The final chief executive of defunct German operator Air Berlin says he was brought into the business to oversee the sale of the company as it grappled with a long list of woes.
Speaking at an event organised by analysts Bernstein on 15 November, Thomas Winkelmann stated: "Why did I go there [Air Berlin]? Because the majority shareholder [Etihad Aviation Group] had a plan, and the plan was: sell the company in a decent way."
Etihad did not immediately respond to a request for comment on his remarks.
Despite Air Berlin's well-publicised problems, Winkelmann recalls it had some attractive assets when he took over in February 2017. Its Dusseldorf and Berlin Tegel operations were "safe harbours", the former Germanwings chief states. "I can sell that," he says, describing their catchment areas as "a strong market" in Europe's "number one economy".
The sell-off plan was going to "take two to three years at best", he notes.
In August 2017, however, Air Berlin filed for insolvency when Etihad withdrew financial support, saying the business had "deteriorated at an unprecedented pace".
Under a restructuring effort that began before Winkelmann took the helm, Air Berlin had already agreed to wet-lease a total of 33 A320s and A319s to Lufthansa’s budget arm Eurowings, and another five A320s to group subsidiary Austrian Airlines. Shareholder Etihad and TUI Group had meanwhile begun ultimately fruitless talks on creating a leisure joint venture based on Air Berlin's Austrian affiliate Niki and Germany-based TUIfly.
Winkelmann recalls a lengthy list of fundamental issues with the business, acknowledging that "Air Berlin was in trouble for many, many, many years".
He explains: "It had a combination of too high costs, non-existing IT systems that didn’t know how the revenue management was being done, and changing shareholders that [frequently] changed strategies."
Among its most pressing issues were the "$2 billion or more of debt and you pay 10% – it is not sustainable".
He suggests the carrier's earlier decision to negotiate sale-and-leaseback deals for a number of aircraft was a "red flag", explaining that in the absence of positive reasons to do so – such as a change in tax regulations – "you don’t do it as a healthy company".
Other problems included its cost of distribution, which Winkelmann suggests is an issue rarely acknowledged by airlines, particularly compared with labour and fuel burdens.
"Air Berlin’s distribution cost was more than double what it should have been," he states.
More fundamentally, the business suffered from operating six AOCs.
"I am not a big fan of having too many AOCs inside one company," he says, citing "conflict for years" over different labour contracts.
"It was unfair to everyone in the company… [some] labour contracts were very competitive, and others were not," he states. "We are all human beings. If I know you make 10% more than I… immediately the pain starts."
Ultimately, he believes, "you will be in labour negotiations for years, and years and years" under such an arrangement.
While Winkelmann was unable to provide comment on the aftermath of Air Berlin’s collapse due to ongoing proceedings, he suggests the carrier would have been "the perfect Chapter 11 case", referring to the ability of struggling airlines in the USA to bounce back within months of bankruptcy by reorganising debt.
In the European regulatory environment, however, Air Berlin's serious injuries ultimately proved fatal.
While the fate of airline's assets has largely been decided since it entered administration, certain issues with creditors are still to be resolved more than 12 months later.
Source: Cirium Dashboard