AVIATION Air Berlin files for insolvency as it weighs options

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 yesterday. Etihad, which bought a 29.2 per cent stake in the German carrier in 2011, said 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 (Dh1.08 billion) of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business,” an Etihad spokeswoman said. 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, although the troubled airline will not seek bankruptcy protection for its units Niki Luftfahrt and Leisure Cargo. Talks with Deutsche Lufthansa and other parties on disposals of assets are continuing, the airline said. The German government is providing the carrier with a €150m bridge loan, and its flights will continue while insolvency proceedings are under way.

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 €782m loss in 2016, said the losses widened further to €293.3m 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 the 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 spokeswoman said.

“Etihad is prepared to consider making available funding if there is a 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,” the spokeswoman said, adding that the airline is working with the relevant parties to determine whether such an arrangement can be found on “acceptable terms”.

Etihad said a rapid and unprecedented deterioration of Air Berlin’s financial results has led to the situation