Air Berlin expects to miss break-even target

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Air Berlin is expecting to generate an operating loss for the full year 2013, after failing to meet targets during the crucial holiday period over the summer.

The German airline had aimed to break-even in terms of earnings before interest and tax during the current year. But after a lower-than-expected performance during the July-September period, Air Berlin says it will only be able to “come close” to its fourth-quarter expectations with the help of positive one-off effects and higher operating income.

“Since the general market situation will not recover in the year-end quarter, due to the current price weakness in particular, we now expect that we will no longer be able to achieve our original forecast of achieving the break-even level in EBIT in 2013,” the Berlin-based operator says.

Revenues from January to September 2013 fell 2.7% to €3.25 billion ($4.37 billion) compared with the same period last year. Meanwhile, the operating loss grew 4.4% to €80.9 million, and pre-tax loss increased 1.2% to €136 million.

Air Berlin’s cost-cutting and revenue improvement programme Turbine, for the first time, had a positive impact on the operating result during the third quarter 2013, the airline says. However, the €200 million target for the full current year was almost entirely reached already by the end of September, with little more benefit to come during the fourth quarter, it adds.

Air Berlin says it is not planning to increase the target through additional measures. Another €200 million are to be gained during second half of the two-year programme in 2014.

As a result of the Turbine scheme, the carrier was able to cut operating expenses 4.9% to €1.25 billion during the third quarter. Key parts of the improvement were improved terms with airports and aircraft lessors, the carrier says. Leasing costs decreased 5.6% to just under €152 million, while the number of aircraft was cut from 158 aircraft last year to 145.

The fleet cuts affected particularly Airbus A320s and Boeing 737-700s. The former type’s fleet has been reduced by six aircraft to 39 A320s, while eight 737-700s left the fleet, with 15 aircraft remaining by the end of September.

The number of destinations was slashed by 13.5% to 147, as the number of flights fell 8.7% to about 179,000 compared with the first nine months of 2012. Capacity was reduced by 6.6% with seat load factor increasing two percentage points to 85.6%.

Air Berlin says it cut 562 full-time positions in the current year, more than half of the planned 900 job losses as part of the Turbine programme. Meanwhile, the total staff fell by 505 to 8,885 employees by the end of September.

Almost half of the job cuts were achieved by outsourcing an in-house customer service centre to a newly-formed joint venture with Berlin-based specialist provider Competence Call Center Germany.

A central initiative during the current winter schedule is to consolidate the narrowbody fleet at five stations in Germany, with each location deploying a single aircraft type. Airport turnaround times are to be improved through a new boarding sequence and hand luggage rules.