In what is the largest civil aircraft order of the year, Air Berlin yesterday bought up to 110 Airbus A320s to aggressively build its fleet and in turn stabilize the company's position as Europe's third-largest, low-fare airline.

The aircraft will be delivered from the end of 2005 through 2011. Seventy of the 110 A320s are on firm order. Air Berlin ordered the aircraft for itself and for NIKI, the low-fare airline majority owned by Niki Lauda in which Air Berlin holds a 25% stake. Ten aircraft are allocated to the Austrian carrier, while the rest will be used to grow Germany's second-largest airline.

The order has been under negotiation for months and was postponed several times (DAILY, May 14). Because of Air Berlin's status as a privately owned company, financing became a major issue in the process. Air Berlin, nonetheless, found a consortium of banks that provided financing for the new fleet.

"By placing such a large order, we want to ensure that we can grow in the low-fare segment in the long term," Air Berlin Managing Director Joachim Hunold said.

Air Berlin follows Europe's largest, low-fare airlines, easyJet and Ryanair, in placing an order of more than 100 aircraft. EasyJet opted for 149-seat Airbus A319s, while Ryanair ordered Boeing 737-800s. Air Berlin's A320s will be fitted with 174 seats in a single-class configuration.

Europe's low-fare airline sector appears to be heading for a shake-out as financially strong players continue their aggressive growth path, while others, such as V-Bird and Volareweb, suffer from financial difficulties and low yields in key markets. Observers believe that of the roughly 50 low-fare carriers in Europe only three to four big airlines will emerge, while the rest will refocus on small niche markets or not survive.

Contrary to earlier plans, Air Berlin no longer intends to change its ownership structure. The airline in the past mulled an initial public offering and has talked to potential strategic partners, such as TUI AG, Germany's largest integrated tourism company. Air Berlin is also in an extensive code-sharing deal with TUI's Hapag Lloyd airline unit that many saw as a first step toward further integration. However, Air Berlin is currently non-unionized and Hunold has voiced strong concerns about being integrated into larger and less-flexible structures.