Flights operated by insolvent German carrier Air Berlin will end by Oct. 28 at the latest, it said yesterday, urging staff to seek jobs elsewhere while it works towards a carve-up of its assets.
Air Berlin filed for insolvency in August and a government loan is keeping its planes in the air to give it time to negotiate with investors for parts of the business.
Talks with Lufthansa and easyJet are due to run until Thursday and once a deal for parts of its business has been agreed Air Berlin will have to wind down the rest of the operation.
"After purchase contracts have been agreed, the company must end its own operations step by step," Air Berlin said in a statement.
Between the signing of a deal and obtaining competition approval, which could take several months, the Air Berlin business will operate under wet leases, whereby the carrier will rent out crewed planes.
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German investor bids Dh2.2bn for bankrupt Air Berlin
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Air Berlin's Niki, which flies to tourist destinations, and regional airline LG Walter are not insolvent and those will continue to run, the company said.
Most Air Berlin long-haul flights have already been cancelled and the remainder will end on Oct. 15.
Lufthansa is interested in Air Berlin operations with about 81 planes, including Niki and LG Walter, while easyJet is in talks for parts of the business with about 27-30 planes, Air Berlin administrators have said.
Those operations also include access to take-off and landing slots at Air Berlin's hubs in Tegel and Duesseldorf.
Air Berlin leases its planes, so any bidder will have to fund the aircraft separately. Lufthansa said last month that its board had freed up €1 billion to invest in new planes for Eurowings, which it said were likely to come from Air Berlin.
However, a newspaper reported yesterday that talks with easyJet may not result in a deal after the British carrier reduced its offer.
Analysts and industry experts have said that easyJet could be interested in slots made available at London Gatwick after the collapse of British holiday airline Monarch, which was grounded last week.
EasyJet has already encouraged cabin crew and pilots made redundant by Monarch last week to apply for positions at the budget carrier.
Air Berlin yesterday said its staff would not all find jobs with the potential buyers of its assets and they should start looking for jobs.
Eurowings has already opened up vacancies for 1,000-plus pilots, cabin crew and ground staff and said on Friday that it had received more than 2,500 applications from around the world, about half of which were from pilots.
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
