Airberlin Is Getting Out Of Paying Compensation For Delayed Flights

A few days ago I wrote about how airberlin filed for insolvency, after Etihad withdrew its financial support. There’s no need to panic immediately, as the German government is giving the airline an emergency loan of 150 million Euros, which is expected to last them for a few months. Hopefully they are able to restructure and continue to operate in one form or another after that date.

While there aren’t immediate impacts as far as their operations go, there are some interesting side effects due to the difference between “old debt” and “new debt.” As I wrote about yesterday, airberlin tickets issued through August 15 can no longer be refunded, even if someone paid extra for a refundable ticket (originally August 11 was the cutoff, but that has been changed to August 15). That seems crazy, but as FlyerTalk member ralfkrippner explained:

German insolvency law distinguishes “old debt” from before the filing date from “new debt.” New debt has a higher status und thus the management would violate insolvency law and be personally liable if they pay out funds to creditors with “old debt” before the final liquidation of the company and its assets with a quota part payment. And tickets issued before filing date Aug. 11 are definitely old debt. Besides from that the acceptance of such tix for transport is also a violation but it probably was the first decision of the official insolvency procurator to honour old tix for transportation as otherwise the company would shut down immediately without any potential for continuation and therefore chance of upholding value of assets.

This isn’t the only change happening for those with existing tickets, though. The EU has strict compensation guidelines when airlines have flight delays, where you’re potentially entitled to up to 600EUR of cash compensation for a delay. For flights through August 15, 2017, airberlin won’t pay compensation for delayed flights. Per airberlin’s FAQs:

DO I STILL RECEIVE REGULATIONS FOR MY CLAIM FOR DAMAGES / COMPENSATIONS, E.G. FOR DELAYS OR FLIGHT CANCELATIONS?

No. Unfortunately no compensations will be paid for flights before August 15th, due to effective insolvency regulations. Affected passengers have the opportunity to file the claim for the insolvency schedule after the opening of the insolvency proceedings. For all flights after August 15th kindly refer to our online claim form provided by our Guest Relations Team.

Like I said, I get why this is happening, though it’s still so strange to me that this is legal. The good news is that going forward flights will be refundable (per the fare rules) and also eligible for EU compensation, given that this would be considered “new debt.”

(Tip of the hat to @FlyingDutchBlog)

Comments

  1. Its different when a company is under insolvency!

    Well they aren’t getting out of paying the compensation. Wveryone who has a legal claim under the EU regulation has simply a cash requirement (not sure if its the right word but its Forderung under German law) which AirBerlin has to pay in cash – which is a debt for Air Berlin.

    Since they are not allow to pay any debts they simply can’t pay it. But everyone with a claim can register the claim with the liquidator – and when the liquidator is settling those claims everyone will get their share of the insolvency quote – and thats when the 15th August plays a rule again.

    A claim after the 15th August will first get the money back before a claim before the 15th.77

  2. In essence, insolvency proceeding overrule the euro aviation regulation?

    I’m curious. Is air berlin deemed as legally insolvent at the time of filing, a beginning of proceeding, or the final rendering of court decision?

  3. @James: No, you have a legal valid claim – but AirBerlin is under german law not allow to pay to you.

    Air Berlin filled for a insolvency under the german ESUG law (a bit like chapter 11), but the insolvenccy proceedings are currently provisionally

  4. So for existing travel they will continue to operate and transport passengers with existing tickets for travel Aug 30 – Sept 6 and beyond? Or should I cancel my flight now and rebook with another airline?

  5. @Tina
    Thanks! So any compensation or refund (like nemme above) shall be treated as non-preference and non-secured creditors? If yes, is the time discrepancies shall apply to include interest thereto?

  6. @James: Exactly . Typical there will be four ranks:

    1st – any debt resulting after the filling
    2nd rank – secured debts (will be repaid from the profit of the selling of the secured assets)
    3rd rank – unsecured debts before 15th August
    4rd rank – subordinated debts (like the bonds)

    Since the insolvency was just filled on Tuesday and its not open yet no filling is possible at this moment. But if it is – one can claim the interest aswell. If you search for “insolvenzforderung anmelden” on google the two justiz.bw links will show how to do it.

  7. What about a ticket bought long before August 15th for a flight after August 15th? Which rules apply to that?

  8. @Larry

    EU261 compensation should apply – the duty to pay for delays has been incurred due to action after the cut-off date.

  9. Will the German law hold in other EU nations? Technicialy other governments could foreclose Air-Berlin’s airplanes while in their airports or any deposit Air Berlin had to provide to the relevant authority when starting a route, right? Or perhaps just foreclose and auction their slots in non-Getnan airports.

  10. @lior
    First question’s answer: NO.

    Your further comments clearly showed you have no understanding of what is going on.

  11. @Lior:
    1) The German bankruptcy court’s rulings are valid for other countries within the EU. It’s one of the cornerstones of the EU single market. In the AB case, the bankruptcy court has apparantly determined that, supported by the 150M Euro loan of the German national government, it’s in the best interest too all creditors to keep the company flying until a take-over is arranged;
    2) AB most likely will have filed for (temporarily) bankruptcy protection in the other countries in the world, including the USA, to prevent aircraft, equipment or cash seizement from creditors based outside the EU;
    3) The UK is the only country in the EU (so far) where slots are sold for a value, for LHR & LGW. So no value here

  12. Hi I am waiting for a compensation for a claim filed before August 15. I understand that this is a 3rd ranked priority.

    I contacted AB staff and they said ” You have the opportunity to file the claim for the insolvency schedule after the opening of the insolvency proceedings. ”

    What does that really mean ? What should i do to get the money ?

  13. Our daughter just flew Air Berlin to Italy via Dusseldorf and they lost her bag. How can she file a claim and will she have any luck with getting compensated?

  14. A few corrections to the above:

    @Tina: Senior and subordinated debt (such as bonds) will in all likelihood take precedence above unsecured creditors (depends on the language in the bond indentures, but such ranking is typical).

    Passengers with refund, EU flight delay compensation, lost damage, etc. claims that arose before August 15 are unsecured creditors. They will form part of the large pool of unpaid suppliers, etc. who have claims that are the most junior and will be paid a pro rata share of what is left after all claims more senior are satisfied in full.

    Note that in Germany certain claims that would be general unsecured claims in the United States such as unpaid wages, are more senior.

    @Larry: If you want a refund for your ticket bought before August 15 for travel after August 15, then your claim is considered “old debt” (pre-petition in U.S. parlance); however, if you seek EU Flight Delay/Cancellation Compensation for a flight that occurs after September 15, then your claim is “new debt” (post-petition).

    An interesting question could occur if your post-August 15 flight is delayed or canceled. Part of the remedies that the EU Regulations provide for is the right to a refund if the flight is canceled or the delay is of sufficient length that it no longer serves your purpose of travel. You could make a colorable argument in this scenario that you are seeking remedies provided by the EU Regulations for a claim that arose post-August 15 so that it could be considered “new debt” (rather than a simple refund of your ticket purchased pre-August 15).

    @Lior/Joost: There is a fairly established consensus in the world that a single bankruptcy proceeding is the most efficient. In the United States, this is recognized through a Chapter 15 filing (which Air Berlin has done), which provides for domestic recognition of a foreign bankruptcy proceeding. Creditors are enjoined from seizing assets that may be in the U.S. Many other countries (but by far not all, particularly in the developing world) have similar cross-border recognition of bankruptcy proceedings.

    One notable exception is when it comes to real estate. Many judges around the world do not permit anything to do with the foreclosure of fixed property to be done by courts from another jurisdiction.

    @Everyone: The United States bankruptcy law is exactly the same as Germany (and every, or virtually every, Western country (and probably most of the world)) in distinguishing new debt from old debt. The idea is that in order to have an ongoing entity post-bankruptcy filing, others will need to have increased protection to continue to do business with the bankrupt entity. Who would continue to do business if any invoices you send would simply be submitted as an unsecured claim where you get nothing or pennies on the dollar?

  15. I bought a ticket on October 5 and they have decided to stop flying after 27 October. Does anyone know if I have any hope to get a compensation?

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