Overcapacity in the airline industry could soon drag on the yield of listed operators, and so the exit of struggling airlines is good news for the overall market. The latest to go is Germany's second-largest airline Air Berlin, which filed for insolvency after its largest shareholder, Etihad, pulled its financial support. The German government has stepped in with €150m (£136m) in emergency funding so that the airline can continue with flights it had already scheduled. Once this has been achieved other airlines will have the opportunity to step in to fill the void in the German market.
Germany’s largest airline Lufthansa could be in prime position to scoop up more capacity in the German market. This has Ryanair (RYA) concerned. It has lodged a competition complaint with the German Bundeskartellamt and European Commission over what the budget airline feels is “manufactured insolvency” and an attempt between the German government, Lufthansa and Air Berlin to divide the insolvent airline’s assets. Ryanair alleges that this excludes major competitors and ignores EU competition and state aid rules.
Shares in easyJet (EZJ) and Ryanair are up 4 per cent and 3 per cent respectively since the news of Air Berlin’s insolvency, suggesting that the market believes this presents an opportunity for the budget airlines to expand their presence in Germany. Any moves to fill the void left by Air Berlin are not likely to be immediate since both easyJet and Ryanair have scheduled their aircraft for the upcoming winter season, according to analysts at Liberum.
