Air Berlin Files For Insolvency Proceedings After Etihad Withdraws Financial Support

8 Comments

Embattled German airline Air Berlin has filed for insolvency after Etihad has declared there would be no further financial support for the money burning carrier which ended up being a cash grave for them in recent years.

Travelers, especially those who are still missing baggage, should prepare themselves for thing getting even more turbulent in the weeks ahead even though flights will continue to operate (for now).

Passengers haven’t had an easy run with Air Berlin in recent years, especially those who checked in baggage. Every day we receive around 4 emails from readers who have a baggage problem with Air Berlin, complain about zero customer service or having their possessions gone missing forever.

Now that Etihad shut off the money flow the carrier saw no perspective for future operation and filed for involvency proceedings in a Berlin court.

Bloomberg (access here) reported on it already.

Air Berlin Plc filed for insolvency proceedings after main shareholder Etihad Airways PJSC withdrew its financial support.

The discount carrier and subsidiaries submitted the filing in a local Berlin court, though it won’t seek bankruptcy protection for its Niki Luftfahrt GmbH and Leisure Cargo GmbH units, Air Berlin said in a statement. Talks with Deutsche Lufthansa AG and other parties regarding disposals are continuing, it said.

Air Berlin has been restructuring in an effort to stem years of losses, including leasing part of its fleet to Lufthansa. Plans to merge Niki with TUI AG’s German airline arm fell apart in June after Abu Dhabi-based Etihad said it failed to reach a deal on forming a joint venture for the operation.

Etihad has invested or better said entangled themselves in a variety of European loss-making airlines including Air Berlin, Alitalia and others in the hopes of using the carriers as feeders to their Abu Dhabi hub and to facilitate their gateways in Europe. Most of these investments went sour and the two biggest offenders in this regard (Alitalia and Air Berlin) have now both filed to bring bankruptcy proceedings on the way.

Etihad which has come under pressure for their cost structure is apparently now doing their strategic reviews and decides to cut these investments off.

What happens now?

The German Government has assured it will support Air Berlin with a loan (which will likely never be paid back) in order to ensure operations are continuing. Customers can even continue to book tickets even though I’d consider that a risk that isn’t to underestimate at this point. Better to avoid purchasing any connection on Air Berlin from now on, including mileage redemptions on other airlines ticket stock. For now yes, you will still be able to fly on your tickets but that can end very fast.

The downfall of Air Berlin will now likely accelerate as insolvent airlines are usually unable to receive fuel at airports on a credit basis anymore and mostly have to pay in cash which isn’t that easy to come by for a bankrupt airline.

Flights on NIKI are not affected at this time.

What about my Air Berlin Topbonus Miles?

The Topbonus program is essentially owned by Etihad as they purchased Air Berlins frequent flyer program many years ago (and drastically overpaid for it in a sham way to inject capital into the company (which was pretty much already on the brink of bankruptcy back then).

For now you shouldn’t worry that the miles lose their value immediately. However keep in mind that program changes can occur at any time. Including the blocking of awards on other airlines, reduction of award availability overall and many other option. I wouldn’t count on the miles having lots of value in the future and therefore would strongly consider not crediting any mileage to Air Berlin Topbonus anymore.

What if my flights eventually get cancelled and I’m stranded?

It’s likely too late to purchase specific insurance (new policies) at this point, covering your Air Berlin ticket. Already purchased tickets should be covered by travel insurance if they passenger has any, either through the credit card or purchased separately.

Customers who paid for their tickets by credit card and end up being stranded can initiate a charge back with their credit card company. Tourists who purchased a holiday package originating in Germany are likely insured through a comprehensive insurance policy that has to be legally provided by tour operators (Reisepreissicherungsschein).

Conclusion

This has been on the horizon for a long time and I’m actually surprised it took Air Berlin that long until it’s last breath. That being said the decision was likely made by Etihad, not Air Berlin themselves. As soon as the money flow from Abu Dhabi stopped the fate of Air Berlin was sealed.

Based on all the emails we’re getting, Passengers should also consider to stop checking in baggage with Air Berlin. It is a complete disaster how the airline handles passenger baggage and then provides no customer support whatsoever. I highly doubt people will ever see the money for claims they now make for legitimate expenses resulting from loss of passenger baggage.

If you enjoyed this article, get our blog updates for free!

SHARE
Previous articleInterContinental Ambassador Updated Portfolio
Next articleReader Question: SPG Platinum Challenge & Extending Status Beyond February 2019?

YOU MIGHT ALSO LIKE