Etihad Airways PJSC will bail out Air Berlin PLC once more, tightening its hold on the carrier by providing funding as falling traffic and ballooning losses depleted equity at the cash-strapped German airline.
Etihad is buying 300 million euros ($415 million) in convertible bonds, while Air Berlin will sell at least another 150 million euros in notes, providing 450 million euros in cash, the company said in a statement. The bond sold to Etihad, it’s biggest shareholder, has no maturity and will count toward equity, the carrier said.
Since 2011, Etihad Chief James Hogan has acquired stakes in carriers from Aer Lingus to Virgin Australia Holdings Ltd., feeding more traffic via Abu Dhabi, Etihad’s desert hub. Etihad has funded Air Berlin before by taking a stake in the German carrier, as well as buying 70 percent of its customer loyalty program in addition to a credit line of $255 million, now extended by 5 years. Etihad can’t buy a majority in Air Berlin without losing the German company’s traffic slots.
“We have to thoroughly evaluate our possible courses of action including our long-term business model,” Air Berlin Chief Executive Officer Wolfgang Prock-Schauer said in the statement, adding the company now faces “more fundamental restructuring,” without providing details.
A version of this article appeared in the print edition of The Daily Star on April 29, 2014, on page 5.