Air Berlin ups cost-cutting target as Etihad synergies take hold

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Air Berlin has raised the target of its efficiency improvement programme, 'Shape & Size', after the carrier performed better than expected during the first quarter of this year.

The UK-registered German airline provided an update on the initiative as it held its annual general meeting in London today (7 June).

Last month, the company revealed that year-on-year sales had increased 4% to nearly €813 million ($1.02 billion) during the first three months of 2012, while its before-tax loss was reduced from €188.3 million in the first quarter of 2011 to €149.3 million this year.

Air Berlin had previously planned to improve its 2012 earnings before interest and tax (EBIT) by €200 million through cost-cutting initatives and improved sales - a target which has now been raised to €225 million.

Since the beginning of the year Air Berlin has cut its capacity by 8.6%, exceeding a 5.3% drop in the number of passengers to around 12.2 million.

Chief executive Hartmut Mehdorn says that the company was thereby able to increase its yields and achieve the "best capacity utilisation for a first quarter" since the airline was floated in 2006. He adds that the management expects a "positive result" next year.

Further integration of Austrian low-cost subsidiary Niki Luftfahrt; changes to its revenue management and reservation systems; a recently introduced three-tier fare structure; and "constant scrutiny" of the route network and fleet size are all central elements in the efficiency programme, according to Air Berlin.

Greater cooperation with main shareholder Etihad Airways - which owns 29% of Air Berlin - should also help to improve the German airline's performance. Air Berlin has so far transferred maintenance of its ordered Boeing 787 fleet to the Abu Dhabi-based carrier, and has adopted the latter's business class seats on a number of its Airbus A330 aircraft.

Air Berlin says it set up a project team with Etihad to align product standards, cooperate on frequent flyer programmes, "collaborate in the area of 787s", and extend codeshares.

"The two partners will be able to achieve turnovers in the tens of millions over the next two to three years by exploiting synergies," says Mehdorn.

He predicts that Air Berlin will gain "more than 240,000" additional passengers this year due to its membership in the Oneworld alliance.