Air Berlin files for insolvency as Etihad pulls funding plug
Air Berlin Plc filed for insolvency after leading shareholder Etihad Airways PJSC withdrew its financial support, marking the second failure of a major European airline in four months after the Persian Gulf carrier pulled the plug on funding Italy’s Alitalia SpA in May.
While Air Berlin said in a statement Monday that it will continue flying with the help of government loans, the filing puts thousands of German jobs at risk weeks before German Chancellor Angela Merkel stands for re-election. Deutsche Lufthansa AG said it may buy parts of its main national rival.
Air Berlin has racked more than 2.7 billion euros (USD3.2 billion) of losses in a little over six years and has net debt of 1.2 billion euros. Etihad bought a 29 percent stake in 2012 as part of a plan to feed more passengers through its Abu Dhabi hub by building a network of minority investments, a strategy that it’s now unraveling after itself suffering losses of $1.87 billion in 2016.
“Etihad has notified Air Berlin of the fact that it will not provide any further financial support,” the German carrier said in its statement, adding that the move has led it to conclude that there is “no longer a positive continuation prognosis.” Etihad’s two board representatives have resigned.
Etihad said that it withdrew funding after Air Berlin’s operations deteriorated at an “unprecedented pace” in recent months. The state-owned Mideast carrier’s links to Germany, which include a code-share agreement with Lufthansa, remain important and it is ready to assist in finding a “commercially viable” solution for Air Berlin, according to an emailed release.
Lufthansa and another unidentified airline are “far advanced” with plans for a partial rescue and a deal could be finalized in coming weeks, Air Berlin and Germany’s economic ministry said in separate statements. The government is supporting the process by providing a 150-million-euro bridging loan through its Kreditanstalt fuer Wiederaufbau promotional bank.
Air Berlin submitted the insolvency filing in a local Berlin court, though it said it won’t seek bankruptcy protection for the Niki Luftfahrt GmbH and Leisure Cargo GmbH units.
The discount carrier already has links to Lufthansa, once its arch-rival, following an agreement to lease out part of its fleet to Europe’s third-biggest airline group. Plans to merge Niki with TUI AG’s German unit in a further restructuring of Air Berlin fell apart in June after Etihad said no agreement had been reached on the joint venture proposal.
Rome-based Alitalia began bankruptcy proceedings for the second time in a decade on May 2 after workers rejected a 2 billion-euro refinancing plan involving 1,600 job losses. Etihad’s then-chief James Hogan said at the time that his company wasn’t prepared to carry on in investing without the support of all stakeholders.
Hogan has since left the Gulf company, which last month also announced that it was exiting another so-called Equity Alliance partner with the sale of a stake in Swiss regional carrier Darwin to Slovenia’s Adria Airways. Bloomberg
