Air Berlin files for insolvency – what happens next?

Yesterday’s news was dominated by Air Berlin’s insolvency. As I’m currently in Germany I got to read about it from all sides.

airberlin new york berlin airplane

Things haven’t been great for the German airline in recent years, partly due to the delays in opening the new Berlin Brandenburg airport which would have provided Air Berlin with a strong home base.  The airline had invested heavily expecting in advance of this.

Etihad owns 29% of the airline and has been injecting a lot of money over the last six years.  As well as direct loans, it has injected funds through backdoor routes (taking control of the Topbonus loyalty programme at what appeared to be an inflated price) as well as helping out with pilot training and fleet management.  None of this was enough.

Now Etihad has decided to not ‘loan’ any more money to Air Berlin – €250m of a €350m investment went in as late as April – and it had to file for insolvency after a further promised €50m from Etihad failed to arrive.

According to Der Spiegel Angela Merkel and Lufthansa CEO Carsten Spohr visited Abu Dhabi back in May to talk about the future of Air Berlin and were promised financial support until Autumn 2018.  Looking at yesterday’s news this promise was broken within a few months, probably driven by the departure of Etihad CEO James Hogan.

For now the biggest issue for those with booked Air Berlin flights is whether or not they will be able to fly to their destinations.

For Head for Points readers, the main concern is likely to be over Avios redemptions.  Air Berlin flights from North America to Germany represent excellent value, as the tax can be as low as £4 one way in Business Class.  My review of an Air Berlin Business Class flight from New York to Berlin is here.

Thanks to the German government, who announced a loan – unlikely to be seen again – of €150 million to Air Berlin yesterday, there shouldn’t be any issues at least for the next three months.  This keeps the airline alive until after the German elections.  Tickets are still being sold and the current flying schedule will be met.

Of course, new ticket sales are likely to be very slow, and suppliers are likely to want paying in advance from now on.  Even solvent European airlines tend to lose money over the winter season.  The €150m may not be enough.

No one knows for certain what will happen next.  Talks with Lufthansa are far advanced, as was well known.  The Financial Times (paywall) quoted Mr Dobrindt Germany’s transport minister: “There is no transfer of Air Berlin as a whole to Lufthansa — there are parts of the business that will go to Lufthansa and there are interested parties for other bits of the business, so we do not expect cartel difficulties”.

Etihad was reported to be negotiating for additional flying rights to Germany as part of any transaction but that is now off the table, clearly.  Lufthansa’s Eurowings subsidiary would benefit from being merged with the Air Berlin short haul routes.  Lufthansa’s willingness to enter the long-haul market from Dusseldorf and Berlin is not clear.

easyJet is also reportedly interesting in taking over part of the short-haul operation, potentially just the Airbus-operated fleet.

Should you be worried if you have an Air Berlin Avios ticket booked?

oneworld has issued a statement that Air Berlin will continue to be part of the alliance throughout the insolvency process.  Air Berlin’s NIKI subsidiary is not in administration and continues to operate as normal.

If you have a trip to North America booked on Avios, any of these things may happen:

You fly as booked – if Lufthansa take on the long haul routes, it will take longer than a year to integrate them and the existing timetable and bookings should be honoured

Your flight is cancelled – British Airways rebooks you via London or possibly Madrid

Your flight is cancelled – British Airways refunds all of your Avios and taxes.  You’d still need to find a new flight but you’re not out of pocket.

However it works out, you should be fine.

Be grateful that you do not have any Air Berlin Topbonus miles, because reports on Flyertalk last night state that redemptions on Etihad or any oneworld airlines such as BA are now blocked.  All you can book is Air Berlin ….

Interestingly, if you need a short notice Avios reward flight to North America, take a look at Air Berlin.  There is a lot of availability right now.  Our main article on how to redeem with them is here.

We will keep you posted on updates.

(Want to earn more Avios?  Click here to visit our home page for the latest articles on earning and spending your Avios points and click here to see how to earn more Avios from current offers and promotions.)

Which is better - the Lloyds Avios Rewards upgrade voucher or the BAPP Amex 241?
Did you know Lufthansa offers a 25% mileage discount for children?
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Comments

  1. RussellH says:

    I imagine that there is all sorts of commentary throughout the German media.

    Logged in to my freenet.de e-mail and found no communication from Air Berlin / topbonus at all. But there is an interesting article on the freenet.de home page if you read German.As Rob reminded us, Air Berlin have been flying for Eurowings for some months, but now that Air Berlin is bust a major stushie has blown up about pay for both ground and flight crew. There had been an arbitrated agreement, but that has now collapsed. Leaders of relevant trade unions have said that LH is in a position to buy up cheap aircraft, but does not need to stick to pay agreements.

    Could get nasty?

  2. Tickets issued up to and including August 15th will not be refunded. See their page of questions about the current situation. Likewise, any delay compensation refunds prior to the 15th are now null and void. Have a good day.

  3. James Wagner says:

    I hope OneWorld will still somehow retain an ex-EU to the Red Sea resorts.
    AB BER-HRG was a good redemption, even better if it had a decent business class cabin (better seats, not necessarily lie flat but at least wider, more legroom and good reclines).