European flight fares could rise after low-cost Berlin Air fails

AIR fares could rise across Europe following the collapse of German low-cost carrier Air Berlin, airline executives have warned.

Air Berlin, which had seen passenger numbers fall by nearly a million in a year, has filed for insolvency, but is being propped up by German Chancellor Angela Merkel’s government, which has provided it with a €150million (£136 million) bridging loan.

It is in talks with the country’s largest airline, Lufthansa, for the sale of the bulk of its assets, along with other airlines understood to include easyJet and Thomas Cook subsidiary Condor for the remainder. Lufthansa said it hoped to secure an agreement by the end of September.

Europe’s biggest low-cost carrier, Ryanair, has complained to regulators that the loan and talks amount to a ‘carve up’ that will stifle competition and raise prices both in Germany and across Europe.

Ryanair said: ‘The German government is supporting this Lufthansa-led monopoly with €150 million of state aid so that Lufthansa can acquire Air Berlin without its debts and drive air fares even higher than they already are.’

However, airline investors have said they welcome greater consolidation. One leading

investor said: ‘Anything that reduces capacity will put up prices and that is a very good thing indeed for the industry. The low fuel price has kept European airlines in business when they should have gone out of business ages ago.’ Jochen Schnadt, chief commercial officer for British carrier bmi regional, said: ‘We have still not had the consolidation in the European airline market that has already taken place in the US and which has led to a healthier market in the long run.’