Air Berlin collapse as Etihad withdraws financial support

Passengers board a German carrier Air Berlin aircraft at Tegel airport in Berlin Germany

"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", he said.

Germany's Air Berlin filed for insolvency Tuesday prompting the government to step-in to keep the country's second-largest airline operating in the short-term.

Air Berlin's insolvency came after its main shareholder, Etihad, stated it would not give further financial support to the German carrier.

In a statement, Air Berlin said the German government will provide a bridging loan to allow all flights to operate for now, and avoiding the prospect of disruption to passengers this summer.

In 2016, Air Berlin showed a record 782 million euros in losses - a 75% increase compared to 2015 - which the company attributed to restructuring costs and depreciation.

Air Berlin has long battled for survival, booking losses amounting to 1.2 billion euros over the past two years and relying on cash infusions from Etihad.

As Moni Bar, Air Berlin's representative in Israel, put it, "As of now we have not been informed of any change, and all operations are continuing as usual".

Ryanair complained to the European Commission and Germany's competition regulator, the Bundeskartellampt, that the government and Lufthansa were conspiring to carve up Air Berlin while excluding competitors and ignoring anti-trust and state aid rules.

However, Etihad insists it remains "open to helping find a commercially viable solution for all parties" and that it "will support Air Berlin's management during these hard times".

Etihad said that it withdrew funding after Air Berlin's operations deteriorated at an "unprecedented pace" in recent months.

The new flights, scheduled to start next year, were announced earlier this month.

Germany flag-carrier Lufthansa is supporting the restructuring efforts of the airline jointly with the German authorities.

Italian national airline Alitalia, another of Etihad's investments, is also in administration and seeking bidders for its business. "If acquired, Air Berlin's Dusseldorf airport slots would likely be a valuable asset to Lufthansa while freezing new entrants out of the "full" airport, unless the German authorities require slots to be surrendered to new entrants".

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