Air Berlin files for insolvency after losses mount
Germany's second largest carrier continues to fly with bridge loan from government
Air Berlin, Germany’s second-largest airline, filed for insolvency proceedings after it ran into operational and financial difficulties following years of losses.
Air Berlin no longer has “a positive continuation prognosis”, as its main shareholder, Etihad Airways, withdrew financial support, the European carrier said in a statement on Tuesday. Etihad, which bought a 29.2 per cent stake in the German carrier in 2011, said in a statement that the move to seek administration was “disappointing for all parties”, especially, as the Abu Dhabi-based operator provided extensive support to Air Berlin for its previous liquidity challenges and restructuring efforts over the past six years.
“In April this year, Etihad provided €250 million of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business,” an Etihad spokeswoman said in statement. The business of the discount airline, however, had deteriorated at an unprecedented pace, which prevented it from overcoming its problems and pursuing alternative rescue plans, the spokeswoman said.
Air Berlin and its subsidiaries submitted the filing in a local Berlin court, though, the troubled airline will not seek bankruptcy protection for its units Niki Luftfahrt and Leisure Cargo. Talks with Deutsche Lufthansa and other parties regarding disposals of assets are continuing, the airline said. The German government is providing the carrier with a €150 million bridge loan whose flights will continue while insolvency proceedings are underway.
Air Berlin has been restructuring its business model to improve its financial position and offset the impact of losses sustained over the years. The carrier, which reported a €782 million (Dh3.31 billion) loss in 2016, said the losses widened further to €293.3 million in the first quarter of 2017, compared with €182.3m during the same period last year. In June the airline said it was open to partnering with Lufthansa, as it seeks to secure its long-term future.
Etihad said a rapid and unprecedented deterioration of Air Berlin’s financial results and liquidity has led to current situation. The airline has significant funding needs, which, from its trading outlook, are well in excess of what would be reasonable for Etihad as a minority shareholder to provide, the Etihad spokesperson said.
“Etihad is prepared to consider making available funding if there are legal and commercial basis to provide short-term liquidity as part of Air Berlin’s effort to explore other possible solutions, provided that such funding does not further increase Etihad’s financial exposure,” said an Etihad spokeswoman, adding that the airline is working with the relevant parties to determine whether such an arrangement can be found on “acceptable terms”.
Updated: August 15, 2017 05:02 PM