Air Berlin Insolvent as Funding Plug Pulled by Etihad

Air Berlin has filed for insolvency due to Etihad Airways, its leading shareholder withdrawing financial support. This marks the second failure for a major airline in Europe in the last four months after the funding of Alitalia SpA the Italian airline was pulled in May by the Persian Gulf carrier.

On Monday, in a prepared statement Air Berlin announced that it was continuing to fly with help from loans by the government, but the filing puts at risk thousands of jobs in Germany. This comes at a time when Angela Merkel the current German Chancellor is standing for re-election.

German carrier Deutsche Lufthansa AG said it might buy parts of its biggest national rival.

Air Berlin accumulated over €2.7 billion or $3.2 billion in losses in about six years and has €1.2 billion of net debt. Etihad acquired 29% of the airline in 2012 to be included in its plan to move more passengers through its hub of Abu Dhabi through a network of investments with minority stakes.

That strategy however is coming unraveled after it suffered losses of more than $1.87 billion during 2016.

Etihad notified the German based air carrier that it would not be providing further support financially, said the carrier in a statement, adding that this move led to it concluding there was no longer a positive prognosis for continuation. Two representatives on the Air Berlin board from Etihad have resigned.

Etihad said it withdrew its funding after operations at Air Berlin deteriorated at a pace that was unprecedented the past few months.

The Mideast carrier’s links in Germany, which include an agreement for code-share with Lufthansa, are important and it is standing by ready to give assistance in finding a solution that is commercially viable for Air Berlin said a statement released via email by the state-owned air carrier.

Lufthansa as well as another airline that was unidentified are in far advanced planning to partially rescue the airline and a deal might be finalized over the upcoming weeks, said the economic ministry in Germany and Air Berlin in two separate statements.

Germany’s government has supported the process through providing a bridge loan of €150 million.

Air Berlin filed for insolvency in a local court of Berlin, though it announced it would not file bankruptcy protections for the Leisure Cargo GmbH and Niki Luftfahrt GmbH units.

The discount carrier has been linked with Lufthansa for a lease agreement for some of its fleet to the third largest airline in Europe.