Dba Luftfahrtgesellschaft Mbh Business Information, Profile, and History

History of Dba Luftfahrtgesellschaft Mb H

Dba Luftfahrtgesellschaft mbH (dba) is one of Germany's leading regio nal airlines. About four million people each year fly dba, which was expanded by a quarter in 2005 when it took over the operations of ano ther German carrier, Germania Express. The airline operated a fleet o f about 30 aircraft in late 2005, with plans to more than double the fleet and to go public. Originally established in 1978, dba was acqui red by British Airways plc (BA) in 1992 to take over its German opera tions.

Origins

The initials "dba" go back to Deutsche British Airways, or Deutsche B A, the U.K. airline's operation in the internal German market. Britis h Airways PLC had operated routes between Berlin and cities in West G ermany since World War II. To satisfy a government mandate to wind do wn its Internal German Services (IGS) following the country's reunifi cation, BA transferred its business to a new mostly German-owned ente rprise.

Created as a shell in 1991, Deutsche BA was 49 percent owned by Briti sh Airways, with three German banks (Commerzbank, Bayerische Vereinsb ank, Berliner Bank) owning the rest. The new airline began operations on July 1, 1992, using the assets of recently acquired Delta Air Reg ionalflugverkehr GmbH & Co.

Delta Air had been operating a fleet of nine Saab 340s and one Dornie r 228 on a regional network based in Friedrichshafen, plus two additi onal hubs in Stuttgart and Bremen. Delta Air was owned by Switzerland 's Crossair AG and industrialist Friedrich von Bohlen und Halbach.

Delta Air had been launched in 1978 by Alfred Scholpp as a tiny commu ter airline connecting Friedrichshafen to Stuttgart and Zurich with a de Havilland Twin Otter. It also ran charter flights. Switzerland's Crossair bought a 25 percent stake in 1982 and began a strategic part nership as the fleet was upgraded with Fairchild Metroliner II aircra ft, notes Flight International. These were replaced with the S aab 340s in 1986, when Crossair supplied new capital to raise its sha reholding to 40 percent.

Delta Air then developed a considerable business supplying feeder tra ffic to Deutsche Lufthansa AG, the flag carrier, which accounted for up to 40 percent of its revenues. Delta Air ran into some turbulence in the 1980s but had recovered its profitability by the time it was a cquired by BA. Passenger count was growing rapidly, up to 225,000 in 1991, as the airline developed new routes to the former East Germany. Revenues were about DEM 60 million ($35 million) and the airline had 190 employees.

Renamed Deutsche BA Luftfahrtgesellschaft GmbH, the airline grew rapi dly at first but would be unable to post a profit for more than a doz en years. By 1995, Deutsche BA's network stretched as far as the Balt ics; as a German airline, it could fly into countries its British par ent could not, an executive told Flight International. Turnove r for fiscal 1994-95 was about DEM 450 million; passenger count was u p to 1.75 million.

Although a dozen or so carriers were operating within Germany as its domestic market was liberalized, by the late 1990s the competition wa s largely a two-way race between Lufthansa, which had a 70 percent ma rket share, and dba, with 20 to 25 percent. Dba was gaining market sh are, however, at the cost of profitability, analysts told the Swiss d aily L'Agéfi. Deutsche BA managing director Carl Michel complained that Lufthansa was unfairly pricing its flights below its operating costs on routes where it competed with dba.

Deutsche BA remained in the red into 2001 amid intense price competit ion from a new crop of domestic low-cost carriers and intruders from abroad. Its fares slipped as low as DEM 88 ($93) as it fought to maintain market share. As Deutsche BA developed into a low-cost carri er, British Airways, which had acquired dba's remaining shares in Apr il 1998, sought to sell it off to focus on its own full-service netwo rk.

Relaunching as dba in 2002

British budget carrier easyJet, seeking to complete its European netw ork, acquired an option to buy Deutsche BA in 2002 but abandoned the purchase several months later after failing to win support of the Ger man pilots' union. By this time, Deutsche BA had 800 employees, one q uarter of them pilots, and a fleet of 16 Boeing 737 aircraft flying a bout three million passengers a year. In spite of a reported 40 perce nt market share on domestic routes, dba had yet to make a profit. It lost DEM 60 million on revenues of DEM 264 million in the fiscal year ended March 2003.

Other airlines, such as German charter operator TUI, showed interest in acquiring Deutsche BA. In June 2003, however, it was sold to texti les and airline entrepreneur Hans Rudolf Woehrl via the Nuremberg-bas ed investment group Intro Verwaltungsgesellschaft for a token DEM 1, plus a quarter share of future profits for three years. BA also agree d to cover about DEM 70 million in projected losses and lease expense s for the remainder of the year. If BA had simply shut down Deutsche BA, it would have had huge social costs under German labor law, Ai rfinance Journal noted.

The airline was now called dba Luftfahrtgesellschaft mbH, or simply d ba. German rail operator Deutsche Bahn sued the company, claiming tha t the moniker caused confusion with its own initials. A court ruled t hat the names and industries involved were sufficiently distinct to a void this problem, and noted that other well-known German businesses like Deutsche Bank and Daimler Benz also had similar initials.

As the company headed toward recovery under new ownership, employees accepted a 20 percent pay cut. The new chairman, Whoerl, also institu ted a number of other cost-saving measures including refinancing airc raft, he told Dow Jones. While cutting back on expenses, he al so expanded dba's operations, including adding new service to London in direct competition with its former owner. It also soon added servi ce to Hanover from its Munich base.

By the end of 2005, dba had lined up feeder agreements with several i nternational airlines, including Emirates and the U.S. carrier Delta Air Lines. Part of the plan was to make dba more attractive to the lu crative business travel market, and these connections increased its c onvenience.

Profitable in 2005

Dba achieved its first profit in the fiscal year ended March 2005. Re venues were about DEM 279 million, with a net profit of DEM 1.7 milli on. The airline carried three million passengers during the year and expected to carry four million in 2005-06.

At the end of the 2004-05 fiscal year, dba took over the operations o f Germania Express (Gexx), the budget airline set up in June 2003 by charter group Germania Fluggesellschaft mbH. Gexx operated a fleet of a dozen Fokker 100s on 15 routes and had annual revenues of DEM 130 million. The acquisition gave dba a couple of new destinations within Germany (Bremen and Frankfurt), extended its reach into Europe, and increased its annual passenger count from three million to four milli on, making dba Germany's third largest carrier after Lufthansa and fa st-growing rival Air Berlin GmbH & Co. Luftverkehrs KG. Soon afte r, Gexx owner Hinrich Bischoff became dba's majority shareholder, but he quit his stake a year later.

Dba successfully worked a new channel of distribution in the summer o f 2005. The grocery store chain Aldi Sued sold more than a half milli on one-way tickets for DEM 50 each. As demand grew, so did dba's flee t, which reached 29 aircraft by September 2005. The airline had immed iate plans to raise the fleet to add another half-dozen planes as it made a bid to be the market leader on flights within Germany.

Dba increased its capacity still further by placing a large order wit h Boeing Company in November 2005. It was buying 40,737 jets for deli very beginning in 2008, an order worth more than $2 billion at li st prices. Dba was making plans for an initial public offering to fin ance some of the new planes. One key step, reported Dow Jones News wires, would be changing the company's corporate type from GmbH t o AG in the 2006-07 fiscal year.

Principal Competitors: Air Berlin GmbH & Co. Luftverkehrs KG; Deutsche Lufthansa AG; Germanwings; Hapag Lloyd Express.

Chronology

• Key Dates:
• 1978: Delta Air is set up by Crossair AG.
• 1992: British Airways acquires 49 percent of Delta Air and ren ames it Deutsche BA.
• 1998: British Airways acquires the remaining shares.
• 2003: Dba is sold to an investment group led by Hans Rudolf Wo ehrl.
• 2005: The company takes over the operations of Germania Expres s.