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Air Berlin collapse as Etihad withdraws financial support

Posted 15 August 2017 · Add Comment

Abu Dhabi-based Etihad Airways has been dealt another financial blow with the collapse of German carrier Air Berlin which is 29% owned by the Gulf carrier. The German carrier has filed for insolvency but blames Etihad which, it said, had withdrawn financial support.


Etihad has already suffered from the bankruptcy of Italian national carrier Alitalia which was part-owned and financially supported by Etihad.
Germany's federal government has stepped in with a bridging loan in order to maintain flight operations "for the long term", Air Berlin says. "All flights operated by Air Berlin and [Austrian subsidiary] Niki will continue as planned," it said.
In a statement today Etihad described Air Berlin's insolvency filing as "extremely disappointing for all parties, especially as Etihad has provided extensive support to Air Berlin for its previous liquidity challenges and restructuring efforts over the past six years".
The Gulf carrier notes that, despite its injection of €250 million in April, "Air Berlin's business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions".
Etihad insisted it remains "open to helping find a commercially viable solution for all parties" and that it "will support Air Berlin's management during these difficult times"

Analyst Saj Ahmad commented: "Air Berlin’s collapse underscores the immense difficulties and challenges that Etihad endured in trying to get the airline to restructure, change and become a viable competitor to Lufthansa.
 
"That Etihad has taken a massive financial hit in its earnings a few weeks ago highlights to good effect why they were not prepared to bail out the airline any more. Coupled with the toxic situation at Alitalia and the sale of Darwin Airline, it looks like Etihad is re-evaluating its position and is probably better off concentrating on its own organic expansion as opposed to be side-tracked by equity stakes that have not delivered the rewards that had been envisioned."
 
Ahmad added: "With that in mind, the new leadership at Etihad, in my mind, has to wipe the slate clean from this sort of troublesome exposure and get back to showcasing Etihad’s premium offerings which are undeniably beyond the rest of its rivals. Etihad has spent too long trying to help others, it has lost ground and needs to recover that. It’s a bad day in the Etihad office, that’s for sure, but now that Etihad is arguably free from Air Berlin, it can get back to business as it looks to turn around its losses."

 

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(c) Reuters

 

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