Air Berlin administrator sues Etihad for up to €2bn
Abu Dhabi-based airline was the main shareholder in the collapsed German carrier
Etihad Airways is being sued for up to €2bn over its role in the bankruptcy of German carrier Air Berlin, a court in the German capital said on Friday.
The Abu Dhabi-based airline was the main shareholder in Air Berlin, which declared insolvency in August 2017. Air Berlin ran out of funds despite receiving a “comfort letter” from Etihad just four months earlier declaring that the Abu Dhabi flag carrier would provide financial backing to the troubled German airline over the next 18 months.
Etihad’s announcement that it would no longer stand by that commitment was the trigger for Air Berlin’s collapse, which prompted severe political recriminations and significant upheaval in Germany’s aviation market
Air Berlin had racked up losses of about €2bn in the six years leading up to its insolvency. The carrier, which struggled to compete with low-cost rivals such as Ryanair, had €1.2bn in net debt at the time.
In an attempt to recoup losses suffered by more than 1m claimants, Air Berlin’s insolvency administrator is now taking legal aim at Etihad. According to a statement from the Berlin district court on Friday, the administrator “is of the opinion that [Etihad] gave a binding commitment. Because it violated that commitment, it should settle all the justified claims of creditors.”
The administrator believes that at least three separate claims worth €500m in total are justified. But given the large number of additional claimants, the court has provisionally estimated the overall value of the claims to be “up to €2bn”.
Etihad has until the end of January to respond to the claims. The final decision over whether or not the claims are justified will be taken by the Berlin court.
The collapse of Air Berlin was the largest aviation bankruptcy in German corporate history. It came at the height of the summer holiday season, sparking fears that hundreds of thousands of tourists could be left stranded. To avert that scenario, the German government stepped in with a €150m bridge loan to keep the airline flying and win more time to find a buyer for the company’s assets.
The principal beneficiary of the dismantling of Air Berlin was German flag carrier Lufthansa, which managed to cement its position as the largest airline by far in Europe’s biggest economy.
Lufthansa ended up acquiring more than half its rival’s assets, including Austria’s Niki, a holiday airline, for €210m. EasyJet bought another portion of Air Berlin’s operations, while parts of the carrier’s logistics operations found a local buyer.