Sunday, January 27, 2013

German regional OLT Express ceases operations as new parent decides against further investment

German regional airline OLT Express (OL) ceased operations on 27 January and declared insolvency two days later after more than half a decade in operation. The grounding comes after the airline appeared to have entered smoother skies mid-2012, thanks to a change in ownership which should have allowed for a recovery and steady expansion.

OLT Express Fokker 100; D-AOLH@ZRH;26.11.2012/680bgBefore the complete grounding, OL announced it would cut 12 routes almost immediately, clearly signaling that the airline is in trouble. The cuts would be reflected through its equipment, with half of the airline's Fokker 100s destined for withdrawal from active fleet. The carrier operated ten Fokker 100s, four Saab 2000s and a single Saab 340A from bases in Bremen, Stuttgart and Saarbrucken.

Panta Holdings from the Netherlands became OL's parent company in August after taking over the stake in the hands of Polish investors Amber Gold. The latter was also controlling OLT Express Regional in Poland, which ceased operations shortly after Amber Gold took over last year and introduced overly ambitious plans for expansion. Panta Holdings is the parent company of Rekkof, which develops a modernized version of Fokker's regional jet. The company is also behind two Dutch lessors, and was also the parent company of Belgian regional carrier VLM Airlines.

Although OL's finances were no secret, things seemed to improve after Panta Holdings' investment. Not only did the airline gain a valuable and promising parent with experience in airline industry, but it was also cleared to embark on an expansion plan and reorganization. The airline was supposed to modify its business model and introduce elements of an LCC. Modifying an airline's business model can be tricky, but it was expected that Panta Holdings would guide OL in the right direction. Besides, the airline itself is not new to the industry.

In September, OL was given a go-ahead to proceed with merger of another German regional carrier Contact Air, which brought eight Fokker 100s, developed network and a wet-lease agreement with Swiss International Air Lines involving two Fokkers to OL.

For the reorganization to take place, OL needed funds, and its new parent was not expected to disappoint on this field either. The airline managed to reach agreements with unions regarding wage cuts and prepared a series of other measures. However, after sending the plan over to Panta Holdings for approval, its parent company decided to make no further investments into OL, causing it to ground entire operation. The reasons behind Panta Holdings' change of mind remain unclear.