Etihad upbeat at long-term prospects for Air Berlin

Abu Dhabi
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Etihad Airways chief executive James Hogan says the Gulf carrier would not have backed Air Berlin's recapitalisation if it did not believe the company could be brought to sustainability and that its European investments do comply with ownership and control rules.

Air Berlin late last month revealed a return to losses for 2013 and has embarked on a major recapitalisation - in part back backed by its biggest shareholder Eithad - to give it breathing space to carry out a deeper restructuring than the current turbine cost-cutting programme.

"We have a very clear strategy on how we build the hub in Abu Dhabi, how we connect Europe with India, south-east Asia, Australasia," said Hogan, speaking to reporters in Abu Dhabi about its continued support for Air Berlin. "The largest outbound market from Europe is Germany. Air Berlin carries 35 million passengers and if you look at the Etihad side in regard to the traffic that is coming to our system that has exceeded our targets. If you look at the cost synergies we have been able to achieve with Air Berlin, that has exceeded our targets.

"Now if we weren’t convinced that Air Berlin could not be re-engineered, we would not have invested that money quite frankly. And we are bringing in a management consultancy to help us with the reconstruction process. That starts this coming week," he says. "We have also placed two of our executives in the business. So we are looking at how we accelerate turbine, we will look at what we need to do to for a more fundamental restructuring and I have no doubt that we can bring it back to profitability."

Air Berlin has been involved in a restructuring over the last year which has seen the carrier cut capacity and look to boost yields and make its business less seasonal. "We started recalibrating their pricing 12 months ago, but it takes 12 months because you need the data. So moving forward we can see improvements in yields and the management team understand the issues they need to tackle and they will.

"This is not about knee-jerk reactions,” he adds. "With 35 million passengers, Air Berlin is a good airline, the German market wants Air Berlin to be there, we just need to give the management team the support they need to do the job they need to do. One of the reasons we have brought in the restructuring company is nothing is sacred. [We will look at ] what do we have to do to bring Air Berlin to long-term profitability and viability."

The airline's interest in Air Berlin, and other European carriers Air Serbia and Etihad Regional, have come under scrutiny from European regulators as part of a wider probe as to whether foreign investment into European airlines company with ownership and control rules. Hogan though is unperturbed. "We comply very clearly with the rules and regulations in Europe, we have to - it's in our interests that they are in shape. It’s a nonsense that we don’t comply with these regulations."