Etihad buys into Airberlin's restructuring

Etihad Airways is backing Airberlin’s decision to accelerate structural change within the airline to target sustainable profitability, said the Abu Dhabi-based airline, which has a 29.21 per cent stake in Airberlin.

In a media statement, Etihad maintained it will subscribe to a €300 million (Dh1.52 billion) 8 per cent perpetual subordinated cumulative convertible guaranteed bond. The UAE said this will form part of a recapitalisation which is intended to strengthen and assist in the reorganisation of Airberlin’s capital structure and secure the improved long-term prospects for the business and its stakeholders.

The UAE airline’s stake in Airberlin will remain unchanged at 29.21 per cent while Airberlin will issue a further bond of a minimum of €150 million (Dh762m) for general corporate financing purposes.

Germany’s Airberlin has announced a restructuring “that is fit for purpose in today’s competitive market conditions” and will appoint a Chief Restructuring Officer for the purpose.

James Hogan, President and CEO of Etihad, reaffirmed that Etihad was a strategic minority investor in Airberlin, and remained confident and committed for the long term.

He said: “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. Airberlin has our full support in this process.

“We’re here for the long term - for the airline, the travelling public and the community. With the right strategic vision, and the right implementation, Etihad Airways believes Airberlin can become a sustainably profitable business, securing the jobs of its 8,900 employees and the many thousands more workers it indirectly supports.”

Airberlin reported operating losses for the year-ended December 31, 2013, of -€231.9 million. This was despite the German reaching its €200 million cost reduction and revenue contribution target for the year.

The German airline reported an unusually sluggish outbound summer season due to the hot weather, followed by the traditionally difficult winter quarter. This was compounded by increased competition and on-going weakness in the European economies.

Explaining the merits of Etihad Airways’ equity investment strategy in Germany, Hogan said: “This partnership has very clear benefits for Etihad Airways too. When we embarked on our partnership with airberlin in 2011 our access into the tightly restricted German market was limited. We operated just 25 flights per week to three destinations.

“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.

Etihad boosts flights to Beirut, Amman

Etihad has announced an increase in its services to Beirut and Amman from 18 flights per week to triple daily schedules from July 2, 2014.

The additional flights will add over 800 seats per week between Abu Dhabi and the two Arab capitals. “The Middle East network has been performing strongly. We have steadily increased frequencies on both routes in line with strong demand, not only to the capital of the UAE, but also via Abu Dhabi to and from key destinations in Asia and Australia,” said Hogan.

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