On Tuesday, Charlotten-Wilsmersdoft-based Air Berlin filed for insolvency. One of the biggest factors of the insolvency of Air Berlin was the loss of one of the most important financial partners to the company, Abu Dhabi-based Etihad. Because the German Government assisted the now-bankrupt Air Berlin by giving them $150 million euros to resume operations in the short term, they are now capable of operating flights until November of this year. This loan was granted to avoid any inconvenience of stranded German passengers who cant fly back to Germany because of system wide flight cancellations in the wake of Air Berlin’s downfall.
Lufthansa is the airline most interested in buying parts of the Air Berlin Group, with aspirations to pass the insolvent carrier’s routes to their daughter airline, Eurowings. Along with Lufthansa, airlines like EasyJet and TuiFly are also interested in buying landing and takeoff rights from AB so that they can expand in the competitive European aviation market.
Air Berlin, founded in 1978 by an ex-Pan Am pilot, grew exponentially in a short period to become the 2nd biggest airline in Germany. Air Berlin grew because they focused solely on the massive European tourism market. Therefore, their routes were aimed for leisure passengers and not businessman, offering lower fares with more fees for non-necessities.
With the arrival of the Arabian airline Etihad into the Air Berlin organization in early 2016, the pair started changing the entire foundation of the German airline, creating an airline that operates a mix of business and leisure routes. Etihad invested more and more money into getting a higher stake in Air Berlin, allowing Etihad to have lots of control within the organization. At one point, Etihad had a 29.2% stake in their German counterpart.
Air Berlin started aggressively expanding into the USA, offering multiple long haul routes with their recently bought Airbus A330-200 aircraft. With maintenance troubles leading to systemwide delays, (especially on long haul flights) more often than not there was little to no benefit in operating in the already-competitive Europe-North America market.
As Air Berlin began losing money at a hefty rate of 100,000 euros every hour, Etihad cut their funding program for the airline, leading to the downfall and eventual insolvency of Air Berlin, once a thriving carrier with a bright future ahead.
Air Berlin in their tourism times were earning a more money than they knew what to do with, getting to a situation were the only German opponent was Lufthansa, a massive carrier that operates a very profitable operation out of their two major hubs at Frankfurt and Munich. Air Berlin had the choice to expand at a massive rate to put a dent in Lufthansa’s German market share, or to stay where they were with a modest route network and, quite frankly, a successful operation. Of course, their Arabian partner (Etihad) wanted what was better for both carriers involved in their partnership, which in their eyes was to connect Abu Dhabi to America via Germany and so allow German and American businessmen to eventually end up in Abu Dhabi. Subsequently, Air Berlin, as a smaller airline, followed the advice of Etihad and expanded at an aggressive rate. This was the move that may be the sole cause of the situation they are in now, unfortunately. Looking into present days, Air Berlin has been trying to enter the business sector, which was not a good idea for an airline that was founded under the premise that they would serve solely leisure travelers.
Featured photo by Falbo Sorce / Flickr