After nearly five months of detailed examination the German competition authority in August finally gave the unconditional go-ahead for Air Berlin's acquisition of LTU.
The president of German competition authority Bundeskartellamt, Bernhard Heitzer, concluded that the market capacity offered by other carriers is such that potential competition exists on individual routes and the joining of Air Berlin and LTU would not constitute market dominance. He cited the alternative availability of seats on charter airlines such as TUIfly and Condor, as well as on low-fare carriers such as Ryanair, easyJet and Germanwings.
"We finally got the strategic decision we had hoped for," says Air Berlin chief executive Joachim Hunold. "Nevertheless, it is regrettable that this process took so long. Therefore, synergies could not be exploited during this year as planned."
Air Berlin first announced in March its intention to purchase Düsseldorf-based LTU for €140 million ($190 million) plus the assumption of €200 million in debt. It is expecting to make cost savings of between €70 million and €100 million annually from 2008, but, explained Hunold: "Whether we can achieve this depends on the outcome of the collective agreement, which is being negotiated with the LTU pilots."
The pilots of LTU and dba, which Air Berlin acquired last year, were preparing to strike in August to protest the deal but this was averted with an eleventh hour agreement between Air Berlin and the Vereinigung Cockpit trade union.
Air Berlin also has forged a new agreement with the Vereinte Dienstleistungsgewerkschaft trade union, clearing the way for the creation of a new engineering company which will service the 130-strong Air Berlin fleet and develop a third-party business. The 970 technical personnel who have been working for LTU in Düsseldorf and Munich and for Air Berlin in Düsseldorf and Berlin will now form the nucleus of Air Berlin Technik. They will shortly be joined by the 130 employees of dba-Technik in Munich. Air Berlin hails this move as a "decisive step towards increasing cost savings and competitiveness".
Source: Airline Business