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Etihad sends shockwave after cutting funding for airberlin


The German airline was coping with considerable financial difficulties in the past time, but it caused a serious headache for some and business opportunities for others after it filed for insolvency at the local district court in Germany. The commencement follows after Etihad, the main shareholder of airberlin, withdrew their funding. The airline calls it a part of the “restructuring process that is already underway”. However, the move is largely supported by Lufthansa, and the German government, which injected a large sum into the airline to keep it afloat.


Etihad pulls out from the game, Germany pulls out its wallet

The Abu Dhabi-based airline has announced that it will withdraw its funding for airberlin. Etihad owns 29% of the German airline and supported it with solid injections; $293 million were funded just this April.

“In April this year, Etihad provided EUR 250 million 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,” said the statement released by Etihad.

“Under these circumstances, 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.”

The action of Etihad sparked a major issue for the airline, which in turn created issues for its 7,200 staff. That led to the government swiftly deciding to provide the airline with a €150 million loan to keep it afloat for another three months. Though, the state is also seeking other ways to secure the jobs, like Italy did when Alitalia faced the same fate after Etihad pulled the plug on it just this spring. The state had offered financial support for the airline not so long ago but it was refused.


The prying vultures above the fading body

Just like in the case of Alitalia, numerous airlines want to acquire chunks of the airline with Lufthansa, Ryanair and easyJet being in the short-list of potential buyers.

Currently, easyJet has a minor presence in Germany, which is why acquiring a part of airberlin would allow the British carrier to continue its expansion in Western Europe. However, the low-cost airline operates an all-Airbus fleet, while airberlin also flies Boeing and Bombardier planes, which is why only partial acquisition seems viable for financial reasons.

Another possible bidder is Ryanair, which – like EasyJet – operates planes only of a single company, though the Irish low-cost airline prefers the American-build Boeings, which would mean that the fields of interest of the two carriers might not intersect so much in case they both would be carving up airberlin. On the other hand, Ryanair already posed a strict attitude towards the German side, accusing it of an "obvious conspiracy".

“This manufactured insolvency is clearly being set up to allow Lufthansa to take over a debt-free Air Berlin, which will be in breach of all known German and EU competition rules,” said spokesman of Ryanair, Robin Kiely.

“Now even the German Government is supporting this Lufthansa-led monopoly with €150m of State Aid so that Lufthansa can acquire Air Berlin and drive domestic air fares in Germany even higher than they already are. German customers/visitors will suffer higher air fares to pay for this Lufthansa monopoly.”

The largest German airline is expected to be the main buyer, expressing support for “the restructuring efforts of the airline jointly with the German Government”. Such move would allow Lufthansa to make their presence more prominent not only in Germany but in Europe as a whole, creating a fear of a substantial monopoly. The mixed fleet of airberlin is also favorable to Lufthansa, which has Airbus and Boeing aircraft among others.

The insolvency also sparked a rise in shares of the European airlines. Lufthansa saw the largest increase of 4.7%, following easyJet’s 4.5% and Ryanair’s 3.3% growth. Meanwhile, shares of airberlin plummeted by 32%.


Until the wings are not clipped, the German bird will fly

For three more months, for now, the second largest airline, will continue to fly with all flights operating by it and NIKI continuing as scheduled and booking still remaining available and valid.

Though the fate of the airline is already decided.

“Negotiations with Lufthansa and other partners regarding the acquisition of business units of airberlin are far advanced and highly promising. These negotiations may be finalized shortly,” the company stated.

“We are working tirelessly to achieve the best possible outcome for the company, our customers and employees, given the situation,” said CEO of airberlin, Thomas Winkelmann.

 

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