Air Berlin this week confirmed it has to cut deeper to achieve its goal of returning to an operating profit in 2013. The airline launched a new cost savings program, "Turbine 2013“, but without disclosing any of its content. CEO Hartmut Mehdorn wrote a letter to employees saying that Germany’s air passenger tax and the high fuel price were the main reasons that made the new initiative necessary.
Well, that is only half the truth at the most. The only surprise about turbine 2013 is that it came so late. In mid-2011, Air Berlin launched its "Shape and Size“ restructuring program that aimed at cutting costs by €230 million. Given the size of its losses, it was clear back then that the airline would actually have to aim at much more significant savings. While the airline is addressing its cost base, it seems not to be asking fundamental strategy questions and therefore risks continuing a business model that appears to be becoming increasingly unsustainable. On the other hand, it may not be too late to react and focus on a niche rather than trying to be all things to all people.
Air Berlin’s trend is indeed worrying. Its financial performance has not improved and turbine 2013 is a result of that. New initiatives such as its Oneworld membership have not brought (and were not expected to bring) benefits large enough to turn the trend. And given the low yield character of European connecting traffic, it is unlikely that the recently announced code-sharing agreements with Air France and KLM will help a lot either.