Whatever the HY1 2019 results of easyjet will be when they are disclosed on May 17, don’t expect black numbers here from the airline’s operations at Berlin Tegel. As CEO Johan Lundgren recently told Airinsight: “We made a huge improvement from the result that we had last year and that is what we are seeing too this year. But it is true to say that we don’t anticipate that we going to break-even or make money on that.” Easyjet is not there yet but it has been making huge steps at improving its results at the Berlin airport. The airline always had a presence at Germany’s capital, when it operated to Schönefeld at the South East of the city. All changed late 2017 when airberlin filed for bankruptcy. It offered a unique opportunity for easyjet to become the leading airline at that other Berlin airport – Tegel, situated at the North West. In October 2017, easyjet announced it would purchase 25 Airbus A320s from airberlin, as well as initially some 300 cockpit and cabin crew for £40mln. After European Commission-approval, it completed the acquisition mid-December and began operations with a winter schedule on January 5, 2018, by offering domestic services to six cities within Germany plus to 71 destinations within Europe. By Summer 2018, the number of routes out of Tegel had increased to over 100. Take-off of the first domestic easyjet service from Berlin Tegel to Munich on January 5, 2018. (Berlin-Airport) Difficult first year The first year at Tegel has been a difficult one. After a £50mln loss after HY1 (£26mln headline loss, £24mln non-headline loss), the airline had anticipated a full-year headline loss of £75-95mln. It revised this after Q3 to £125mln with an anticipated full-year loss of Tegel operations of £175mln. In the end, both results were better than expected, closing at a combined £-152mln: £-112mln as headline loss and a £-40mln non-headline charge. Traffic results have shown a huge improvement. At the HY1 2018 presentation, easyjet recorded 0.7 million passengers flown out of Berlin Tegel. By the end of the year, this had grown to 3.9 million passengers. By comparison: total traffic at Tegel in 2018 included 22 million passengers. The airline generated £198mln of revenues (£40,69 per seat), compared to £42mln in the first six months (£35.97 per seat). Full-year load factor was 80.6 percent, up from 63.4 percent by late June. Wet-leasing increased costs Yet, a major factor contributing to the negative result has been the need to operate a partly wet leased fleet. Easyjet took over ten ex-airberlin A320s that needed modifications to meet the same standards as its own aircraft, but also wet-leased extra capacity from Condor, SmartLynx, and WDL for a cost of £16mln in HY1. Over the year this has gradually changed: by November most wet-leased aircraft had been replaced by fully owned easyjet Airbus’, driving down costs and making a tap into a dedicated integration contingency fund unnecessary. Also affecting headline costs were higher than expected unhedged fuel costs, airport costs, taxes, crew training and the effect of competition. Room for improvement Although improving, Lundgren has a couple of things on his mind that need improving before Tegel is to his liking: “There are two things in there. One is the planning of the slots in terms of how we anticipate them to plan in order to optimize the schedule. We haven’t got as far as we wanted, for instance of moving out on the domestic flying this season and move them more to leisure destinations.” Schedule optimization already improved load factors and costs from HY1 to HY2 2018, but Lundgren expects another major step on this in 2019 as easyjet operates to its own schedule instead of to the ex-airberlin one it inherited last year. Currently, easyjet has based 35 aircraft at Tegel and that poses another problem: Tegel’s restricted facilities, with 14 terminal stands and 36 remote stands. “We also have a number of aircraft that we don’t have stands for, so they are now placed elsewhere at other bases. That is costing us extra. That is something we can improve upon”, says Lundgren. Lundgren takes a wait-and-see approach to what will improve, once much-delayed Berlin Brandenburg opens with 16 terminal stands and 85 remote stands. Potentially that offers more efficient operations, but Lundgren keeps his skepticism as it is still uncertain if the airport will open in October 2020. Fierce competition On one thing easyjet certainly isn’t taking a wait-and-see attitude: competition. The UK airline might be number 1 in Berlin, but Ryanair is next followed by Lufthansa and its subsidiaries Eurowings and Germanwings. “It is fair to say that there has been an increase in competition. We are seeing lower prices from LaudaMotion and Ryanair as well as Lufthansa, so it has been a more aggressive environment. So this and the operational issues have been a contributing factor to us making losses at Tegel. But I have no doubt that this will be a valuable asset and we will deliver to the average and above average network contribution, but it will take some time. We are very much focused on making the changes where we have control”. In March 2018, easyjet announced it would offer 100 routes from Tegel for the Summer schedule. Third from the left is CEO Johan Lundgren. (Berlin-Airport) In its 2018 results presentation, easyjet has targeted 7 percent growth at Tegel in HY1 2019. This looks more than realistic, as overall traffic at Tegel has increased dramatically over the first months of this year: 42.7 percent in January and 32.6 percent in February compared to the same months last year when easyjet had just started operations and competition was at a lower level. Annually some 12 million passengers fly to Germany on easyjet aircraft, making it one of the airline’s most important markets. But Germany is also one of the most competitive and difficult ones. Recently appointed country manager Stephan Erler is tasked with driving easyjet forward in this environment, to which the airline last year added 48 percent capacity and serves eleven airports with a fleet of 35 aircraft. As Johan Lundgren says: “There is a number of difficult markets within Europe, but you are right that it goes up and down a little bit. Yes, we see competitive pressure here, but every market is highly competitive. But we have a great position. Berlin is the second largest city in Europe and we have a clear number 1 position.”
