Struggling German airline Air Berlin filed for bankruptcy on Tuesday after Abu Dhabi-based Etihad Airways-- its main shareholder -- refused to finance another bailout. Etihad had provided 250 million euros (US$294 million) to keep the crisis-stricken German airline afloat just a few months ago.
"Air Berlin's business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions," the Emirati national airline said in a statement. "Under these circumstances, as a minority shareholder, Etihad cannot offer funding that would further increase our financial exposure."
Air Berlin which is Germany's second biggest airline, will continue flying for three months thanks to a bridge loan of €150 million ($176 million) from the German government. Economy Minister Brigitte Zypries said that the loan should give Air Berlin enough time to wrap up talks on the sale of some operations and avoid a disorderly bankruptcy procedure that could have left thousands of travelers stranded during the peak summer season.
The Berlin-based airline, which carries some 80,000 people a day mostly on short-haul destinations, booked losses amounting to €1.2 billion for the last two years. Last September, the discount carrier tried to overcome its financial problems by taking drastic measures. It leased 38 aircraft with crew to rival Lufthansa's units Eurowings and Austrian Airlines and slashed 1,200 jobs - one in seven of its workforce. Amid its restructuring, it was hit by a series of flight cancellations and severe delays, leading to a flood of complaints.
Lufthansa, which is Germany's biggest carrier, and another unidentified airline are in talks with Air Berlin to take over parts of the group, the government said.
Shares in Air Berlin plunged 51 percent and closed 34 percent lower at 51 cents in Frankfurt, valuing the company at 59.6 million euros. Its 170 million euros of bonds due May 2019 fell 33 cents on the euro to a record low of 20 cents, according to data compiled by Bloomberg.
Shares in other European airlines rose in response to the news. Ryanair's stock was up 2.3% in mid-afternoon in Europe, while EasyJet was up 3.2%. Lufthansa rose 4.7 percent, the most in five months.
With reporting by AP