Etihad-backed Air Berlin says “fundamental change” needed

Germany's second biggest airline reported an operating loss of $250.63m for the first quarter of 2014
Etihad-backed Air Berlin says “fundamental change” needed
By Reuters
Thu 15 May 2014 10:17 AM

Air Berlin, Germany's second largest airline, said it needed to change and was working on developing a sustainable business model as it reported a slightly narrower first-quarter loss in line with expectations.

The airline, in which Gulf carrier Etihad Airways owns a 29.2 percent stake, reported an operating loss of €182.8m ($250.63m) in the first three months of 2014, compared with a loss of €188.4m one year ago. Revenue fell 3.8 percent to €761.8m.

Air Berlin, which received a financial boost in the form of a €300m convertible bond from Etihad last month, has been struggling to reach sustained profitability after building up debts during expansion.

It delayed its 2013 results, reporting a net loss of €315.5m for the year only after it had agreed a refinancing through the Etihad bond and the issue of other new bonds.

"There is no doubt of the need for fundamental change," chief executive Wolfgang Prock-Schauer said in a statement on Wednesday ahead of publication of its full quarterly results on Thursday.

"Now we have an adequate capital base and are taking the necessary steps that will deliver the operational and financial transformation required," he said.

Air Berlin said it reduced costs per available seat kilometre by 8.2 percent, excluding fuel, in the quarter when compared with the same period last year.

Analysts say Air Berlin needs to set out a clear strategy and business model if it is to improve its standing in the long term. At present the group serves holiday charter routes to places such as Majorca, as well as point to point travel within Europe and some long-haul routes.

"With recent liquidity and equity injected, pressing financing concerns are resolved for now, but a blueprint for sustainable profitability is still not in sight," Commerzbank analyst Johannes Braun wrote in a note previewing the results.

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