News Column

Etihad to inject fresh capital into Air Berlin

April 28, 2014

Staff Report

Dubai: Etihad Airways is to inject fresh capital into Air Berlin as it tries to stem the losses of its troubled equity partner.

In a statement on Monday, Etihad said it will purchase Âぎ300 million (Dh1.5 billion) in convertible bonds from Air Berlin, while the German carrier will issue another Âぎ150 million bond for "general corporate financing purposes."

Etihad said it supports Air Berlin's restructuring plans, which includes the appointment of a Chief Restructuring Officer, and reaffirmed that it is investing in the German carrier for the long-term.

The issuing of bonds is part of Air Berlin's recapitalisation efforts to lift it back into the black. On Sunday, the German carrier reported Âぎ231.9 million earnings before interest and tax loss (EBIT), compared to a Âぎ70.2 million profit the previous year.

There had been speculation that Etihad would lift its stake in the German carrier as part of the recapitalisation. However, Air Berlin said on Sunday that its ownership structure will not change.

Etihad stated that its "stake in Air Berlin will remain unchanged at 29.21 per cent".

The European Commission is reportedly looking into foreign involvement in European airlines, including Etihad's stake in Air Berlin, to see whether they are complying with foreign ownership and control rules.

In its statement, Etihad reaffirmed that its commitment to the Air Berlin.

"The airline is clearly in a very challenging position. However, we are confident the business is moving in the right direction, and can be turned around but it needs an accelerated and fundamental restructuring. Air Berlin has our full support in this process," stated James Hogan, Etihad Airways' president and chief executive.

The two airlines operate 56 weekly flights, and in 2013 carried more than 560,000 passengers on each other's networks, a 75.3 per cent increase on 2012, according to Etihad, and generating more than Âぎ200 million in revenue.

"This partnership has very clear benefits for Etihad Airways too. When we embarked on our partnership with Air Berlin in 2011 our access into the tightly restricted German market was limited. We operated just 25 flights per week to three destinations," Hogan stated.

He added: "In one single transaction at that time, for less than the cost of a single wide-body aircraft, Etihad Airways gained access to more than 30 million passengers and a combined European network of 228 destinations across 84 countries."

Since investing in Air Berlin, Germany has overtaken the United Kingdom as Etihad's largest outbound European market.

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Source: Gulf News (United Arab Emirates)

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