First reported last October and now apparently in the works, a group of the insolvent Air Berlin’s creditors are now in the process of preparing to sue Etihad Airways for damages after the Abu Dhabi based carrier withdrew all funding in the summer of 2017.
The drama around the insolvent German carrier apparently has no end.
Based on this Reuters article the creditors are now seeking damages that could reach 1 Billion Euros.
Creditors of insolvent Air Berlin have decided to sue former parent Etihad Airways for damages over its decision to withdraw funding in August, which sent Germany’s second-largest airline into administration, a person close to the matter said.
The creditors have asked the administrator to find a firm to finance the planned litigation, the person also said. Air Berlin and the administrator declined to comment. Abu Dhabi-based Etihad was not immediately available for comment.
The administrator had said he was assessing possible claims against Etihad that could potentially reach more than 1 billion euros, arguing that Etihad did not meet its financial obligations toward Air Berlin, once Germany’s No.2 carrier.
Etihad owned a 29 percent stake in Air Berlin and had been providing funding since becoming a shareholder in early 2012. In April 2017, Etihad sent a letter of support to Air Berlin, saying it would provide funding for the next 18 months.
But in August, Etihad said it would no longer provide funding, saying Air Berlin’s business had deteriorated at an unprecedented pace.
The German government stepped in with a 150 million euro ($185.96 million) bridge loan to keep Air Berlin’s planes flying and prevent thousands of travelers from being stranded while it sought a buyer. That loan takes precedence over other creditors. …
Undertaking a lawsuit of this scale would be very expensive, just based on legal expenses such as attorney and court fees alone. The outcome would be everything but clear and apparently there is no money in the pot to pay for such effort.
The Air Berlin administrator would either need a financing from a bank (no chance in hell a bank would loan money for such an enterprise without any guarantees), a law firm that is willing to take the case pro-bono or any other third party that would be willing to gamble and bankroll the lawsuit.
As I said previously I fail to see the basis of these demands in this case apart from not fulfilling their obligation outlined in the letter of suppert that is. The airline has been a notorious loss maker with no end in sight. Who can blame Etihad for pulling the plug?
The same happened with Alitalia where Etihad gave up as well after employees and unions voted against a restructuring plan. Alitalia then went bankrupt and is currently kept afloat through a variety of government loans.
Based on this Bloomberg article Air Berlin ran through 2.7 Billion Euro in about six years time. That’s a staggering sum and doesn’t leave much hope for an investor that things would change.
The Air Berlin insolvency is really exemplary of how the airline has been run for years: Chaotic!
A few years ago the British High Court decided (Re Simon Carves Ltd sub nom Carillion Construction Ltd v Hussain et al) that letters of support provided by a parent company were not legally binding in the sense of a contract. The High Court confirmed that such letters did nothing more than to provide evidence from which the subsidiary can use as part of their on-going management rather than providing a separate agreement with additional rights and obligations between the subsidiary and parent company.