Mateusz Maszczynski is a serving international flight attendant with experience…
As if the Abu Dhabi-based Etihad Aviation Group didn’t already have enough on its plate, the debt-laden airline is now facing a legal action by the administrators of the bankrupt German carrier, Air Berlin. Newly filed court documents in the Berlin Regional Court reveal the company’s administrators are seeking damages of at least €500 million – the court has since provisionally set the value in dispute as high as €2 billion.
Etihad owned a 29% stake in Air Berlin when it collapsed into administration last year and had been a shareholder in what was Germany’s second largest airline since 2012. The German airline was a key part of Etihad’s equity investment strategy to buy minority but significant stakes in foreign airlines in order to feed passengers into its own network via the airline’s Abu Dhabi hub.
Before its collapse, the loss-making Air Berlin had been supported financially by Etihad for some years. Central to the latest dispute was a so-called “comfort letter” sent by Etihad in April 2017 to reassure Air Berlin’s creditors that it would continue to fund the struggling carrier for at least another 18-months. But just four months later, Etihad pulled the plug on Air Berlin and refused to offer any further financial support.
Etihad has previously said it was forced to withdraw support for Air Berlin after the carrier’s losses accelerated faster than had been originally predicted. The decision came just months after Etihad also withdrew financial support from Italy’s flag carrier, Alitalia. Unlike Alitalia, however, Air Berlin’s assets were quickly carved up by the likes of Lufthansa and easyJet.
In a statement posted to the court’s webpage (translated from German), the court explained:
“She (Etihad) had violated her duties from a so-called Comfort Letter of 28 April 2017. On that day, after intensive preliminary negotiations, the defendant had signed a document confirming its intention to provide Air Berlin with the necessary support for the next 18 months in order to enable its subsidiary to meet its financial obligations to fulfil. Contrary to this commitment, she withdrew Air Berlin’s financial support in August 2017, with the result that Air Berlin had to file for bankruptcy.”
The administrators claim the Comfort Letter was legally binding and therefore, Etihad is in breach of contract.
The court has ordered Etihad to respond to the claims by January 2019, although a spokesperson for the airline has told Reuters that the “claims are without merit” and that the airline will “defend ourselves vigorously against it.” The spokesperson added that they would not offer any further comment at this time.
In 2016, Etihad reported a staggering loss of $1.95 billion USD – much of which was attributed to the airline’s failed equity investment spending spree. Last year, Etihad’s losses had narrowed to $1.52 billion after the airline initiated a huge cost-cutting programme.
under the stewardship of new chief executive, Tony Douglas the airline is embarking on a strategic change in direction and nothing appears to be off the table – latest reports even suggest Etihad is considering ripping out its flag-ship Residence class.
Mateusz Maszczynski is a serving international flight attendant with experience at a major Middle East and European airline. Mateusz is passionate about the aviation industry and helping aspiring flight attendants achieve their dreams. Cabin crew recruitment can be tough, ultra-competitive and just a little bit confusing - Mateusz has been there and done that. He's got the low down on what really works.