Budget operator Sterling has acquired fellow Danish independent Maersk Air from the AP Moller shipping group, with the aim of increasing its scale in the Scandinavian low-cost market.
Maersk Air, a long-standing independent carrier, will now be merged under the low-cost Sterling brand. The deal comes shortly after Sterling itself was taken over by Fons Eignarhaldsfelag, an Icelandic holding company which controls budget airline Iceland Express.
The addition of Maersk will more than double the size of the Sterling operation, slotting into place behind Ryanair, easyJet and Air Berlin in terms of the weekly seat capacity being offered this summer . The merged company will pull from the pack, ahead of germanwings, flybe, Hapag-Lloyd Express and others.
There is significant duplication in terms of city pairs – the two carriers have nine in common – providing plenty of scope for rationalisation. The carriers have bases in Denmark, at Copenhagen and Billund – Sterling has 27 destinations in total, while Maersk flies to 31. Duplicated destinations include Alicante, Barcelona, Malaga and Palma de Mallorca in Spain; Amsterdam, Athens, Berlin, Paris and Rome.
Sterling chief executive Almar Orn Hilmarsson says that the deal will enable the two loss-making carriers to move into the black from the end of 2006, in part due to the synergies on offer. The company says that the goal for Sterling to make an operating surplus in 2005 is “still valid”. Sterling and Maersk had a combined loss in excess of DKr600 million ($100 million) last year on revenues of DKr 3.5 billion.
“From being two companies steeped in a particularly difficult competitive environment, with an unsure future as a result, the merger provides the basis for a single company with the opportunity for growth and profitability,” says Hilmarsson, who will continue as chief executive of the merged company. “We will grow, but profitability is of vital importance, so we will be rationalising and boosting the efficiency of both companies,” he says.
Hilmarsson points to synergies in terms of duplicated functions and technology, as well as a reduction in administrative personnel. “This is an unavoidable result, and will be determined according to the best practice and best man principle,” he says. “We will simply build up a new organisation, which will have its own identity and in which each person will be able to seek employment.” The location of the headquarters of the newly merged company has yet to be decided. Flight crews will not be affected by the labour cuts.
The company says the new business “will cultivate the low-fare concept, and therefore only operate with a true low-cost model”. At the same time there will be an increased focus on the charter market, which will become a more independent business area.
Fleet data from Airline Business sister company AvSoft shows that Maersk has a fleet of 13 Boeing 737-700s and six 737-500s, while Sterling has 10 737-800s. Under the deal, Maersk’s existing fleet will remain under AP Moller’s ownership and be dry leased by Sterling for up to six years.
Meanwhile, the new group’s sister airline Iceland Express is looking at the possibility of using aircraft from the Maersk fleet. It operates two Boeing MD-80s, but with the leases coming up for renewal in February, the carrier is interested in Maersk’s more fuel efficient 737-500. Iceland Express will retain its own brand identity.
COLIN BAKER LONDON
Source: Airline Business