The Strategist

Air Berlin launches bankruptcy procedure

08/15/2017 - 15:24

German airline Air Berlin announced start of the bankruptcy procedure. This is stated in the concern’s message.

The company will continue to carry out regular flights, and the German government will provide a loan of € 150 million for the period of restructuring. The company noted that all tickets purchased by passengers on airline flights remain valid. "The reserved tickets remain valid, possibility of booking all flights is preserved," Air Berlin emphasized.

According to the Minister of Economy of the Federal Republic of Germany Brigitte Zypries, financial support from the German government will allow the company to operate for three months. "We proceed from the fact that this money will be enough for three months," she said. According to her, thus the government intends to ensure normal functioning of the company for the period of negotiations with other market participants.

Speaking about the means by which the loan funds will be returned, Zypries stated that Air Berlin can receive money from the sale of slots (the time of arrival and departure at the airports). "We proceed from the fact that the company will sell its slots, and the loan will be returned, including at the expense of these funds," the Minister explained.

Earlier, the Ministry of Economy and the Ministry of Transport of Germany in their joint statement stressed that the government’s financial support will allow the carrier to perform all flights until the end of the summer tourist season. "Now tens of thousands of vacationers are on holidays around the world, otherwise they would not be guaranteed to return; there were no alternative options to return them," the statement says. Otherwise, after the announcement of bankruptcy, Air Berlin would immediately have to suspend flights.

This decision was made after Air Berlin’s main shareholder, Etihad airline (owns 29.21% stake), refused to allocate additional funds to support the loss-making German carrier. The concern added that the bankruptcy procedure will be conducted by the current administration.

Individual units of Air Berlin concern may be acquired by Lufthansa. "Lufthansa is already negotiating with Air Berlin for the acquisition of the company's divisions and offers thereby an opportunity to employ the personnel," Lufthansa said in the press release. "Lufthansa intends to achieve a quick positive result in these negotiations."

The largest carrier of Germany said that "supports Air Berlin’s restructuring efforts together with the German government".

"Among other things, we guarantee continued operation of leased aircraft that carry out flights for Eurowings and Austrian Airlines (Lufthansa’s affiliated companies)," the company assured.
Air Berlin operates flights from Berlin (Tegel Airport) and Düsseldorf. Its fleet consists of about 120 aircraft.

Last year, the company announced plans to reduce up to 1.2 thousand employees and lease part of its aircraft fleet due to significant financial losses.

As of the end of September 2016, Air Berlin’s debt reached about € 1 billion. About 40 aircraft were leased to a competitor - Lufthansa. According to the company itself, last year it transported 28.9 million passengers.