Etihad Responsible for Air Berlin’s Demise?
Scott Dylan January 06, 2019
It looks like a court battle between Air Berlin’s bankruptcy administration and Etihad Airways is unavoidable. The legal team handling Air Berlin’s bankruptcy is claiming that Etihad is responsible for damages of up to $2.26 billion. The alleged damages come as a result of the Gulf-based carrier’s decision to withdraw funding from Air Berlin in 2017.
Air Berlin is one of the latest carriers in Europe to topple. The German airline officially ceased offering flights back in the fall of 2017. However, the financial mess that was left behind is still being cleaned up by bankruptcy administrators. Factors like poor management and rising fuel costs certainly contributed to the downfall of Air Berlin, and the delays and cancellations that plagued the carrier helped to pave the way to decline. The airline was forced to pay millions of dollars in compensation as a result of those issues. It was Etihad’s decision to pull financial support that dealt the final blow that led to Air Berlin’s insolvency. Etihad had been the ill-fated carrier’s biggest shareholder.
What could Etihad Airways be on the hook for if it is proven that the carrier is responsible for the end of Air Berlin? The lawsuit that was filed is asking for an immediate payment of $500 million. In addition, Etihad would be required to pay further damages. The lawsuit was filed in the Berlin Regional Court this month.
How strong is the case against Etihad? It does at least appear at first glance that Etihad broke its legal agreement with Air Berlin. Etihad sent a letter of support to Air Berlin during the spring of 2017 that promised funding for the next 18 months. However, that plan never came to fruition, and it was only one month later when Etihad pulled funding from Air Berlin completely. The German carrier limped along through the summer before officially declaring bankruptcy in the fall.
A lot is still up in the air when it comes to whether or not Etihad will be found responsible for the downfall of Air Berlin. The general perception in the airline world is that Air Berlin did go bankrupt as a direct consequence of Etihad’s decision to pull funding. There is no doubt that Etihad will point to the inevitability of bankruptcy when making a defense case. What is the one thing that the average traveler can pretty much know for sure? You can probably count on the fact that any costs that pile up as Etihad Airways tries to defend itself in court will be passed on to travelers in the form of higher ticket costs. Isn’t that always the case?
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Seems like a weak case against Etihad though I'm no expert of German or EU bankruptcy law. If Etihad can show it lost more money than anyone else then what can others say about Air Berlin's demise being their fault?
How can Etihad raise ticket prices to pay for their legal costs? This is not how markets work. Etihad already charges as much as the market allows them in order to be as profitable as possible. If they could charge more without negatively affecting profits, they would do so regardless of whether they have to pay legal costs somewhere.