Lufthansa Agrees to Buy Parts of Air Berlin

 - October 13, 2017, 9:53 AM
A Lufthansa Airbus Airbus A319 and an Air Berlin Boeing 737-800 taxi at Dusseldorf Airport. (Photo: Flickr: Creative Commons (BY-SA) by calflier001)

Lufthansa Group has agreed to buy major parts of insolvent Air Berlin, including Austrian subsidiary Niki, regional unit Luftverkehrsgesellschaft Walter (LGW), along with an additional 20 aircraft, Air Berlin announced Thursday. According to Air Berlin, the €210 million purchase guarantees the preservation of all jobs at Niki and LGW and opens the prospect of employment for “several thousand” Air Berlin employees. The deal remains subject to approval by Air Berlin’s creditors’ committee, the administrator in the insolvency proceedings and the European Competition Authority in Brussels.

If the agreement gains all the needed approvals, Lufthansa will take over 81 aircraft now in the Air Berlin fleet, including LGW's 17 Bombardier Q400s and 20 Airbus A320s and Niki's 20 A320s. As part of the transition, Lufthansa Group subsidiary Eurowings will take over the airplanes it wet leases from Air Berlin and expand its fleet from 160 to 210 with the purchase of additional aircraft. As a result, Lufthansa expects Eurowings' employee roster to expand from 7,000 to 10,000.

The announcement came just two days after Air Berlin notified its customers that it would cease flight operations on October 28.

Meanwhile, negotiations for other parts of Air Berlin continue with EasyJet. The UK low-fare carrier has submitted an offer to take control of more of Air Berlin’s fleet, opening the possibility of more jobs for the German carrier’s employees.

In a statement, Air Berlin indicated that a “good chance” now exists of repaying a €150 million loan from Germany’s Federal Ministry of Economic Affairs to allow operations to continue during administration proceedings.

Nevertheless, European discount carrier Ryanair said it would challenge the legality of the purchase with European Commission competition authorities. Ryanair has characterized the rescue efforts as “an obvious conspiracy” between the German government, Lufthansa and Air Berlin to carve up Air Berlin's assets to the exclusion of major competitors in violation of EU competition and state aid rules.

Air Berlin declared insolvency on August 15, after failing to convince its main minority shareholder, Etihad Airways, to keep the German airline afloat with further funding. This past April Etihad injected a final €250 million into Air Berlin to support its most recent turnaround efforts. “However, Air Berlin’s business has deteriorated at an unprecedented pace, preventing it from overcoming its significant challenges and from implementing alternative strategic solutions,” said Etihad, which owned 29 percent of the German airline.