Privately-owned Germania filed for insolvency on Monday evening, shutting down all operations within hours and grounding its fleet of 37 planes. About 1,100 employees will lose their jobs, and hundreds of passengers were stranded in holiday destinations such as Mallorca and Turkey.
The Berlin-based airline, which served 4 million passengers last year, blamed its demise on increases in fuel prices, the euro's drop against the US dollar, delays in procuring new aircraft and maintenance problems.
Germania, owned by CEO Karsten Balke, is partly a victim of its own strategy. After Air Berlin went bankrupt in August 2017, Balke had focused on expanding Germania’s fleet to fill the gaps its rival had left, especially in the holiday market. But he apparently miscalculated in expanding and maintaining the fleet.
The carrier also suffered from cutthroat competition of low-cost specialists such as Ryanair, Easyjet and Lufthansa’s Eurowings, which have flooded the market with cheap flights. German union Verdi said the industry was subject to “destructive competition.”
Lufthansa could benefit
As airlines try to operate as lean as possible, unexpected costs can create havoc. The German subsidiary of Lithuanian airline Small Planet went bust in September after it couldn't cope with massive compensation claims by passengers for delayed and canceled flights last summer. Other small airlines, such as VLM in Belgium and Skywork in Switzerland, also ceased operations last year. Ryanair, Europe’s second-largest airline by passenger numbers, reported a surprise quarterly loss of €20 million ($22.8 million) on Monday, blaming low ticket fares.
Germania’s grounding will especially hit smaller airports, including Bremen and Dresden where the airline operated. Lufthansa and Ryanair will only be interested in snapping up the landing rights at larger airports, such as Nuremberg. The Lufthansa group could benefit most from the bankruptcy, because its routes overlapped most with Germania's, an analyst at Berstein Research told Reuters.
Germania, which served holiday operators Tui and Thomas Cook, will most likely be dismantled. An attempt by CEO Balke to restructure the company under German bankruptcy protection rules was rejected by a court in Berlin. An administrator, Rüdiger Wienberg, has already been assigned to handle the insolvency.
A German deputy justice minister, Gerd Billen, urged the European Commission to improve protection for consumers who book their tickets with airline companies that go bust. Customers who booked directly with Germania have no chance of recompense, while those who booked through a travel agency are covered through a mandatory, industry-wide holiday insurance fund.
Jens Koenen is an aviation correspondent for Handelsblatt. Dietmar Neuerer is a political correspondent based in Berlin. Gilbert Kreijger is an editor with Handelsblatt Today. To contact the authors: [email protected], [email protected] and [email protected]