Ouch: Airberlin Files For Insolvency

Bloomberg is reporting that airberlin today filed for insolvency in a Berlin court, after Etihad has withdrawn its financial support. The details of this are still very much developing, so I imagine we’ll find out more details soon. For now the German government is expected to give airberlin an emergency loan, and presumably the airline will have a fixed amount of time in which to find new investors, or else they’ll go out of business. Apparently that emergency loan is 150 million Euros, and that’s expected to last them a few months.

Airberlin has been struggling financially for years, as they’ve had a fundamental identity crisis as to whether they’re a low cost carrier or full service airline. It seemed like they were finally headed in the right direction lately, as they leased a bunch of planes to Lufthansa (the smaller the fleet, the smaller their losses), and as a result cut a lot of their leisure routes.

However, it’s a long road to recovery for airberlin, which has largely been backed by Etihad, as they own a 29% stake in the airline. For years Etihad has invested in foreign airlines as part of their growth strategy, though this has been a total failure. Most notably, Etihad has invested in airberlin and Alitalia, both of which have been performing horribly.

Etihad’s previous CEO was the mastermind behind this growth strategy, and he was fired a few months ago. With the Gulf carriers under financial pressure from their governments, I guess Etihad has had enough, as they’re withdrawing financial support.

We should know a lot more details soon. Nothing will change overnight, and I imagine the airline will keep operating for now. However, I think the German system won’t be quite as lenient with airberlin as the Italians have been with Alitalia.

If you’re scheduled to fly airberlin in the coming days or weeks, I wouldn’t be too worried. Their current loan is expected to last them about three months. Meanwhile if you’re flying them further out than that, well, I guess we’ll have to see what happens.

What do you make of airberlin’s insolvency filing?

Update: Etihad has issued the following statement regarding the airberlin situation:

“We have been informed that airberlin has filed for administration.

“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.

“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.

“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.

“We expect airberlin operations to continue during administration. We have a commercial relationship with airberlin across a range of areas, including codeshare operations, and we will support airberlin’s management during these difficult times.

“Germany is an important market for Etihad and Abu Dhabi, and we remain committed to providing comprehensive air links as a key enabler of trade and tourism.”

(Tip of the hat to View from the Wing)

Comments

  1. Exactly, quite similar to Chapter 11.

    Emergency loan is 150 million €, which is supposed to last for at least 3 months.

  2. Booked a flight in November just a few days ago. Fingers crossed AirBerlin will still be around by then…

  3. Will see what happens with the OneWorld Membership of AirBerlin and of course with TopBonus.. It has been officially sold to Etihad? I have still a few miles to spend and I fear the worst.

  4. First Etihad seems to have totally failed in managing their investment and AB seem to have treated them as a source of cash to fund OPEX losses. They don’t deserve to survive and no more money should be spent keeping them afliat

  5. @Colin: it’s easy to talk like this when it’s not your job on the line.
    And there’s a lot of people’s jobs affected now. And, as past events have proven, it sometimes does make sense to throw some money at it, instead of spending a lot more in welfare later (true at least for Germany).

  6. Not surprised – terrible airline. Took 2 hours to get our bags on an intra-Germany flight into Berlin! Not just our flight but all Airberlin flights were like this.

  7. Didn’t they just announce a couple of new North American routes, including Toronto? I guess that’s down the toilet as I can’t see any one making a future booking with them.

  8. @Jack: this is an airport and third-party ground handling (aeroground) issue.

    I’ve flown AirBerlin a few times on longhaul flights in business and think they have a solid product and service. Also intra-Germany flights worked fine for me in 95% of my flights.

    Their enormous growth strategy 10 years ago backfired and broke their neck. No management team after that was able to fix the legacy issues afterwards. Very sad..

  9. Last Sunday my DUS-JFK flight was cancelled one hour before departure and nobody gave us an explanation on why, but now I understand…

  10. This is a bit unfortunate, but I can’t help but think Airberlin would be in a better position if Brandenburg airport were open. (Tegel has its charms, but most flights depart out of an unpleasant warehouse hangar.)

  11. Ever since AirBerlin acquired LTU, they began their downhill spiral and have been in the red for years and years. They lost almost $800 million dollars last year. It is now only a matter of time before they are out of business for good.

  12. Any idea if this affects flights with Niki? I’m nervous with a Niki flight two weeks away booked as part of a multi-stop Oneworld award trip that I’m halfway through.

  13. Problem with AB is their name. It just sounds like a regional airline. They have a solid product, but need a new marketing strategy. I would start by changing their name to Hansluft

  14. @Jules: same with me, I am thinking about buying a ticket with SAS to cover my flight….
    It is a bad situation with only LH left for intra German flights, but AB had such a bad reputation the last months with their baggage handling problems in TXL, the wetlease of the horrible 777 of PrivilegeStyle for months (my compensation file is still with the arbitration court)…

  15. airberlin going under is also going to be a huge deal for DUS airport. I think everyone always talks about TXL but the reality is that they are also the largest airline at DUS! I’ve flown their Business Class product from DUS to JFK and was overall pretty happy with the flight and product. Prices were sometimes also pretty good but for me the lack of connections to other destinations in Europe made LH and the other Star Alliance airlines a better choice.

  16. @Jackie : “Hansluft” ? That’s the surest way for the courts to rule against AB if LH comes in with a brand infringement lawsuit.

  17. If United has any brains left they will launch a TXL-SFO service. Lufthansa has no interest in doing direct flights from TXL. But there are plenty of people in the tech sector willing to pay a premium flying direct between these major tech hubs.

  18. DUS will be ok because whatever happens to AB – LH Group will end up getting those routes, planes, and staff either through LH directly or via its Eurowings Group.

  19. Personally I would hate to see them going out business. They are great use of Avios within Europe and On many transatlantic routes they are a viable alternative to LH, if I remember correctly they had flat beds before LH did (just need to be really really careful with your seat selection). On top of that if I have a choice between DUS and FRA I take DUS any day.

  20. European regional air is a terrible market for all but the ultra low cost carriers. And it’s an even worse market for passengers who don’t like being herded into little more than a flying cattle car. Unfortunately there is no shortage of folks lining up to fly this way.
    AlItalia had profitable long haul routes but it couldn’t compete in Europe and even within Italy. Maybe these reorganizations will emerge as very small long haul carriers, abandoning the regional markets altogether.

  21. They were (in the past) the best way for me to use AA miles to Europe and avoid the outrageous British fees. They’ve all but disappeared from AA awards in the past few months and I doubt it’s because of lack of capacity.

  22. Remember when the US airlines all declared bankruptcy one by one? They did it to gut union contracts and pension agreements. When American Airlines filed, they had over $2 billion in cash…but they were allowed to pretend they were in dire straights. So, their long-time employees and retirees got screwed and AA reaped the benefits on the backs of their employers.

    I wonder if there’s any of that going on here?

  23. I do not think European Insolvency is the same as US Bankruptcy where it’s works to your advantage to dislodge unions and throw pensions on the government.

  24. @Philipp

    I wasn’t flying that DUS_JFK route but was in AB lounge at the time new broke about that flight cancellation. A couple was quite shocked to hear flight cancellation citing onward flight booked separately.

  25. As stated before, I think at least for the next three months (i.e. roughly until mid November) we should be save, given the commitment by the German government. I think, even if the EUR 150m would not last long enough, they would top it up given the statements they made today. So I’m confident for my flights to come and do not hesitate booking further flights in this period (but not thereafter).

    My greater concern is that LH will take over AB and that the German/EU competition watch dog will take any action to prevent a monopoly on many routes. I think the bridging loan from the German government has actually made that much more likely to happen. The effect will be devastating, as we can already experience now on some monopoly routes (like ZRH-BRU), where non-flex-Economy return tickets are often sold for EUR 1000 or above …

    A (relatively wealthy and prosperous) market of more than 80m people (or more than 100m if you include Switzerland/Austria), should be able to support more than one airline. There are many smaller markets with more than one (still profitable) airline (e.g. Spain, UK, Russia, Turkey, Canada).

  26. Still not sure why Lufthansa, IAG or AF/KLM hasn’t stepped in bought those two airlines like Lufthansa did with SWISS and Brussels

  27. @Roger

    I was at the lounge as well preparing to go do some shopping before boarding when the agent broke the news. I believe I met the couple when re-booking my way back. They made us get our bags – mine took about 50 minutes – and then a sluggish line that took almost 2 hours, and I was in the priority line due to my AAdvantage status…

    At the end I was re-routed through Dublin, but lost a day of work. Submitting now Flight Compensation Regulation 261/2004

  28. The airline industry is full of people who are passionate about aviation, but who have little or no business sense.
    When Etihad announced their investments in AZ and AB I was talking with other business people/frequent flyers and we laughed and joked that “Etihad would find out soon enough how stupid they were…etc.”
    It is hard to imagine that people involved in the industry can be that dumb, especially in the case of AZ, which has been a wreck for years, with no hope of recovery.

  29. I’ve got a flight from SFO to DUS in Sept. Hoping Lufthansa just steps in and takes over that route and flights….

  30. I haved wonder about this but should Oneworld look to acquire the Condor division of Thoas Cook or TUI Germany at this point or should buy a stake in a smaller carrier and expand them? It should be interesting to see what Oneworld does in Germany although it seems like they would just let their position rot due to their lack of unity and liberal partnerships. I would see them buying one of the established tourist companies and hopefully recruiting Luxair but I would certainly be open to and appreciate to hear other opinions.

  31. A couple of months ago I bought tickets from Miami to Berlin on Air Berlin, traveling in December 2017. We traveled that route last year and actually enjoyed our flight on AB. The service and meals were quite satisfactory. Now I’m reading about AB going into insolvency, with a loan of $150M keeping them in the air through November. Any suggestions on what I should do? If they close down at the end of November, it will be too late and too expensive to try and find alternative travel. I have one of those nonrefundable, nonchangeable tickets. Haven’t bought trip insurance yet, and maybe it’s not too late to do that if it will cover insolvency of the airline. Sure was looking forward to spending Christmas in Berlin with my son and his family.

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