DG-Competition has approved Germany’s plans to provide a €150m bridging loan to the insolvent @AirBerlin, thus keeping the country’s second largest airline operational for the next few months as the loss-making airline is wound up and its assets sold off.
The Financial Times reports that Air Berlin had been under pressure after racking up losses of about €2bn over the past six years, and had a net debt of €1.2bn, finally collapsed into administration into administration on 15th August 2017 after its main shareholder, UAE airline Etihad, withdrew further funding.
Etihad had supplied the airline with several cash injections over the past six years as part of the airline’s strategy of buying minority stakes in European airlines to drive air traffic towards its own Gulf air hub.
Etihad said it had decided to stop funding Air Berlin after its business had “deteriorated at an unprecedented pace”. In April, Etihad provided €250m of additional funding to the German airline as well as supporting it to explore strategic options for the business.
The German Federal Government, upon being informed of Air Berlin’s insolvency on 15th August, immediately notified the European Commission of its intention to grant a €150m credit facility – through the German development bank KfW – to maintain air passenger services at the height of the busy European holiday season.
airberlin files for insolvency | German Government offers support | airberlin continues flight operations
— airberlin (@airberlin) August 15, 2017
Yesterday’s announcement by the European Commission acknowledges that
“Rescue and restructuring aid are among the most distortive types of state aid and can only be granted to companies once these have exhausted all other market options.”
Yet the Commission’s guidelines on rescue and restructuring aid allow Member States to support companies in difficulties, provided, in particular, that the public support measures are limited in time and scope and contribute to an objective of common interest.
To minimise the distortive effect of the State Aid, the Commission has accepted undertakings that
- the loan will be paid out in instalments under stringent conditions. In particular, Air Berlin has to demonstrate its liquidity needs on a weekly basis and new instalments will only be paid when all existing liquidity has been used.
- Germany has committed to ensure that either the loan will be fully repaid, or Germany will submit a winding down plan for Air Berlin.
The strict conditions attached to the loan, its short duration and the fact that Air Berlin is expected to cease operations at the end of the process led the Commission to conclude that the measure is compatible with EU state aid rules, over the stringent objections of Irish low-cost carrier, Ryanair, which has branded early indications that another German carrier, Lufthansa, had already entered into talks to acquire AirBerlin’s assets as a “conspiracy” and lodged objections with both the Commission and Germany’s own competition and cartel authority.
The non-confidential version of the decision will be made available under the case number SA.48937 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved.