Bizarre: Airberlin Topbonus Basically Shuts Down (Temporarily?)

This past week airberlin filed for insolvency, after Etihad withdrew their financial support. Usually when airlines file for insolvency or bankruptcy protection, it’s initially “business as usual.” After all, as the company tries to figure out the future, they want to make sure that they’re doing everything they can to maintain public confidence as much as possible.

However, that hasn’t been the case with airberlin. That’s partly due to German insolvency law, and the requirement to differentiate “old debt” and “new debt.” It seems like there’s more to the story than that, though.

I’ve already written about how airberlin won’t be paying compensation for delayed flights that took place through August 15, 2017, because this is considered “old debt.” Similarly, refundable tickets booked prior to August 15 are no longer refundable. It’s bizarre to me that changing terms in such a way is legal, but apparently the rules are being enforced as such precisely due to the law, and because airberlin now can’t pay back “old debt” (in this case your refundable ticket booked prior to August 15) before paying back their “new debt” (for now a government loan of 150 million Euros).

Well, it looks like that wasn’t the end of the changes. Airberlin’s topbonus program has suspended mileage accrual and redemption until further notice. Per a notice on their website:

We cannot currently (since Saturday, 19. Aug.17) guarantee that your miles will be credited. We have had to suspend mileage accruals and redemptions pending clarification of the situation.

We are working hard to resolve the matter as soon as possible and hope for your understanding.

Thank you for your patience.

We don’t officially know the reason for this. What makes this interesting is that topbonus is a spun off frequent flyer program, so it’s separate from the airline. It was spun off in 2012, and is 70% owned by Etihad, and 30% owned by airberlin. So I’m not really sure why this would happen.

I suspect you could still earn miles with a partner loyalty program for airberlin flights, and similarly, that you can still redeem partner miles for airberlin flights. For example, American AAdvantage still shows mileage accrual charts for airberlin, and aa.com also still shows award availability for airberlin.

So it seems like the topbonus program specifically is not allowing the earning and redeeming of miles.

This is way beyond my area of expertise, though I’m not sure if the issue here is that the frequent flyer program is partly owned by airberlin, and as a result, the liability of miles is considered “old debt.” Or maybe it’s something completely different.

I guess we’ll have to wait and see how this plays out. In the meantime, if you do fly airberlin, I’d recommend crediting miles to another program (and hopefully those miles do in fact credit).

Historically when an airline has been taken over by another, that new airline matches the status and miles that members had with the old program. However, that’s no guarantee, given that everything about programs can change at will with no notice.

While I understand airberlin is in a tough situation, I’m sure disappointed in their horrible communication job. You’d think it would be in their best interest to explain to customers why certain changes are being made, rather than just making them with no explanation. Simply saying “hey, your refundable ticket is now non-refundable” doesn’t do much to instill confidence in consumers (not that the real answer would instill much confidence either, but at least everyone would be on the same page).

What a mess this airline is in…

What do you make of topbonus basically shutting down temporarily?

(Tip of the hat to View from the Wing)

Comments

  1. A few months ago, topbonus shut off redemption online for US-based members due to “Adjustments in the topbonus program.” No one at AB could explain why or what the adjustments were or when I could use my miles again.

    I changed my adddress back to Germany and cashed it all out to amazon.de gift cards. Glad I did.

  2. Since topbonus is a different legal entity from airberlin, basically they only pass-through their obligation to the consumer to airberlin. Obligation means debt. Airberlin cannot have a new debt. So passenger cannot accrue mileage.

  3. “TopBonus are granting everyone 4 months of Silver status….”

    Ahahaha they never gave me that either despite following the protocol to get it. Good night topbonus.

  4. Since Topbonus is seperate business (just like the holiday airline Niki or the holiday branch) they would need to fill for insolvency on their own…so nothing changed for them.

    But it could be that they do have large claims against AirBerlin which could bring them in a critical financal situation, and the need to fill for insolvency could arise aswell.

    Just a random thought since we don’t know the financal situation of Topbonus..but it could be a nice way for Ethiad to get out of Topbonus

  5. Airberlin will be liquidiated, there will not be a takeover. Anybody taking over airberlin as a whole would also have to take over all of its debt and of its existing contracts, including its labor contracts. Some airlines (mainly Lufthansa) will buy parts of airberlin’s operations. With this money airberlin will firstly pay back the government loan, if then some money is left, it will be used to pay social security, taxes and salaries. Then airberlin will be liquidated.

    Lucky, as you are a German speaker, I recommend reading this article: http://www.faz.net/aktuell/wirtschaft/unternehmen/was-mit-air-berlin-passieren-soll-15159092.html

    It’s one of the best analysis of what’s happening to airberlin I’ve read so far.

  6. Insolvency would be the only way for Etihad to legally closevTopbonus without honoring the actual milage on the accounts. Otherwise the T&Cs state thst members have 18 months to use their miles,

    I have a Topbonus ticket for Iberia (and a Millemiglia one for AirFrance) in March and will see what happens….

  7. Technically your refundable ticket is still refundable, you just won’t get your money back. Instead basically become a creditor with claims from before AB declared bankruptcy.
    This entitles you to your proportional share of the company’s assets (after paying debts originating after bankruptcy, salaries and various other higher priority claims). Needless to say you will most likely end up with much less than what you would have been entitled to. But it’s still different from a non refundable ticket where you won’t get anything back at all.

  8. It’s interesting to see the different views on bankruptcy and insolvency comparing USA and Europe. Being familiar with bankruptcy proceedings in Europe, I have always been surprised with the possibilities US-based companies have in restructuring debt and liabilities while being able to continue business as usual.

    On this side of the pond, filing for insolvency usually means: game over. Spanair, Malev, Estonian Air, Fly Globespan, Zoom, SkyEurope, to name a few, all went out of business overnight.

    In specific circumstances, the bankruptcy court or curator can choose to keep the business running when there is
    1) a very good chance of a takeover/continuation of the business,
    2) little to win from a regular liquidation of assets
    3) money to pay the new liabilities after bankruptcy (the new debt)
    Money usually comes from the government including unemployment funds.
    All the time, the curator must decide in the best interest of all creditors. As soon as continuation of business during bankruptcy is enforced, leasing companies are unable to terminate leases as this would reduce the value of the company.

    For the refundable tickets that became non-refundable: I’d see it the other way around, one can be glad to still have a ticket: following a typical bankruptcy, the ticket would be useless at all. An as mentioned by James, giving miles to customer would mean a new liability which needs to be specifically approved.

  9. There are basically two relevant questions/issues:
    (a) What is the financial situation of Topbonus (as Tina has explained before), and
    (b) That Topbonus issues reward tickets on AB (745) ticket stock.

    Now as for (b), we need to distinguish between reward tickets already ticketed and miles resting on the Topbonus account. Reward tickets already ticketed, are basically a liability of Air Berlin (not Topbonus). AB either has the obligation to transport you or to pay another airline (e.g. Oneworld or Etihad partners) to do so. Now, miles not yet ticketed, could in theory also be ticketed by another airline (say EY), if Topbonus can reach an agreement with them.

    And this question takes us back to Tina’s point: The financial situation of Topbonus. Obviously, EY (or any other airline) would need to be paid for any tickets issued by them and Topbonus can only pay them, if they have enough assets and in particular cash.

  10. “It’s bizarre to me that changing terms in such a way is legal, but apparently the rules are being enforced as such precisely due to the law, and because airberlin now can’t pay back “old debt” (in this case your refundable ticket booked prior to August 15) before paying back their “new debt” (for now a government loan of 150 million Euros).”

    I find it sort of surprising that you keep describing this situation with Air Berlin as “bizarre.” I assume you don’t find it bizarre that the big US carriers have dumped pension obligations or bad debt in Chapter 11. Why should the contract for a frequent flyer program that can be changed or ended (with notice) in normal circumstances get more protection in insolvency/bankruptcy than workers’ pensions? Loyalty programs here may remain untouched in bankruptcy proceedings because they play an important role in maintaining customer loyalty if the airline is to emerge as a going concern, but they aren’t legally protected as senior/secured debt.

  11. I wonder if my top bonus miles will still expire during all this, I bet they will. What a crappy program. I regret ever saving miles there.

  12. @joost
    Are you trying to said that on one side bankcruptcy law is designed to protect the creditors and on the other side it was designed to protect the insolvent entity?

  13. @Flip
    Interesting article.

    In short: the biggest assets of AB are airport timeslot. Lufthansa is using AB as a buffer to keep out competitor such as RyanAir. You cannot buy only timeslot, but must takeover the whole company whereby AB is unionized, and german speaking air crew is not cheap. Oh.. and while insolvent, the leading negotiator apparently is AB’s boss, not the administrator.

  14. @james: Any agreement of selling assets will need to be agreed from the so called “Gläubigerausschuss” – a board of the largest creditors

  15. On the accounting side, earned miles would be a new debt of airberlin against topbonus as this are two seperate companies. As said before in the comments, this is not possible or least very possible at the moment.

    Nevertheless I think it is more than that. I tried to burn my miles into amazon vouchers last week just one hour after public announcement of the insolvency, but it already wasn’t possible.

    Spending money for anything else than airberlin related topics should not be an issue (e.g third party reward tickets, shopping, etc) under the current situation as topbonus is not insolvent.

    If you have a closer look at the topbonus homepage you can see that airberlin has already been deleted as part of Etihad airways partners. My personal guess is, that EY as majority shareholder of topbonus wants either to sell the topbonus program, working on a solution to transfer the “valuable” Ff to EY Guest or to liquidate it. For now they are just stopping people from cashing out the miles.

    In my opinion this is the illegal part of this whole game as topbonus has not filed insolvency yet. So EY is walking on the edge legally…

  16. According to a German-language forum, airberlin corporate communications let slip that Etihad is (understandably) not interested in continuing topbonus. We can all speculate whether topbonus ltd (British company) will file for insolvency as well, with miles loosing all/most value, whether there will be a chance to transfer to a new owner (like LH or Eurowings) or to Etihad Guest or to use it for shopping etc…
    airberlin promised an update for topbonus members this week… we’ll see what happens…
    I hold a topbonus award ticket for Etihad/airberlin flights in November – let’s see, if Etihad honors a ticket of their reward program on their metal…

  17. @Tina
    My comment is a summary from the article link which Flip provided. It says that airport slot cannot be sold separately. If you want it, you have to take over AB in whole, along with current employees, etc. If no takers, the slot would be auctioned/sell, on which LH would try to blocked RyanAir to get it.

    On a side note, is there any difference in german law regarding a bankrupt entity and an insolvent entity? AFAIK AB is not bankrupt yet, as they got an administrator, not a curator.

    Does an administrator or a curator also need approval from board of creditor in managing the bankrupt/insolvent company’s assets in order to pay to creditors? So, in german law they don’t have independency?

  18. @nils
    Is it really illegal? I mean, most of (if not all) frequent flyer program can change the benefit or terms to enjoy the benefits unilaterally. If it’s a two way contract which any amendment thereto needs approval from both parties (passenger/member and airlines/program owner) I think this blog would be full with class action suit articles….

  19. @james: the insolvent entity is only protected if this is in the interest of the creditors. The interest of the shareholders of the insolvent entity are no longer relevant.

    In the case of Air Berlin, there is hardly any value in the assets at liquidation. The value is in the goodwill: slots, lease agreements, the AOC, the operation by itself including employees, advance bookings with future payments linked to it after operation, etc. This is the value of the company which can be turned into money after a full or partial take over.

    Without protection, the airline will be completely gone within 24 hours: lease firms will immediately seize the fleet, the AOC will be suspended, slots will be taken back by the slot coordinator for redistribution and other airlines will take over within a week. This will destroy all value left in the company and leave creditors with nothing.

  20. @Joost
    Yup. In casu, going concern is the best way to proceed and to capitalize (tangible & intangible) assets to generate funds (to pay creditors).

    Actually my query refers to your understanding of comparison of bankrutpcy/insolvency law between american (anglo-saxon) and europa-continental.

  21. @James: Any selling of Assets will need to be agreed by a board of creditors – ususally the largests are getting a seat.

    The difference between a insolvency & the insolvency under ESUG (which Air Berlin filled for) is the legal status of the board of directors & the liquidator. In a normal insolvency the liquidator has as only person the right to sign legal contracts etc. and the old CEO etc looses all legal power.

    Under ESUG the board is still the legal representation of Air Berlin and the liquidator is only intern visable – or in regrads of bank accounts depending on the court order.

  22. @James: Its sort of my job – but this is super interesting as its the biggest insolvency as ESUG – and interesting since its an airline with not typical assets

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  24. Dear all,

    Did someone get the confirmation if miles from Airberlin flights can still be credited to another loyalty program? Or is this no longer valid either?

    I have some Airberlin flights in the next few weeks and I’d like to know if I can get the miles credited through my Iberia Plus account.

    Thanks for your help.

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