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Home » Airlines » Air Berlin » Why is Air Berlin Blaming Etihad for its Failure?
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Why is Air Berlin Blaming Etihad for its Failure?

Matthew Klint Posted onOctober 26, 2017November 14, 2023 5 Comments

tail fin of an airplane

Air Berlin is seeking damages from Etihad for “letting” it become insolvent. No folks, this is actually not some sick joke. This is true.

Air Berlin is demanding at least 10 million euros, blaming Etihad for “letting” it become insolvent. The carrier is just two days away from closing shop and has already abandoned its longhaul routes.

Frank Kebekus, a Dusseldorf-based bankruptcy lawyer serving as administrator stated:

We are in negotiations with Etihad and hope to reach a general settlement soon. We are hoping for a two-digit million euro sum.

But why? Why should Etihad be on the hook for Air Berlin, a poorly run airline that lost billions over the last five years?

Three Possible Reasons Why Air Berlin is Seeking Millions from Etihad

I’m putting myself in Air Berlin’s shoes, racking my brain to try to find justification for why it would sue or at least make demands. Three possible reasons come to mind.

  1. Etihad, which owns a 29% stake in Air Berlin, made assurances of another financial lifeline only to renege upon them. Such assurances played directly into Air Berlin’s long-term business plan. Thus, but for Etihad’s untimely change of heart, the carrier would have survived.
  2. Part of Etihad’s agreement with Air Berlin is that it will assume a portion of the company’s debts during insolvency. Air Berlin borrowed EU150 million from the German government to keep the carrier alive over the last two months. Such a lifeline was conditioned upon repayment with a 10% interest rate. That still has not been paid back.
  3. Air Berlin allowed Etihad to acquire nearly 1/3 of its airline on the express assurances of Etihad that it would turn the carrier around. By failing in its fundamental mission, Etihad is liable for helping Air Berlin service its creditors.

These are purely speculation and weak speculation at that.

Am I missing anything?

CONCLUSION

View from the Wing calls it chutzpah, but I call it disgusting. It is proper that Air Berlin is going out of business and while Etihad certainly made a poor investment, I see no reason why it should pay any damages to Air Berlin for lending a helping hand to a carrier that would have only failed faster without such help.

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

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5 Comments

  1. Michael Reply
    October 26, 2017 at 6:04 am

    You’re missing a key fact here. When Airberlin annouced their FY16 results earlier this year, Etihad stood behind them and issued a ‘letter of support’ which stated that Etihad would continue to provide financial support and assistance until 2018. Under German law, a business must have a ‘postive forecast’ otherwise the directors are legally bound to file for insolvency. The only way a ‘positive forecast’ could be reached for AB was this letter from EY. EY then unilaterally rescinded the letter and withdrew support in August. This is the reason that AB had to file for insolvency at that time and it’s for this reason that AB has a credible case for damages from EY – they pulled a bait and switch.

  2. Rupert Reply
    October 26, 2017 at 7:11 am

    It’s not disgusting, it’s business: Etihad apparently gave written guarantees for the financing. As a lawyer, you’ll appreciate that this is not merely a “change of mind” to not deliver on those guarantees, thus the Air Berlin administrators of the insolvency are doing their job of getting as much money from anybody they can. The fact that Etihad is negotiating suggests that the administrators do have a case and will probably get something from Etihad which will become part of the insolvency mass to pay the government, anybody who bought a ticket after Aug15 and all the other debtors….

  3. JoeMart Reply
    October 26, 2017 at 9:45 am

    It’s difficult to argue against Etihad not fulfilling their support role, especially after €250m in April were handed to this bottomless pit.

  4. Sean Reply
    October 26, 2017 at 10:12 am

    Air Berlin should sue the Berlin Airport Authority (if there is such a thing) – or the architects / engineers of the new BER airport.

    Air Berlin is a casualty of the failure of the new BER airport.

  5. ed Reply
    October 26, 2017 at 11:10 am

    Reason number 1 is the cause of the suit. That and their continuing statements of support, only to be surprisingly withdrawn. The trustees are doing what they are supposed to be doing.

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