15 August, 2017

Air Berlin Files For Bankruptcy

Air Berlin, the second largest airline in German has filed for bankruptcy protection after its main shareholder investor Etihad, confirmed it would no longer prop up the troubled carrier after trying unsuccessfully for years to turnaround the loss-making enterprise.

Air Berlin transports roughly 80,000 people every day on it's mainly short-haul routes around Europe and employs over 7000 staff.  

Etihad Airways who own just over 29% of  Air Berlin, stated the bankruptcy filing was "extremely disappointing for all parties," especially Abu Dhabi based company had supported Air Berlin for over six years, but revealed it could no longer continue subsidising the German carrier.  "As a minority shareholder, Etihad cannot offer funding that would further increase our financial exposure. We remain open to helping find a commercially viable solution for all parties," Etihad said in a statement released on Tuesday.

Etihad has injected 250 million euros of additional funding into Air Berlin as recently as April this year and helped it "explore strategic options" for its business, the statement says. However Air Berlins business "deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions."  The gulf airline will continue with all the codeshare and other business relationships ity has with Air Berlin and will support its management team fully in any restructuring plans. 

The German government will loan 150 million euro (£139 / $177 million) to the stricken company to keep flights running and not leave travelers stranded during the peak summer season.  "We're in a time when many tens of thousands of travelers and vacationers are in multiple international holiday spots," the German Economy and Transport Ministries said in a statement Tuesday. "The return flights of these travelers back to Germany with Air Berlin would not have been otherwise possible."

Lufthansa issued a statement earlier on Tuesday saying it was “supporting the restructuring efforts of the airline jointly with the German Government”. It added that it is “already in negotiations with airberlin to take over parts of airberlin Group and is exploring the possibility of hiring additional staff”.  According to the Ministry the negotiations between Air Berlin and Lufthansa were already “very advanced”.  Air Berlin and the Lufthansa group had already been working closely since the formation of a deal to lease 38 aircraft from Air Berlin was instigated in December last year. 

Thomas Winkelmann, Air Berlin chief executive, said the company is “working tirelessly to achieve the best possible outcome for the company, our customers and employees, given the situation”.

"Our priority now lies with securing the jobs," said Christine Behle, a union representative. "Air Berlin must proceed with transparency and provide all important information."

Economy Minister Brigitte Zypries said that the bridge loan should give Air Berlin enough time to wrap up talks on the sale of some operations. For now all Air Berlin flights will continue, the schedule remains valid and passengers can still travel as normal. 

However will people still want to fly with the airline knowing its troubled financial situation?   We spoke to some travellers at Gatwick today.

Derek from Surbiton said he wasn't worried,  "I have no trouble in continuing my flights with Air Berlin, the German Government are giving them a loan so everything will go ahead as normal."

It was a sentiment shared by Elizabeth from Portsmouth. "I checked with the staff and all flights are going as normal, the other German airline [Lufthansa] and the government have given a rescue loan, so I'm not going to worry."

Tina from the Midlands was equally unperturbed by the situation, at least in the short term. "I don't see it as a major problem just yet, they are still operating flights, for the time being, so its all ok for now, but I'd be more concerned if I was flying them in a few weeks time when the [government] loan runs out"  

However, passenger loyalty might be put to the test should the uncertainty regarding the airlines future continue for an extend period of time. A early resolution would benefit all, not least of all passenger who have future trips booked with the carrier. However an airline media analyst in Germany told us, off the record, that he believed a buyout deal for the bulk of Air Berlin by Lufthansa would be complete before the end of next week.

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