LONDON – The insolvency administrator for Air Berlin is to sue Etihad Airways up to 2 billion EUR according to a Berlin court.
The suit is due to Etihad’s decision to withdraw funding from the airline which ultimately led it into insolvency, meaning that the Abu-Dhabi based airline did not meet its financial obligations towards the German carrier.
The airline has until January 2019 to respond to the lawsuit, which places wonders into whether Etihad will actually pay this or whether it will lawyer up and try and avoid it.
The carrier owned a 29% stake in Air Berlin and has been a shareholder for the second-largest German carrier since 2012.
October 2017 then saw easyJet signing an agreement with Air Berlin to acquire part of its insolvent operations at Berlin Tegel Airport for €40 million.
The acquisition of the German carrier excludes potential start-up and transitional operating costs. However, easyJet is buying landing slots as well as leases for AirBerlin’s 25 Airbus A320 aircraft.
At the time, it secured 1,000 jobs through a recruitment campaign.
A governmental loan kept Air Berlin operations to give it time to negotiate with investors and possible buyers. The last Air Berlin flight was on October 28, 2017.
The suit refers to a promise made by Etihad in April 2017 that it would provide funding over the next year and a half. Months after, Etihad withdrew funding due to “Air Berlin’s business deteriorating at an unprecedented pace”.
The German Court said that “the claims are for payment of 500 million EUR and the establishment that the defendant is obliged to pay further damages. The Chamber has provisionally set the amount in dispute at up to 2 billion Euros”.
Ultimately, it will be in Etihad’s best interest to fight this suit, especially as the carrier is losing money rapidly.
Moreover, this could also hinder the potential deals being made with Jet Airways to save the Indian carrier.
It does beg the question of whether this is a sensible move for Etihad, acquiring another debt-stricken airline given its track record.
The airline is currently dealing with losses of $3.5 billion, further restructuring of the airline as well as cuts to jet orders.
This makes the future of Etihad even bleaker, and could even result in the bankruptcy of the carrier down the line if the trajectory does not change.
If it has to pay the 2 billion EUR to the insolvency administrators, then that is going to produce even further strain on its finances.