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Why did the federal government interfere in the Air Berlin deal? Behind it is a transport policy strategy: low-cost airlines are to be pushed back.

Insolvency of Air Berlin: Just not too cheap

Why did the federal government interfere in the Air Berlin deal? Behind it is a transport policy strategy: low-cost airlines are to be pushed back.

Insolvency of Air Berlin: Just not too cheap

There has been a lot of criticism about sale of insolvent airline Air Berlin. Von Mauschelei was talking about a set game between federal government and Lufthansa, which now incorporated most of former competitor. And indeed, deal, as it has now come about, would not have been possible without a million credit from Berlin. But what is aim of federal government to pursue this economic policy?

A much quoted statement from still-Transport Minister Alexander Dobrindt (CSU) for sale of Air Berlin gives an answer to that. Dobrindt had given a record that with bankruptcy re was possibility of establishing Lufthansa as a "national champion". But what does that mean?

On many routes within Germany, Lufthansa and its subsidiary Eurowings will be only providers in future, y will be able to determine prices decisively – and are likely to increase m. But federal government is taking this into purchase because it wants to prevent something else: a severe impact on national transport policy.

The competition expert Tomaso Duso of German Institute for Economic Research recently summarized what would have been possible through sale of Air Berlin. International airlines would have had chance "to enter domestic German air transport market in a great way", says Duso. Low-cost airlines such as Ryanair and Condor, or international competitors such as British Airways and Iberia, had few chances because Lufthansa had been placed in a strategically advantageous position before insolvency proceedings began.

Buyers and sellers at same time

Since beginning of 2017, Lufthansa has hired more than 35 aircraft including crews from largest competitor Air Berlin, which carried out flights mainly for Lufthansa subsidiary Eurowings. At opening of insolvency proceedings, Lufthansa was thus indirectly one of largest creditors of Air Berlin. And creditors decide in an insolvency procedure how to proceed with remaining assets of company and which bidders are most likely to take part in a sale. At same time, Lufthansa was both buyer and seller – a problematic double role.

This interlocking of interests would have been prevented, federal government would not have granted bridging loan of 150 million euros, with which Air Berlin flight operation should be maintained. The grand coalition has justified this step with argument that not many thousands of holidaymakers want to be stranded in middle of holiday season. But in this insolvency proceedings, passengers also belonged to creditors. And y usually have to dispense with some of ir claims. Insolvency are particularly concerned about this Überbrückungsredit, especially since re has been no such state aid so far and German economy would orwise not have collapsed.

Ryanair wanted to expand its route network

But if Air Berlin could no longer fly due to lack of money – called grounding in jargon – n company would have been rid of its coveted start and landing rights. And authorities would have immediately reassigned se so-called slots – also to or providers: Ryanair was apparently ready to expand its own network of short-circuits in Germany. But union and SPD obviously did not want to allow that.

© Andreas Prost Zacharias Zacharakis Editor in Department of Politics, Economy and society, time online to author page

The Irish low-cost provider is already mixing up internal German traffic properly. Between Berlin and Cologne, for example, Ryanair flies back and forth for 50 euros also on weekends, and thus not only offers prices of Eurowings and Lufthansa a clear distinction. Even state-owned company on railways, Deutsche Bahn, has little chance of permanently combating se cheap offers.

This is problem: Will German transport market be left to free market forces when a supplier rolls it up with low wages? And is it also in environmental interest to weaken railways in favour of low-cost airlines? The federal government has decided on se issues. For Lufthansa.

For consumer, this ultimately has strongest impact. The prices for travel within Republic are mainly determined by rail and Lufthansa, especially on side and also many main lines. It certainly won't be cheaper.

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