Air Berlin Flying Circus

Stefan Pichler, the new boss of Air Berlin, Germany's second-largest airline, faces a huge task turning around the troubled carrier - and he has to do it without upsetting major shareholder, Etihad.
Stefan Pichler took over at Air Berlin in February.

Veiled diplomatic formulations are not Stefan Pichler's thing – the man is not one to mince his words. But they wouldn’t be much use to him in his current position anyway.

The 57-year-old has perhaps the most daunting job in the European aviation industry: Putting Air Berlin, Germany’s second-largest airline, back on course after years of financial woes. And he must do it quickly.

The company has been in the red for years and has exhausted its proprietary capital. It racked up huge debt after making several large acquisitions and has been unable to reduce costs to better compete with low-cost rivals.

So it is no surprise that Mr. Pichler, who took over in February, has been making waves with his tough statements. He knows the company has to wake up and shake up, especially internally.

“We have to sweep the stairs from the top. Whoever brings added value remains part of the team. Whoever doesn't want to or can't do that must be replaced,” Mr. Pichler said recently.

His most recent statement, to the newspaper Süddeutsche Zeitung, was directed squarely at the airline’s employees and managers. He said that he is working on the assumption that the desperately needed changes will be reached through consensus. “This is our last shot; there will be no second chance.”

How much and what can Mr. Pichler really change at Air Berlin without incurring the wrath of Etihad?

Whether he will have only one shot at success is not something that Mr. Pichler can determine on his own, however. The decision as to how long Air Berlin can survive in the red lies in the hands of one of its major shareholders —Etihad Airways, based in Abu Dhabi. The Persian carrier, headed by CEO James Hogan, has repeatedly bailed out Air Berlin to ensure its most important investment doesn’t flirt with bankruptcy.

Time is short. Mr. Pichler is the third head of the company in four years, but the problems he has inherited are the same old ones, as he admits: Air Berlin grew too quickly through takeovers that were never really integrated; there are too many parallel structures; the strategic orientation is too imprecise.

“An airline has to be managed, not as a portfolio of various activities, but along a value-creation chain,” he has said.

Mr. Pichler now has to prove that he has drawn the correct conclusions from his analysis, and that he will address the core problems with more success than his two predecessors, Wolfgang Prock-Schauer and Hartmut Mehdorn.

 

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Many people say that the former international marathon runner is more than capable of the challenge. Before entering the cockpit at Air Berlin, he turned round the fortunes of Fiji Airways, although it was a relative minnow with only eight airplanes. He also built another small airline, Kuwait's Jazeera Airways, into a successful regional force between 2009 and 2013.

Mr. Pichler's reputation is not framed in gold, however. He was forced out of the top job at tour operator Thomas Cook in 2003. He had guided the company onto a course of vigorous growth, but decisions such as the removal of the well-known Condor brand from its airline subsidiary proved to be mistaken.

And the Munich native remains a controversial figure at another previous employer, Lufthansa. Critics say that with his occasionally undiplomatic manner, the straight-talking manager upset several applecarts there.

Either way, there is a fundamental question: how much and what can Mr. Pichler really change at Air Berlin without incurring the wrath of Etihad?

The Persian Gulf airline is most concerned with using its investment in Air Berlin to force the German airline’s main rival Lufthansa to its knees. Mr. Picher, on the other hand, knows that he first has to downsize the company in order to stabilize the books.

“Two alpha animals are facing off against each other; fur will fly,” said an industry expert, referring to the forthcoming battle with Mr. Hogan.

But Mr. Pichler has a fallback: Financial independence. Thanks to high pay in his former positions, he doesn't actually need the job at Air Berlin, even if a restructuring success would do his ego some good. He was clever enough to have publically labelled his role at Air Berlin as temporary right from the beginning, and is already known to be thinking about retirement down under in Australia.

 

Jens Koenen leads Handelsblatt's coverage of the aviation and IT industry and is bureau chief of the Frankfurt office. To contact the author: [email protected]