Dba Luftfahrtgesellschaft mbH

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Dba Luftfahrtgesellschaft mbH

Terminalstrasse West, Terminal 1 Modul A
85356 München Flughafen
Germany
Telephone: +49 89 97 59 15 00
Fax: +49 89 97 59 14 73
Web site: http://www.dba.de

Private Company
Incorporated: 1978 as Delta Air Regionalflugverkehr GmbH & Co.
Employees: 760
Sales: DEM 265 million ($160.9 million) (2005 est.)
NAIC: 481111 Scheduled Passenger Air Transportation

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

Origins

The initials "dba" go back to Deutsche British Airways, or Deutsche BA, the U.K. airline's operation in the internal German market. British Airways PLC had operated routes between Berlin and cities in West Germany since World War II. To satisfy a government mandate to wind down its Internal German Services (IGS) following the country's reunification, BA transferred its business to a new mostly German-owned enterprise.

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

Delta Air had been operating a fleet of nine Saab 340s and one Dornier 228 on a regional network based in Friedrichshafen, plus two additional 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 commuter 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 partnership as the fleet was upgraded with Fairchild Metroliner II aircraft, notes Flight International. These were replaced with the Saab 340s in 1986, when Crossair supplied new capital to raise its shareholding to 40 percent.

Delta Air then developed a considerable business supplying feeder traffic 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 acquired 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 rapidly at first but would be unable to post a profit for more than a dozen years. By 1995, Deutsche BA's network stretched as far as the Baltics; as a German airline, it could fly into countries its British parent could not, an executive told Flight International. Turnover for fiscal 1994–95 was about DEM 450 million; passenger count was up 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 was largely a two-way race between Lufthansa, which had a 70 percent market share, and dba, with 20 to 25 percent. Dba was gaining market share, however, at the cost of profitability, analysts told the Swiss daily 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 competition 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 carrier, British Airways, which had acquired dba's remaining shares in April 1998, sought to sell it off to focus on its own full-service network.

Relaunching as dba in 2002

British budget carrier easyJet, seeking to complete its European network, acquired an option to buy Deutsche BA in 2002 but abandoned the purchase several months later after failing to win support of the German pilots' union. By this time, Deutsche BA had 800 employees, one quarter of them pilots, and a fleet of 16 Boeing 737 aircraft flying about three million passengers a year. In spite of a reported 40 percent 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 textiles and airline entrepreneur Hans Rudolf Woehrl via the Nuremberg-based investment group Intro Verwaltungsgesellschaft for a token DEM 1, plus a quarter share of future profits for three years. BA also agreed to cover about DEM 70 million in projected losses and lease expenses 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, Airfinance Journal noted.

The airline was now called dba Luftfahrtgesellschaft mbH, or simply dba. German rail operator Deutsche Bahn sued the company, claiming that the moniker caused confusion with its own initials. A court ruled that the names and industries involved were sufficiently distinct to avoid 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 instituted a number of other cost-saving measures including refinancing aircraft, he told Dow Jones. While cutting back on expenses, he also expanded dba's operations, including adding new service to London in direct competition with its former owner. It also soon added service to Hanover from its Munich base.

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

Profitable in 2005

Dba achieved its first profit in the fiscal year ended March 2005. Revenues were about DEM 279 million, with a net profit of DEM 1.7 million. 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 of 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 million, making dba Germany's third largest carrier after Lufthansa and fast-growing rival Air Berlin GmbH & Co. Luftverkehrs KG. Soon after, 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 of 2005. The grocery store chain Aldi Sued sold more than a half million one-way tickets for DEM 50 each. As demand grew, so did dba's fleet, which reached 29 aircraft by September 2005. The airline had immediate 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 with Boeing Company in November 2005. It was buying 40,737 jets for delivery beginning in 2008, an order worth more than $2 billion at list prices. Dba was making plans for an initial public offering to finance some of the new planes. One key step, reported Dow Jones Newswires, would be changing the company's corporate type from GmbH to AG in the 2006–07 fiscal year.

Principal Competitors

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

Key Dates:

1978:: Delta Air is set up by Crossair AG.
1992:: British Airways acquires 49 percent of Delta Air and renames it Deutsche BA.
1998:: British Airways acquires the remaining shares.
2003:: Dba is sold to an investment group led by Hans Rudolf Woehrl.
2005:: The company takes over the operations of Germania Express.