reports. Hans Rudolf Woehrl, an aviation entrepreneur who sold various carriers to Air Berlin in the past, said Sept. 10 that he made an offer that may amount to 500 million euros ($597 million).

Bidders for Alitalia have until Oct. 3 to file their plans. The near simultaneous collapse of leading airlines in two of Europe’s biggest aviation markets has forced interested parties to evaluate how to play each deal.

For EasyJet, that’s meant pushing to acquire Air Berlin assets, where it may see an easier route to picking up the remnants of a company most of which may be awarded to Lufthansa. Dublin-based Ryanair, Europe’s biggest low-cost carrier, has removed itself from those proceedings, with Chief Executive Officer Michael O’Leary reiterating Thursday that he sees a “stitch-up” between the German government and Lufthansa.

Italy Focus

“We’re putting our money where our mouth is and focusing on Alitalia,” O’Leary said at a press conference in Berlin where he outlined route-expansion plans for the German capital.

Alitalia filed for bankruptcy protection in May after employees rejected a refinancing deal that included job losses. Air Berlin went into insolvency administration in August following Etihad’s decision to end funding amid a restructuring that called for cutting the fleet in half.

To be sure, Air Berlin’s position is dire. The company lost 300 million euros in the three months though March and while airlines typically make more money in summer, it was losing about 3 million euros per day, Lufthansa CEO Carsten Spohr told employees in a briefing last month.

Air Berlin pilots staged a sickout this week that resulted in the cancellation of more than 100 flights, prompting the insolvency administrator to warn that all planes could be grounded unless staff return to work right away.

No Revival

“What’s really at stake is the future of the German aviation market,” Sanford C. Bernstein & Co. analysts including Daniel Roeska wrote in a report. “Anybody taking the airline as a whole and trying to turn it around from bankruptcy will see his money vanish quicker than he can say ‘abracadabra.”’

On offer in the Air Berlin and Alitalia auctions are takeoff and landing slots as well as crews and planes to serve them. The German company has about 140 leased aircraft, while Alitalia operates 122 short- and long-haul jets.

Ryanair’s proposal to the Italian administrators will include pledges to buy new Boeing Co. or Airbus SE planes for Alitalia’s short-haul operations, keeping the brand, retaining operational staff on cheaper contracts and expanding long-haul operations to the U.S., O’Leary said.

EasyJet is skeptical about bidding for Alitalia, with simultaneous talks on two deals probably too difficult, though the U.K. carrier might still place a low binding offer to keep its foot in the door, according to the people familiar with the matter. Lufthansa’s Spohr has yet to rule out looking at the assets.

“You could say: ‘Italy is one of our most important markets after the U.S., so we have to look at this,”’ he told Lufthansa employees. “You could also say: ‘Alitalia? Are you crazy? That’s the last carrier I’d look at.’ Both are true. We have to see what we can do.”

— With assistance by Thomas Seal

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