Air Berlin files for bankruptcy but flights will keep going

Edited by walterp on . Posted in Business

Germany’s struggling budget airline Air Berlin on Tuesday said it had filed for insolvency proceedings after its main shareholder Etihad Airways said it “would not provide any further financial support”.

The German government was providing a bridging loan to keep flights going, it added in a statement.

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 booked losses amounting to €1.2 billion over the last two years, and has been relying on cash infusions from Etihad for survival.

The carrier had recently applied to the German states of Berlin and North Rhine-Westphalia for a public guarantee.

“The board of directors of Air Berlin PLC has, after close evaluation, determined that Air Berlin PLC has no longer a positive continuation prognosis,” the airline said, adding that it had filed for insolvency with the court of Berlin-Charlottenburg.

“The reason for this conclusion is that its main shareholder Etihad Airways PJSC has notified Air Berlin PLC of the fact that it will not provide any further financial support to the Air Berlin group,” the group said.

It added that two members of the board of directors, who joined after being nominated by Etihad, had resigned.

“The German federal government is supporting Air Berlin with a bridging loan secured by a federal guarantee to maintain flight operations,” Air Berlin said.

In a bid turn to the tide, Germany’s second-largest airline embarked on a massive restructuring plan in September 2016 that included renting 38 aircraft with crew to Lufthansa and slashing 1,200 jobs – or one in seven of its workforce.

Amid the restructuring, it was hit by a series of flight cancellations and severe delays, leading to a flood of complaints.

Lufthansa for its part announced that it was “already in negotiations with Air Berlin to take over parts of the airberlin Group and is exploring the possibility of hiring additional staff.”

‘Hot potato’

Germany’s giant services sector union Verdi responded with dismay to Air Berlin’s surprise announcement.

“This is a heavy blow for Air Berlin employees,” said Verdi board member Christine Behle.

“Our priority now is to secure jobs. Air Berlin must proceed with the utmost transparency and provide all necessary information.”

The pilots’ union Cockpit said the Air Berlin news came as “a shock”.

It welcomed the government’s help in minimising the disruption over the coming months, but it accused Etihad of making the wrong strategic and management decisions and turning its back on Air Berlin workers.

“Etihad is dropping Air Berlin like a hot potato,” it said.

Air Berlin said two members of its board of directors, who joined after being nominated by Etihad, had resigned.

 

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