Air Berlin files for insolvency but flights continue

Air Berlin, Germany's second-largest carrier, has filed for insolvency, after its main shareholder Etihad declared it would not be providing further financial support

15 August 2017, 4:07pm
Etihad pulled the plug on Air Berlin, and Lufthansa may pick up some of the pieces
Etihad pulled the plug on Air Berlin, and Lufthansa may pick up some of the pieces
Germany's Air Berlin on Tuesday announced it had filed for insolvency after its main shareholder Etihad Airways said it would not plough any more cash into the troubled airline.

The airline, which has accumulated debt for almost a decade, reported a record loss of €782 million in 2016.

The German government said it was providing a bridging loan of €150 million to keep the carrier flying at a time when many Germans are still on holiday.

German rival Lufthansa said in a separate announcement it was in talks with Air Berlin to take over parts of the group.

Air Berlin has long battled for survival, booking losses amounting to €1.2 billion over the past two years and relying on cash infusions from Etihad. Air Berlin's passenger numbers have also been consistently in decline: in July, the airline lost a quarter of its customers compared with the previous year.

The carrier has furthermore been plagued by delays and cancellations, for which it has been forced to pay millions of euros in compensation.

In a surprise announcement, the German airline said it had filed for insolvency with the court of Berlin-Charlottenburg after Etihad "notified Air Berlin PLC of the fact that it will not provide any further financial support to the Air Berlin group".

Etihad, which holds a 29.2-percent stake in Air Berlin, said the development was "extremely disappointing" but that it could no longer justify further funding after providing an additional 250 million euros in April.

"Air Berlin's business has continued to deteriorate at an unprecedented rate, preventing it from overcoming its significant challenges," the Abu Dhabi-based company said.

German Economy Minister Brigitte Zypries told a hastily assembled press conference that the government was assisting Air Berlin with a bridging loan to prevent passengers from being stranded during the busy holiday season.

"To keep Air Berlin's flight operations going, the government has decided to grant a bridging loan for 150 million euros," she told reporters.

The money should be enough to keep Air Berlin running "for three months", she said, adding that flights would go ahead as scheduled and that new tickets could still be booked.

Flights at Air Berlin's low-cost subsidiary airline Niki are also continuing as normal.