Air Berlin files for insolvency as Etihad pulls funding plug

Bloomberg

Abu Dhabi-based Etihad Airways withdrew its financial support to German carrier Air Berlin Plc, which has filed for insolvency on Tuesday.
In an official statement, Etihad Airways said that this latest development is “extremely disappointing for all parties,” especially as the state-owned airline “has provided extensive support to Air Berlin for its previous liquidity challenges and restructuring efforts over the past six years.”
It added that in April this year, Etihad provided EUR 250 million of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business.
It marks 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 on Tuesday 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 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 Abu Dhabi based 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 a 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.