German budget airline plans share float

FRANKFURT- Air Berlin, Europe's third-biggest discount airline, aims to sell shares to the public before the start of the soccer World Cup in Germany on June 9 to help it to expand against Ryanair and EasyJet.

Air Berlin is expected to post a profit of €51 million ($100 million) this year, according to a study by Commerzbank, which is managing the share sale with Morgan Stanley.

Last year's net loss widened to €115.9 million from a loss of €2.9 million in 2004, chief financial officer Ulf Huettmeyer said this week, releasing net earnings figures for the first time.

Air Berlin executives declined to say how much of the carrier would be sold or how much they hoped to raise as they prepare to finance an expansion to compete with Ryanair, Europe's No 1 low-fare airline, and EasyJet, No 2.

The company has ordered new planes to increase its fleet by about half over the next four years and plans to expand in Scandinavia and eastern Europe.

Chief executive Joachim Hunold said Air Berlin decided not to delay the IPO until after it posted a profit because it would have missed a chance to expand in the low-cost market now.

Low-fare airlines hold 21 per cent of Germany's market, up from 1 per cent five years ago.

Air Berlin's earnings were hurt in the past by fuel costs, Huettmeyer said. The average price of jet fuel in northwestern Europe rose 41 per cent last year, according to Bloomberg data.

Air Berlin estimates that it has 10 per cent of the discount-airline market in Europe, with Dublin-based Ryanair holding 26 per cent and Britain's EasyJet 23 per cent.

Air Berlin changed its corporate structure on January 1, allowing Hunold to get around German requirements that workers' representatives be given seats on the supervisory board.

The Financial Times Deutschland said yesterday that Air Berlin would raise as much as €900 million selling more than 50 per cent of the company in a May IPO, citing unidentified people familiar with the plan.

The IPO would be the biggest for an airline in Europe since Iberia Lineas Aereas de Espana, Spain's biggest airline, raised €530 million in April 2001, according to Bloomberg data.

Air Berlin, now Germany's second-biggest carrier after Deutsche Lufthansa, began flying from West Berlin in 1978 with one leased Boeing 707. Because only Allied aircraft were allowed to land in West Berlin at the time, it was founded in the US state of Oregon by Kim Lundgren, an American pilot who had previously flown to the city for Pan American World Airways.

Lundgren owns a 26 per cent stake in Air Berlin, and five German businessmen and aviation enthusiasts hold the rest of the airline, along with Hunold, who says he does not plan to sell his 5 per cent stake.

- BLOOMBERG