Germany's second largest airline is in grave danger of going bust

Air Berlin Airbus A330Andreas Wiese / airberlinAir Berlin Airbus A330.

After years of financial struggles, Air Berlin filed for insolvency on Tuesday.

Germany’s second largest airline, although insolvent, is expected to continue operation with the aid of a $US176 million bridging loan, Reuters reported.

However, Air Berlin’s future remains murky after Etihad Aviation Group, one of the company’s main financiers, announced it has cut off the airline’s access to its coffers.

In reaction to Air Berlin’s decision to file for insolvency, Etihad wrote in a statement:

“This development is 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. In April this year, Etihad provided EUR 250 million of additional funding to Air Berlin as well as supporting the airline to explore strategic options for the business. However, Air Berlin’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.”

Etihad, which owns 29.2% of Air Berlin, has spent more than $US2.3 billion trying to turn around the ailing German carrier. Etihad and Air Berlin have been equity partners since 2012. Unfortunately, the German airline has not been able to deliver the Abu Dhabi, United Arab Emirates-based Etihad the solid footing in the European market.

At the same time, Lufthansa, Germany’s national airline, announced it is in negotiations to take over parts of the Air Berlin’s operation during the company’s reorganization process.

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