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Joined: Fri Sep 08, 2000 8:46 pm

Condor To Downsize

Fri Sep 12, 2003 5:13 pm

Looks like the low cost carriers are having the same effect on the german tour market that they had in the UK.

Condor mulls new aircraft as it downsizes current fleet
Dateline: Friday September 12, 2003

Condor Flugdienst GmbH, battling a sharp downturn in the package-tour business along with the rest of parent Thomas Cook AG, is downsizing its fleet.

Phased shrinkage of Condor will reduce the current operational fleet by six to 34 by summer 2004: 13 757-300s, nine 767-300s and 12 A320s flown by subsidiary Condor Berlin. Some of the company's 47 aircraft already have been mothballed, leased out or are up for sale, leaving 40 in operation as of last May.
Plainly put, Condor has too much capacity for a vastly changed market, officials declare. Demand for package tours has dropped to the 1998 level while overall charter capacity of German carriers has increased 23% since then.

A total of 356 staff positions will be affected, only 240 of which involve full-time employees, most of whom will be able to transfer elsewhere within Thomas Cook's 50% owner Lufthansa Group. German retail giant KarstadtQuelle holds the other half of the eur8 billion ($9 billion) travel conglomerate, while Thomas Cook in turn owns 90% of Condor with LH having 10%.

Simultaneously with the downsizing, Condor is pursuing plans to restructure with an order next year for 22 aircraft and increasing its focus on seat-only sales to compete with no-frills carriers. It is talking to both Airbus and Boeing about a possible order. "We could be an early customer for the 7E7 but we are also looking at 737s and 767s, as well as A320s/A321s and A330s," Executive VP-Thomas Cook Airline Operations Rudolf Tewes told ATWOnline in Frankfurt. "There is no haste, but we see a decision in 2004."

Advanced discussions are underway with one of several interested buyers in connection with the ultimate disposal of all of Condor's 13 757-200s. The carrier also intends to unload its 13 757-300s eventually, Tewes said.

Included in the restructuring are plans Thomas Cook is working on, to be announced this fall, that will centralize activities of the group's five leisure-market airlines along the lines of a single pan-European entity to capitalize on cost savings and synergies. Intense restructuring efforts are geared to save the conglomerate eur600 million over two years.

In addition to Condor, the group includes Thomas Cook Airlines UK with 24 aircraft, Thomas Cook Airlines Belgium with six and SunExpress, which operates eight planes to Turkey. Combined they fly from 47 departure points in eight countries to 80 airports in 25 countries.--LH

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RE: Condor To Downsize

Fri Sep 12, 2003 5:37 pm

Good morning!

I'm not sure if this is exclusively a result of the LCC trying to break into the tour market. Tour business has been terribly weak this last year, booking numbers were down, German tourists have significantly scaled down their holiday expenses because of the economic situation in this country of ours. That's the main reason why Condor is reducing fleet numbers (and some others, too).

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RE: Condor To Downsize

Fri Sep 12, 2003 5:42 pm

The effects Condor is experiencing are not so much due to competition from low cost carriers, because there is hardly any overlap between the route networks of Germany's leisure airlines and LCC's. Only the Italian market has been penetrated to a wider extent by low cost airlines so far, while only a tiny fraction of the traffic to traditional vacations spots like Spain, Greece and Turkey is condicted by LCC's.

IMO Condor's troubles are generated (among other factors) by:

A. general overcapacity in the German market
B. the long-lasting economic downturn in Germany
C. the competition from cheaper, lower-priced competitors like e.g. Air Berlin.

Condor is one of the few leisure carriers offering a relatively high level of job benefits to their employees. While this is not a make-it-or-break-it criterion for economic success or failure, other carriers with streamlined structures (both in terms of labor costs and operations) manage to produce lower seatmile cost in this very competitve, because largely price driven travel segment.

Also, there has been a tendency to spread leisure flights from the main airports to the smaller regional airports, serving them with relatively small equipment (737/ A320).

Condor's fleet, which comprises mainly B757/ B767 is in many cases too large to serve these markets. Exception might be Condor Berlin with their A320. Carriers like AB, HF and YP with small equipment syphon off a lot of the traffic which would have otherwise flown from the large gateway airports like DUS, FRA and MUC.

The intention to base the fleet size on the lower demand of the winter season is a very logical move, and the acquisition of (cheaper) third-tier capacity during the summer is another means to decrease costs.

Also, I read in a separate interview, that DE is very interested in the 7E7, because the A330-200 would be way too big. A decision is not forthcoming, because the 767 is deemed to be in mid-life (delivered in the early 90s) now.

Don't quote me on that, but IMO it is very possible that we'll see the 757's being replaced by A321HGW in a few years. But keep in mind that this is only my theory, so don't flame me for it.  Smile

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