This morning I woke up to an email from Etihad stating that they were pulling their funding from Air Berlin. This step is the latest, and probably fatal, step that has taken the carrier down a road towards the end. Air Berlin, which is one of the quirkier carriers in Europe, has long been struggling. The airline has depended on Etihad’s investment in order to survive. Without Etihad, the airline is insolvent. The question now remains, how did we get here and what will happen next.
How Air Berlin Got Here
Air Berlin has been transforming time and again over the past two decades. They used to be a full service carrier in Europe, but then they switched to a more low-cost model. In the 2000s, they acquired LTU. LTU was a long haul leisure airline in Germany. With the addition of A330s to their fleet, the airline began (once again) offering frills on long haul flights. With this hybrid model, the airways joined oneWorld and began trying to be a major player in Europe.
When this system began to falter, Etihad decided to invest in them, and take a minority stake in the airline. This made Air Berlin one of two carriers that straddled to alliances. They are a part of oneWorld, and were a part of Etihad Partner Airlines. This made it awkward for them to cooperate with Qatar Airways (a fellow oneWorld member). They relied heavily on Etihad for connecting passengers, as well as for flights to Asia and Africa. As recently as this week, the airline announced plans to start offering more intra-European business class. I assume this was before they knew Etihad was going to pull the plug.
Where We Are Now
Bloomberg quotes the airline’s situation as insolvency. The insolvency comes at no surprise, given the airline has been hemorrhaging money over the past years. This means the airline will not be able to meet its financial obligations without help. For now, the airline will be operating under loans from the government of Germany. This is likely a political tool in order to ensure Prime Minister Merkel’s success in the elections in the coming months. Air Berlin will probably cease operation in part or in whole by the end of November. All of this comes after American ended their codeshare with Air Berlin last year.
What this Means
This means many many things. There is strong speculation that Lufthansa will purchase part of Air Berlin. This could save the airline’s employees. Surely Air Berlin will pull out of Etihad Partners very soon, although Etihad owns AB’s frequent flyer program. As for oneWorld, if Lufthansa purchases them, they will cease to exist as an independent carrier. This will make them another member of oneWorld that goes bankrupt. They join Mexicana and Kingfisher Airlines of India. Their partnership with jetBlue will probably not go through, meaning that jetBlue will be looking for a new European partner. As for their flights to Toronto and Chicago, they will likely never even take off.
Landing Thoughts:
To me, this is very sad news. I had a chance to fly with Air Berlin and they had a superb product. It will be tough to see what will happen to the airline’s employees, as they hold no fault in this situation. With the airline insolvent, no one will invest in them, and they will likely need to be sold off at a bargain price. This is great news for Lufthansa, which will grow their portfolio of airlines. The situation can give them an edge to bolstering their European low cost carrier Eurowings both in Europe and abroad. It will take a few months to see how this plays out, but I only see it benefiting Air Berlin’s competition.
What do you think? Did Etihad to right to pull the plug on Air Berlin? Will Lufthansa purchase a stake or the whole of Air Berlin? Let us know!
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H/T: Bloomberg
All Images from Wikipedia.
So, I have RT tickets from Chicago to Switzerland next June on Airberlin, booked through British airways avios. Luckily British airways also flies from Chicago to Switzerland via LHR on the same days. Would British airways be required to give me new seats on a similar flight if airberlin cancels the flights?
Hi Ted! Thanks for reading,
I don’t know if BA would honor the tickets, just in case check this website with their conditions of carriage. If you can’t see the link, simply reply to this comment and I will send it to you some other way. I would make sure first, and if they do not, then call them to rebook the ticket. It’s always better safe than sorry.
Best,
The Millennial Traveler
I liked airberlin a lot when I lived in Germany as a consultant. Good product, friendly staff, and the elite benefits were not bad. Gold member (mid-tier) usually had a free middle seat at the front of the plane, which is basically the same product as LH business class.
They’ve deteriorated so much over the past few years – just take a look at twitter accounts like airberlinhell. They lose luggage like crazy, and customer service is snarky and downright rude most of the time. Hope LH buys some of it the business and saves the employees, or they’re able to restructure to something profitable.
Hi Stephen! Thanks for reading,
I don’t know how they used to be, but my experience with them 2 years ago was wonderful. It really makes me sad to see this happen to them, but I can understand that maybe my flight was a one-off great service thing. I can see LH buying part of the airline, saving some employees, and hopefully some routes.
Best,
The Millennial Traveler