August 24, 2012
Insiders close to Etihad Airways and Air Berlin say tensions about the German carrier’s strategy are mounting despite denials from both airlines that Hartmut Mehdorn may soon be forced out as CEO.
Manager Magazin, a German economic monthly, claims Etihad CEO James Hogan is pushing for Mehdorn to be replaced. Hogan allegedly is displeased about Air Berlin’s first half results, which are worse than expected and wider than the same period in 2011.
Also, Air Berlin has drawn on almost all of the $255 million loan provided by Etihad late last year when the UAE-based carrier purchased a 29% stake in the European operator.
Hogan says the report is “irresponsible” and an Air Berlin official described it as “nonsense”. Etihad has two of the 11 seats on Air Berlin’s board and cannot remove the CEO on its own.
However, industry sources say that Etihad’s management is indeed becoming increasingly impatient with the German airline given the slow pace of restructuring. The sources say Hogan clashed with Air Berlin Chairman Hans-Joachim Koerber during a recent board meeting over Hogan’s call for greater efforts to restructure Air Berlin.
Hogan, separately, has to prove to his shareholders that his ambitious expansion strategy works. Etihad has bought stakes in Air Berlin, Virgin Australia, Aer Lingus and Air Seychelles and wants to take a much larger interest in Aer Lingus.
That comes on top of the multi-billion dollar expansion of its own fleet and multiple bilateral codesharing agreements.
Etihad is also negotiating an alliance with Air France-KLM.
While Etihad cannot directly remove Mehdorn, it does have significant power. Air Berlin has drawn $200 million of the $255 million loan provided in December.