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Joachim Hunold (CEO of Air Berlin) November 2007 PDF Print E-mail

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Could you please present Air Berlin to our readers? What are your specificities compared to other European LCCs?  What do you do better than your competitors?   
                   
We never wanted to be a low-frills carrier and never wanted to be like a flag carrier. Where we position ourselves is as a hybrid carrier-  in between the competitive European scheduled aviation sector. A sector rife with competition and generally low margins. We have greatly raised the ‘customer experience’ in this sector by creating its own segment, and providing an industry leading high quality service at significantly low fares.
The service aspect is at the core of Air Berlins strategy as we believe there is a large market who appreciate the value added benefits of our services. Air Berlin’s customer management strategy is to provide the most attractive and ‘best in the market value’ scheduled air transportation services.

From the most comfortable,modern fuel efficient aircraft, to inflight menus created by the famous Sansibar restaurant, Air Berlin’s processes are driven with the customer in mind. We firmly believe that quality produces efficiency, by delivering the best product in the market sector and achieving customer retention.   

The market has understood our strategy and continues to reward us with a consistent buying interest on the stock market. After initial concerns, experts now consider the “Air Berlin model” as exemplary for the sector. So far, we are the only German hybrid carrier, namely a carrier that uses all conceivable sales channels, thereby making itself less dependent on seasonal fluctuations. In the future, we also plan to grow faster than the market in which we do business. For a long time, Air Berlin has considered this market to embrace not only Germany but Europe as a whole

How do you analyze the competition in Germany with German carriers (TUI, Condor, Germanwings…)? And especially with Ryanair, easyJet and other LCCs? Which LCC is for you the main competitor?    

Every airline to fly on the same routes as we do is a competitor. Competition can be tough, but it has to be fair – if so, it is good for the business, and can be furtherer of innovation. In Germany, we are the second biggest airline, in Europe the third biggest Low Cost Carrier – but all in all: we differ from every other airline in Europe. We offer much higher customer service levels than all other European Low Cost or Low fare carriers, and most of Europe’s National or legacy carriers.

What is your position on environmental issues concerning European LCCs?        

Air Berlin is aware of its responsibility for environment-friendly behaviour and adheres to policies designed to keep emission levels as low as possible. One of the central elements of Air Berlin’s environmental commitment is its fleet policy. Our company operates one of the industry’s youngest fleets. Almost all aircraft are fitted with Winglets or Wingtips, to improve the wings’ aerodynamics and contribute to reduced fuel consumption up to 3%. Moreover, the new Air Berlin aircraft also are considerably quieter than comparable other aircraft.
 
Emissions trading in air transport can only be one component of a comprehensive overall strategy to reach the ultimate goal of a reduction in emissions. In particular, this has to include the implementation of new technologies and the creation of adequate infrastructure, both parts of which must be carried out simultaneously. The “Single European Sky” project alone, which has been in political discussion for almost 15 years, would reduce the CO2 emission by up to 12 %. Considerable potential is available here, which should be made use of. The current target date of 2020 is not ambitious enough. The German air transport industry therefore continues to insist on a coherent and well-balanced overall strategy.

The European Low cost carriers market has reached a certain maturity which leads to its consolidation.  During this transition, what are, for you, the greatest threats to the European Low cost carriers? Fuel rising? Overcapacity? Evolution of airports? Regulation?...
    
The airline industry is highly competitive and this is true especially for the low-cost segment. Moreover, aviation competes with ground transportation options particularly with regards to short haul routes. We see these “risks” as challenges that will be overcome with the successful hybrid business model.  Its unique position clearly separates us from other LCC and from the problems of overcapacity, where the battle for  market share is carried out almost exclusively through pricing and, as a result, through cost cutting,  Air Berlin takes advantage of the opportunity of the accelerating consolidation process. The acquisitions of dba and LTU are examples of such participation. Accounting for approximately 22 per cent of overall operating expenses, aviation fuel represents by far the most significant cost for Air Berlin. Fuel prices are subject to notoriously wide and poorly predictable fluctuations that often enough are only minimally correlated with business developments. Thus, in order to improve planning confidence and to reduce the influence of price fluctuations on profitability, Air Berlin systematically engages in hedging transactions.

What are your expansion projects for the coming year(s)?        
 
We were never aiming to be big or not big, expansion projects must be profitable and must make sense. In light of the quickly progressing concentration process of European aviation, integrating Condor in 2010 into the Air Berlin Group secures the future for both companies. Together, we will achieve international competitiveness. This step makes sense, especially following the takeover of LTU, since it will enable us to offer our clients a more tightly-meshed long-haul flight network.

Many LCCs look after extra-revenues to offset the low price of their tickets. What are the projects of Air Berlin in terms of Extra-revenues?     

We successfully integrated additional meals and high-quality service, such as the on top gourmet “Sansibar” meal, which has become very popular among our customers. Additional in-flight products or tickets for ground transportation and our premium partners for our frequentflyer program Top Bonus are further examples from which we and our customers will profit.   
     
Do you believe that consolidation of the market will lead to 2-3 main LCCs in Europe, or do you think there will always be many LCCs on niche markets? 

I think there might be more consolidation, not only in Germany, but also in Europe. There are a lot of low-cost carriers and you don’t know how long they will last and some flag carriers are in a very weak position. Look for example to Austria or Italy.                

Are you worried about the shortage of pilots and crew hitting LCC market? 

As we started this year with our own flightschool we can secure our need of pilots.

What are the options for Air Berlin to transform its business model in order to make more costs savings? 

Our expansion and the thereby resulting joint market presence offers cost-cutting potentials and positive synergies.

 
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