Air Berlin files for bankruptcy after shareholder pulls plug

By DAVID RISING Markets Associated Press

Germany's second largest airline, Air Berlin, has filed for bankruptcy protection after its main shareholder, Abu Dhabi-based Etihad, said it would make no more financing available following years of unsuccessful turnaround attempts.

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The loss-making airline, which carries some 80,000 people a day mostly on short-haul destinations, will get a 150 million euro ($177 million) government loan to keep flights running and not leave travelers stranded during the peak summer season.

"We're in a time when many tens of thousands of travelers and vacationers are in multiple international holiday spots," the German Economy and Transport Ministries said in a statement Tuesday. "The return flights of these travelers back to Germany with Air Berlin would not have been otherwise possible."

The loan will allow Air Berlin to operate until the end of November, its CEO Thomas Winkelmann said.

After that the airline's future is uncertain. Rival Lufthansa, which is Germany's biggest carrier, and another unidentified airline are in talks to take over some operations. Winkelmann said the talks were "very well advanced."

Union ver.di called the bankruptcy a "severe blow" for Air Berlin's more than 7,000 employees.

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"Our priority now lies with securing the jobs," said Christine Behle, a union board director. "Air Berlin must proceed with transparency and provide all important information."

Economy Minister Brigitte Zypries said that the bridge loan should give Air Berlin enough time to wrap up talks on the sale of some operations.

The bankruptcy filing was prompted by the decision by Etihad, which holds a 29.2 percent stake, to stop funneling money into the airline after years of propping it up.

Air Berlin said that in light of Etihad's decision, it "came to the conclusion that there was no further positive way ahead for Air Berlin."

Already the carrier had been trying to ease its costs and lighten its debt load of 1.2 billion euros after reporting a record loss of 782 million euros last year. In December, it reached a deal to lease 38 plans to Lufthansa's units Eurowings and Austrian Airlines.

Etihad Airways said the bankruptcy filing was "extremely disappointing for all parties," especially as it had supported the airline over six years, but that it could not continue pumping money into a loss-making business.

"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," it said.

It said it had injected 250 million euros of additional funding into Air Berlin as recently as April and helped it "explore strategic options" for its business. But it said the carrier's business "deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions."

Shares in Air Berlin plunged 34 percent on Tuesday to 51 euro cents.

The Emirati national airline said it continues to have codeshares and other business relationships with Air Berlin and will support its management.

Air Berlin's decision comes three and a half months after another Etihad-backed European carrier, Alitalia, entered its second round of bankruptcy protection in a decade.

Etihad said at the time that Alitalia needed a "fundamental and far-reaching restructuring" and it was not prepared to keep pumping money into the struggling Italian airline.

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Kirsten Grieshaber and Frank Jordans in Berlin, and Adam Schreck in Dubai contributed to this story.