Airberlin Goes Bankrupt, | Lufthansa May Buy The National Rival

DUBAI:  Etihad Airways said on Tuesday,  it is withdrawing financial support for German budget carrier airberlin and will not offer further funding to the struggling carrier, which filed for insolvency on Tuesday, August 15.

Filing for administration is similar to bankruptcy, and effectively means a company’s management is passed on to a different party, usually a court-appointed administrator.

In a statement, Etihad said that as a minority shareholder in airberlin it could not offer funding that would further increase its financial exposure. The Abu Dhabi-based airline described airberlin’s move to file for administration as “extremely disappointing for all parties.”

Meanwhile, Deutsche Lufthansa AG said it may buy parts of airberlin, its main national rival.

Expressing disappointing over the move, Etihad Airways, which owns nearly 30 per cent of airberlin, said: “This development is extremely disappointing for all parties, especially as Etihad has provided extensive support to airberlin for its previous liquidity challenges and restructuring efforts over the past six years.”

It added that in April this year, Etihad provided “250 million euros of additional funding” to airberlin as well as supporting the airline to explore strategic options for the business.

“However, airberlin’s business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions,” Etihad said in the statement.

It further said it expected airberlin’s operations to continue during administration. “We have a commercial relationship with airberlin across a range of areas, including code-share operations, and we will support airberlin’s management during these difficult times.”

The beleaguered German carrier has racked up over 2.7 billion euros in losses over six years, and has a net debt of 1.2 billion euros. The carrier and Germany’s economic ministry said in separate statements that Lufthansa and another unidentified airline are “far advanced” with plans for a partial rescue. A deal could be finalised in the coming weeks, as per the statements.

Etihad bought a 29 per cent stake in the carrier in 2012 as part of a plan to expand its global network.

That strategy also saw Etihad acquire a stake in Alitalia, another major European carrier that filed for administration in early May this year. That plan was also partly behind the $1.87 billion that Etihad recorded in losses in 2016 as the carrier was faced with an $808 million charge on certain assets and exposures to equity partners, mainly related to airberlin and Alitalia.

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