By Neil Halligan
Fellow Etihad equity partner Air Serbia is also expected to break even by the end of the year
Air Berlin, the German airline in which Etihad Airways owns a 29 percent stake, will be profitable within two years, according to the Abu Dhabi carrier's CEO and president James Hogan.
The UAE’s national airline bought a stake in the German carrier in 2011, and they now codeshare on up to 60 destinations, creating a connection for Etihad to Gemany via its Abu Dhabi hub.
Last month, Air Berlin appointed Stefan Pichler as CEO as the German carrier moves forward with its previously announced restructuring programme to deliver long term sustainable profitability.
Speaking at the Arabian Business Forum in Dubai on Tuesday, the Etihad CEO said the airline has had to reduce overheads and make it more efficient.
“Air Berlin has over 35 million guests a year; they're the sixth largest pan-European airline. Germany is the largest outbound market in Europe.
“It's an airline that has been impacted by challenges, as all European airlines, but as we restructure [it will] move back to profitability within the next 24 months,” he said.
In August, Etihad's strategic investment in Air Berlin began to pay off, with the German carrier reporting a net profit of €8.6 million ($11.43m) for Q2, reversing a €38 million loss compared to last year.
The airline, which is Germany’s second largest carrier, also saw revenues rise 3.6 percent to €1.15bn.
Air Berlin reported a full year loss of €231.9 million in 2013, and has been struggling to reverse years of losses. In April, Etihad said it will subscribe to a €300 million bond, part of a recapitalisation intended to strengthen and assist in the reorganisation of Air Berlin’s capital structure.
“We’re here for the long term - for the airline, the travelling public and the community. With the right strategic vision, and the right implementation, Etihad Airways believes Air Berlin can become a sustainably profitable business,” Hogan said at the time.
The Abu Dhabi CEO also said he also expects Air Serbia, which it bought a 49 percent stake in 2013, to perform well this year.
"Twelve months ago they (JAT, now re-branded as Air Serbia) lost €73 million. We came to an agreement with the Serbian government and the debt was written off. We both agreed to recapitalise and rebuild a new airline that will break even this year,” he said.
Earlier this month, Air Serbia said it was on track to reach profitability by the end of the year, after reporting third-quarter revenue had jumped 54 percent to €57 million, from €37 million for year-ago period.
Passenger numbers increased 74 percent, from 419,000 to 730,000.
Hogam said Etihad’s strategy has been to “stretch the airline’s network” through code-shares with other airlines, like Virgin Australia, Air New Zealand, South African Airways, Kenyan Airways, Jet Airways, all of which gives the UAE airline access to 450 destinations.
Etihad also owns a 33 percent stake in Swiss Carrier Darwin Airline (which was rebranded Etihad Regional), as well as stakes in Ireland's Aer Lingus (4.1 percent), Air Seychelles (40 percent), Alitalia (49 percent), India's Jet Airways (24 percent) and Virgin Australia (19.9 percent).
This non-organic model will pay off eventually with greater good.