21 Aug 2017

Air Berlin Failure Could Lead to Higher European Air Fares

Air Berlin Plane in Flight

European air fares could rise following the failure of low-cost carrier Air Berlin.

The budget airline has collapsed, partly due to dwindling passenger numbers which have dropped by about a million in the past year. The German government has propped up the carrier with a €150million bridging loan, but it is in talks with other airlines to sell off its assets. Lufthansa are lining up to buy the bulk of its assets, and other airlines such as Easyjet and Condor are hoping to pick up the remainder.

Ryanair has complained that the ‘carve-up’ will stifle competition and drive prices upwards in Germany and across Europe. They said ‘The German government is supporting this Lufthansa-led monopoly with €150 million of state aid so that Lufthansa can acquire Air Berlin without its debts and drive air fares even higher than they already are.’

Airline investors, however, have said they welcome greater consolidation. One leading investor said: ‘Anything that reduces capacity will put up prices and that is a very good thing indeed for the industry.

‘The low fuel price has kept European airlines in business when they should have gone out of business ages ago.’

Jochen Schnadt, chief commercial officer for British carrier BMI Regional, said: ‘We have still not had the consolidation in the European airline market that has already taken place in the US and which has led to a healthier market in the long run.’

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